Gas reserves in 2005 reached highest level since 1984: AGA

New York (Platts)--31Mar2006

Estimates of natural gas reserves in the US surpassed 197 Tcf at the end
of 2005, marking their highest level in more than 20 years, the American Gas
Association said in a new report Friday.

That increase in reserves does not necessarily translate into higher
production capability, however, the Washington-based trade group said.

AGA examined figures reported by 30 large gas reserves holders, which
account for about 49% of total US reserves, with small independent producers
holding the remainder. Based on those figures, gas reserves last year climbed
about 2.1% from the 193 Tcf reported at year-end 2004, putting reserves at
their highest level since 1984.

While more than 27,000 gas wells were completed in the US last year--the
highest level of completions on record--the bulk of those wells "were drilled
onshore in shales, tight sands and coal seams, which are low-yield and
slow-yield resources," noted Chris McGill, AGA's managing director of policy
analysis and the author of the report.

In addition, some of the strength in reserves can be attributed to
Hurricanes Katrina and Rita, which kept Gulf of Mexico-area gas production
"fairly static" and left gas in the ground that might otherwise have been
produced last year, the report noted.

Large and small producers extracted an estimated 18.3 Tcf of gas from the
estimated inventory of reserves last year, down about 2.7% from 2004 due
primarily to hurricane-related shut-ins.

Moreover, about 5 Tcf of the increase in reserves can be attributed to
merger-and-acquisition activity, AGA noted, as companies such as Chesapeake
Energy, Chevron, Noble Energy and XTO Energy all made substantial purchases
last year.

And while domestic gas production has risen roughly 7% since 1990, from
17.2 Tcf to about 18.3 Tcf in 2005, "AGA's current view of future production
capability is that it will remain in the 18- to 19-Tcf range per annum for the
foreseeable future unless significant policy decisions opening access to
potential resources are made."

---Melanie Tatum, melanie_tatum@platts.com

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