Potential Gas Committee
We assess the potential supply of natural gas in the USA
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FAQ

How often does PGC publish new resource estimates? The most recent Biennial Report, covering the December 31, 2012 PGC estimates, was issued in April 2013.

What do PGC’s resource estimates include?  A finite volume of natural gas exists in place within the rocks that comprise the shallow part of the earth’s crust. This finite volume of gas in place is the total natural gas resource. The fraction of this resource that is recoverable is a function of technology and economics.

The Recoverable Resource consists of both discovered and undiscovered natural gas resources. The discovered gas resource  consists of the quantity previously produced, plus present proved reserves which are volumes in known fields that are believed to be 90 percent or more likely to be recovered in the future, plus gas remaining in known fields that will be recovered through extension and complete development of known pools and reservoirs.

The Undiscovered Resource is the potential gas supply that could become productive with further exploration and development. It  includes both the gas remaining in undiscovered pools and reservoirs within known fields and the gas that may be discovered in new fields and reservoirs within provinces that are either presently productive or as yet nonproductive.

PGC’s assessments of potential resources include all of the undiscovered gas resource plus that part of the discovered resource that is not included in proved reserves. Three categories of potential resources are recognized and reported—Probable, Possible and Speculative. They are differentiated based on the availability and reliability of geologic, geophysical and engineering information. Both nonassociated and associated or dissolved gas are included in all categories.

What methods are used to estimate resources? Natural gas occurrences are related to conditions favoring their formation and accumulation, such as the existence of organic-rich source rocks, sufficient maturation of the organic material and the presence of reservoir rocks and traps. The fundamental technique for estimating potential gas resources is to compare the factors that control the existence of known occurrences with the same factors as observed in similar, though not necessarily identical, prospective areas. This “attribution” technique is applied to each of the PGC resource categories. In each instance, what is known about the prospective area is evaluated relative to what is known about natural gas accumulations that have been discovered elsewhere in the same geologic province or in similar provinces. Studies of producing  areas  provide information on the productive capacity of particular formations and the average size and size range of accumulations. In its simplest form, the assessment of potential gas supply is derived by (1) estimating the volume of potential gas-bearing reservoir rock, (2) multiplying this volume by a yield factor,  and (3) discounting to allow for the probability that traps and/or accumulations exist.  A yield factor represents the amount of gas expected to be produced from a given unit volume of rock. It is calculated using data from known gas accumulations considered analogous to the prospective ones being evaluated. Yield is the volume of discovered gas (i.e., cumulative production plus proved reserves) divided by the volume of productive rock containing the gas. The yield factor applied to any prospective area may be adjusted to accommodate variations appropriate to the prospective area.

The judgment of the assessor is the most important factor in assessing Probable, Possible and Speculative resources. Wide variations can be expected in reservoir conditions and other resource attributes among the areas, the provinces within an area, and even within a given province. The amount and quality of information available for prospective areas also varies. A PGC assessor may consequently employ somewhat different approaches and modifications of the PGC assessment procedure tailored to these conditions. PGC members possess the scientific and technical knowledge and the practical experience necessary to select appropriate adjustments for their assigned provinces, using available geological, geophysical, engineering and production data, both public and proprietary, to apply an objective, scientific approach to the challenge of resource assessment.

Each assessor considers three separate situations in preparing estimates:

1.  The existence of the minimum number of traps, the most marginal of source rock and reservoir conditions, the minimum reasonable yield factor, and the possibility that many traps may exist that do not contain recoverable gas accumulations. In this situation, an approximately 100 percent probability exists that at least the corresponding gas resource estimate is present. This result is the PGC minimum estimate of the resource.

2.  The most reasonable estimate of the existence of traps and accumulations and the most reasonable assessments of source rock, yield factor and reservoir conditions. In the assessor’s judgment the probability is highest that these conditions prevail and that the corresponding estimated quantity of gas resources is present. This result is the PGC most likely estimate of the resource.

3.  The quantity of gas that might exist and be recoverable under the most favorable conditions. This situation assumes a maximum number of potential traps with favorable source rock and reservoir conditions, a maximum reasonable yield factor and the condition that each trap is filled with a recoverable accumulation. The probability that such conditions prevail is near zero, as is the probability that this much gas resource is present. These conditions lead to the PGC maximum resource estimate.

