At the present time, the United States uses approximately 62 billion cubic feet ("Bcf") of gas per day. The production of natural gas from all sources in the United States, including unconventional ones such as coal bed methane ("CBM") and shale gas totals approximately 52 billion cubic feet per day, or a deficit of some 10 Bcf per day.
Much of the projected growth in natural gas consumption throughout the world is in response to rising demand for natural gas to fuel efficient new gas turbine power plants.
As indicated in the "Consumption versus Production Ratio" graph above, there is a serious deficit in gas supply that cannot be made up in the near term from Liquefied Natural Gas ("LNG"), or from Canadian or Mexican imports. Therefore, natural gas prices in the United States for the foreseeable future will generally reflect either: i) the lower economic limit of new gas fields developed mostly from unconventional sources; or: ii) the cumulative cost of developing gas reserves in a foreign country, liquefying such gas, shipping it internationally, gasifying it portside in the United States, then transporting it to United States burner tips.
It is for these many reasons that natural gas prices in the United States today generally range from a low of US$7/MMBtu to levels as high as US$18/MMBtu depending upon seasonal demand. Such prices make the development of unconventional gas very inviting. It makes the testing and development of conventional gas even more attractive.
Significant unconventional gas reserves take some time to aggregate because of the low reservoir pressures, low permeability and low ultimate recoveries per well that generally characterize this resource in many basins in the United States, Canada and the Rocky Mountains. By contrast, natural gas from conventional reservoirs, such as those underlying the Louisiana gas provinces targeted by Pryme, are far more permeable - generally resulting in higher rates of production, significantly higher reserves and lower production costs.
The current worldwide oil production level is approximately 80 million barrels per day. Of this amount, the United States consumes approximately 20 million barrels, or 25% of the total. This is in light of the United States population, which is about 5% of all the world's inhabitants. Moreover, the United States holds only approximately 3% of the world's oil reserves, and that United States resource is characterized by production that declines at a rate in excess of 5% per year.
None of the foregoing takes into account the potential growth in demand for oil of China, followed by India. Both countries at the moment consume about 10 million barrels per day, combined. According to the International Energy Agency, the Organization of the Petroleum Exporting Countries ("OPEC") cartel now supplies about 38% of the world oil market. The Asian population and standard-of-living growth added to infrastructure development in the region, contrasts with declining oil reserves in the North Sea, the Caspian Sea, the Gulf of Mexico and West Africa.
As in the case of the harder-to-develop unconventional natural gas discussed previously the relatively abundant, more permeable oil reservoirs have already been found and production from them is in decline on a worldwide basis. What remains are oil resources that have no natural energy in situ, nor do they have much permeability. Moreover, they generally contain petroleum of high viscosity that is difficult to unlock from its native rock.
Such characteristics translate into a very high economic limit for modern-day oilfields that require, in order to produce commercial quantities of product, the energy inputs of steam, or water under pressure, or carbon dioxide, or the heat of combustion in order to supplant reservoir energy that has long since depleted, or was lacking in the first place - such as "dead" oil in place. In addition are the logistical problems of artificial lift and lateral surface movement of sluggish produced fluid to some refinery that must be specially designed to process this feedstock of low volatility and yield. All these links in the production, transportation and process chain have a very high capital cost that cannot be economically justified with oil prices much below US$35/Barrel.
By contrast, production from conventional oil reservoirs such as those in the Louisiana Middle Wilcox Basin in LaSalle Parish to be purchased by Pryme, and deeper oil reservoirs that also happen to be prospective of oil within the gas provinces targeted by Pryme in central Louisiana, are more permeable, have higher, virgin reservoir pressures and have higher saturation of low-viscosity oil - resulting in higher rates of production, significantly higher reserves and lower production costs.