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WASHINGTON, DC -- A new Natural Gas Supply
Association analysis of Energy Information Administration (EIA)
reserve replacement figures suggests that, over the past decade,
the largest natural gas producers have increased their role in
gas exploration while smaller producers have concentrated increasingly
on the management of mature gas fields.
Philip Budzik, NGSA's director of federal
regulatory affairs and technical analysis, reviewing the past
ten years of EIA data, found that the top 30 domestic gas producers
accounted for 79 percent of new discoveries in 1995, as compared
to only 44 percent in 1986.
The rest of the industry is increasingly
responsible for the additions to the natural gas reserve base
resulting from reserve revisions. In 1986, the smaller producers
accounted for 36 percent of the total gas reserve revisions; but
by 1995, this segment of the industry accounted for 78 percent
of total revisions.
Why the change? "Although I have only
anecdotal evidence," Budzik said, " I believe that the
smaller oil and gas companies are getting out of the exploration
business because of the need for large capital investments and
a high level of technological sophistication that is required
to find new gas reserves. Large producers enjoy capital and technology
economies of scale, which are best employed in the exploration
and development of low-cost natural gas reserves.
"In contrast," Budzik continued,
"the smaller gas producers can use their lower operating
cost structure in conjunction with enhanced recovery techniques
to extend the life of existing gas fields, thereby increasing
gas reserves through revisions."
Budzik concluded, "The data suggest
that each industry segment is utilizing its unique economic advantage
to work within specific exploration-and-production niches. That
should result in the most efficient development and production
of the nation's natural gas resources."
Budzik noted that identification of the
trend should be of interest to stockholders and analysts who follow
the use of corporate resources. Just as important, the trend
is good news for natural gas consumers, because a cost-efficient
natural gas supply chain helps maximize consumer value.
While the specialization of companies is
increasing, the contribution of the two industry segments to total
gas production has not; the top 30 companies consistently produced
about 50 percent of the total over the past decade. Similarly,
reserve holdings have remained relatively constant over this period,
with the top 30 gas producers holding about 55 percent of natural
gas reserves.
The Natural Gas Supply Association
represents integrated and independent companies that produce and
market domestic natural gas. Established in 1965, NGSA encourages
expanded use of natural gas and a regulatory climate that fosters
competitive markets.
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This page last updated August 31, 1997.