Values of the minimum, most likely and maximum resource potential comprise a triangular distribution encompassing the estimated resource potential and are reported individually for each geologic province. By considering each of the three situations described above, PGC’s assessors can best reflect and express both the limiting conditions within the geologic region and the most likely values of the resource potential. Assessment results are reviewed periodically at meetings of the Area Work Committees and by the entire PGC at the national level in order to maintain necessary and reasonable degrees of consistency and uniformity.

The final assessments for each province are combined to derive the total resource potential for each Area and the entire country. This procedure is discussed in the third section below headed by “I have added area values …”.

Do risk adjustments need to be applied to PGC’s resource estimates? In general, no, but this can depend on the intended use of the estimates. PGC reports recoverable natural gas resources and not original-gas-in-place estimates. A recovery factor has therefore already been applied. Additionally, a Monte Carlo (Latin Hypercube) statistical aggregation has been applied to the minimum, most likely, and maximum recoverable resource volumes estimated by our experts in order to derive statistically valid mean estimates. That said,  the estimates of the Potential Gas Committee (PGC) represent potential natural gas resources that, in the judgment of its members, can be recovered by future drilling under conditions of:

1. adequate economic incentives in terms of  price/cost relationships, and

2. current or foreseeable technology.

The PGC estimates are “base-line” estimates in that they attempt to provide a reasonable appraisal of total U.S. natural gas resource potential—an appraisal that is not subject to assumptions about the time of development of the resource, the life span of the natural gas industry, or a specific price to be paid for the produced gas. No consideration is given to whether or not this resource will be developed; rather, the estimates are of resources that could be developed if the need and economic incentive exist. Furthermore, the estimates assume there are no governmental  or regulatory restraints on development and production of the resource and they ignore effects of access factors such as availability of pipeline connections. Given these assumptions, there may be occasions where an adjustment factor is warranted to account for uncertainty regarding the pace of development of the resources.

What is your response to commentary suggesting that PGC’s estimates are optimistic? (1) We do not know of any other published source that currently reports undiscovered resources by producing province. Consequently we have no valid basis for comparison. Some years ago there were a number of organizations that issued natural gas resource reports. A comparison of those reports shows that PGC tended to be the most conservative of estimators. (2) PGC’s experts do not report single values for their assigned provinces. They report a range of values that consider the minimum, most likely, and maximum volumes that could be expected for each area. These estimates are then presented to a panel of PGC experts in peer review sessions conducted to assess any bias, the sources of data, the applied methodology and the reasonableness of the estimates. We believe that our process results in a study that is scientifically pure and academically rigorous. (3) Finally, if one reviews the history of PGC’s reports, they will find that PGC’s ultimate recoverable resource estimates have generally increased from one report to the next. This trend reflects the fact that as industry discovers new gas supplies in previously unknown reservoirs, we learn that a resource exists that was previously not accounted for. Therefore, our estimates represent only a snapshot in time, which is the very reason we update our estimates every two years to take into account new information and new technologies.

I have added Area values estimated by PGC but my answers do not agree with PGC’s total value. I think PGC has made an error? Our treatments of the data and the reported results are correct. It is statistically incorrect to arithmetically sum values of varying probability. Therefore, it is improper to add the most likely, minimum and maximum estimates to derive area and national totals. A simulation program is instead required to calculate the totals. The statistical aggregations of  resource estimates that PGC reports are calculated using commercially available software, @RISK (v. 3.1, Palisade Corporation, Newfield, New York). Microsoft Corporation’s Excel® spreadsheet application was used in conjunction with @RISK to input data and to assist in analyzing the results.

