Abstract

Worldwide natural gas resources are emerging to be an important contributor in meeting the rapidly increasing demand for energy. Natural gas in the United States has been analyzed by the National Petroleum Council (NPC) to be an important component of the U.S. energy demand, representing approximately one-quarter of that demand. Natural gas demand was forecast to increase from 22 Tcf in 1998 to 31 Tcf in 2015. Increased demand was predicted from economic growth and increased environmental concerns that favor natural gas over oil and coal. U.S. lower 48 natural gas production was also forecast to increase from 19 Tcf in 1998 to 26 Tcf in 2015. The shortfall in supply relative to demand is expected to come from imports, mainly from Canada. The goal of 31 Tcf of supply by 2015 can be achieved at reasonable prices, however, only if exploration and production technology improvements continue.

Although the Permian Basin of Texas is historically an oil province, interest in natural gas resources has recently increased as a result of declining oil production and improved natural gas prices. Much of the Permian Basin natural gas production to date has been a byproduct of oil production. Little research or commercial effort has been directed at examining incremental natural gas production opportunities and the future resource potential in the Permian Basin. The Yates Formation in the Permian Basin contains such an underexploited gas resource. For example, in Shafter Lake Field, Andrews County, natural gas from the Yates Formation has been historically underexploited in lieu of deeper occurring oil reservoirs, and it has been produced and sold at a discount because of its high nitrogen content and low pressure. Regional use of this natural gas as a fuel source for natural gas-fired turbines or mixing of the high-nitrogen gas with other low-nitrogen gases may increase its value and expand its market. In light of the growing importance of natural gas resources, supply and demand issues in the context of the world, the United States, and the Permian Basin will be examined in detail.