Most of the world thinks that Oil & Gas people are a bunch of liers. Nothing new there. I worked on preparing the SEC 10K reports for Amoco for 10 years, and I'll tell you that the SEC reserves definitions are set in concrete and companies play games with them at the company's peril (we were audited by some pretty sharp guys 8 years out of 10).
Reserves numbers do not have a time horizon. If a well is producing 25 MCF/day economically, is not declining, and has 275 MMCF of Proved Developed Reserves then it can be reasonably expected that it will take 30 years to recover the reserves. That 275 MMCF number might only be 10% of the actual gas in the ground, but the company feels that the other 90% is not economically recoverable (e.g., they might feel that the integrity of the production casing might only be 30 years and they haven't figured out an economic way to increase rate, and the well doesn't make enough gas to justify the capital to drill a replacement). If economic conditions change then all of those assumptions are revisited. Originally oil companies felt that at $5/bbl they would recover about 20% of the original oil in place in the Permian Basin of West Texas and East New Mexico. At $20/bbl companies decided that setting pumps might be cost effective and raised the number to 35%. At $30/bbl water floods became economic and the recovery increased towards 40%. As oil prices were approaching $100/bbl in the mid-1980's the companies decided that a CO2 flood made sense and upped the reserves to nearly 50% of original oil in place. Same resource, different economic climates.
In terms of gas to supply an increasing electric demand, your friend is both right and wrong. At today's (depressed) natural gas prices, no one is drilling development gas wells so a new plant coming on line will not spur an increase in supply. If the price doubles (to around $6/MCF) there are absolutely an adequate number of identified, leased drilling sites and existing gas-delivery infrastructure to satisfy any generator-construction schedule envisioned.
The price is low today because of a glut of gas from the new shale gas plays. Those fields are running at a small fraction of their potential and swamping the U.S. gas market (and international markets are closed due to EPA taking decades to approve export facilities). At a decent price to the producers there is plenty of gas, but what does a "decent price" do to the economics of gas-fired electric generation? Mostly the tipping point is around $5/MCF where the economics favor coal. At around $10/MCF the economics favor both coal and fuel oil over gas for electric generation. At less than $6/MCF the drilling economics favor oil drilling.
So I guess if someone turns on a multi-megawatt gas-fired station and finds that gas price has gone up, we are big fat liers yet again. The mainstream news outlets will be all over what liers we are and Congress will start hearings. Emotion will trump economics yet again and Congress will have to "do something" probably something stupid like price controls or "windfall profits taxes" both of which have historically shut down drilling regardless of pricing (silly emotions control both sides of the coin).
David Simpson, PE
MuleShoe Engineering
"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