@RISK employs simulation to derive probability distributions of aggregate volumes based on the input triangular (minimum, most likely, maximum) volumetric probability distributions. For a particular area the program repetitively samples the many related input  distributions and recalculates the aggregate outcome a specified number of times (iterations), outputting an aggregate probability distribution. For efficiency a “Latin hypercube” sampling technique is used by the PGC which, owing to its stratified approach to sampling of the input distributions, converges to a stable result much faster than Monte Carlo sampling does. The Latin hypercube stratification approach divides the cumulative probability distribution of the input data into several equal intervals. A sample then is taken randomly from each interval or “stratum” of the input distribution.  A minimum of 1,000 sampling iterations are run in order to aggregate PGC province data into area totals, and province totals into the national total.

@RISK also allows for the consideration of dependency relationships among variables. While the value of an independent variable is unaffected by the value of any other variable, the value of a dependent variable is determined, wholly or in part, by that of some other variable. The dependencies of PGC areas are appropriately estimated and included in the simulation where applicable.

PGC’s statistical handling of the assessment results is in accordance with the recommendations of the Energy Information Administration’s evaluation of domestic natural gas estimates. (Energy Information Administration, 1989, An examination of domestic natural gas resource estimates: U.S. Dept. of Energy, Energy Information Administration Rept. SR/RNGD/89-01.)

What is your response to suggestions from some media  reporters that PGC’s estimates are self-serving because its members work in the oil & gas industry? We have seen these comments and are perplexed by them. By analogy, is it reasonable to suggest that it is preferable to have a school teacher perform brain surgery, or have a photographer defuse an explosive device? We cannot think of individuals outside the industry that would have access to geological data, and also possess the geological and reservoir engineering training, education, and experience required to conduct hydrocarbon appraisals. PGC ‘s membership comprises unpaid volunteer experts, advisors, representatives, and observers from  the exploration,  production, transmission, distribution, and service sectors of the natural gas industry, as well as representatives of the financial, academic, and government sectors. This broadly balanced participatory effort results a uniquely supportive environment for intellectual and academic honesty. Having said this, if there are individuals interesting in joining our organization as an evaluator, who are of strong moral character, have access to geological data, can meet experience and educational requirements, and are willing to undergo peer reviews of their work, we will be happy to assess these qualifications for membership. We similarly welcome Observer and Representative class applicants.

I read in the news that PGC has said that its resource estimates show that the U.S can meet its natural gas needs for 100 years. Is this true? PGC has never issued a statement that the U.S. has enough natural gas resources to last 100 years. These are statements made by others outside our organization who make that calculation (dividing total resources by annual production volumes). While our report reveals that America has a significant endowment of natural gas resources, PGC has no mandate to determine the future pace of development of these resources. We state emphatically in our report that  the estimates are “base-line” estimates in that they attempt to provide a reasonable appraisal of total U.S. natural gas resource potential—an appraisal that is not subject to the assumptions of the time of development of the resource, life span of the natural gas industry, or specific price to be paid for the produced gas. No consideration is given whether or not this resource will be developed; rather, the estimates are of resources that could be developed if they are needed and adequate price/cost relationships exist.

What qualifications do I need to become an “evaluator” class member of PGC?  We look for highly motivated individuals who are willing to donate personal time every other year to produce estimates covering an assigned geographic area. We require proof of appropriate geological and/or reservoir engineering degree(s) and a history of experience that includes conducting geological studies and/or hydrocarbon appraisals. You will also need to have access to geological data and historical drilling and production information for use in evaluations. Seismic data is beneficial. (No worries; all proprietary data is held confidential).  You must agree to participate in a peer review session that describes the data available, the methodology used to prepare estimates, and discusses the estimates derived. We also encourage attendance at our two annual meetings, although this is not mandatory. There is no compensation for service; we simply receive personal satisfaction that our effort will benefit, for example:  energy companies engaged in planning,  exploring for, developing, transporting, and distributing natural gas;  financial analysts who need to appraise the financial outlook of companies that are impacted by availability of natural gas;  educational institutions that need to plan for and develop curriculums which educate and train students as future natural gas industry employees; and government branches  engaged in the formulation of energy policies that include natural gas.

Are PGC’s members paid for their work? PGC is an all-volunteer effort. We do not provide any compensation to Officers, Directors, or members.

How do I become a member of PGC? You have inquired and now we are interested in you!  Please send us your contact information  along with a resume that shows employment and educational history. Also indicate your areas of expertise and geographic area(s) of interest.