Louisiana's Natural Gas Balance

Louisiana continues to be a net exporter of natural gas to the rest of the country. This trend is not expected to change in the near future. Total 1988 consumption of natural gas in Louisiana of approximtely 1.4 TCF represents 29% of total Louisiana gas production of 4.9 TCF and 8% of the total U.S. consumption of 18.0 TCF. On the other hand, 1988 Louisiana production represents 30% of 1988 estimated total U.S. production of 16.3 TCF.

Sources of Gas Currently Available to Louisiana

Texas - State Controlled Production

The first out of state source of supply that comes to mind is Texas, the only state that produces more gas than Louisiana. Total 1988 production for Texas is estimated to be around 6.2 TCF. Significant quantities of Texas gas are already transported through Louisiana. In 1987, Louisiana transported 0.1 TCF into Texas, but Texas transported 1.5 TCF into Louisiana. Most of the Texas gas is transported on through the state into the interstate gas market (See Figure 1.), but an indeterminate amount is actually consumed in Louisiana. At the end of 1987, Texas controlled proved gas reserves were at 42.2 TCF.⁴ As the need develops, significant quantities of Texas gas, which is already readily accessible to Louisiana users, will be available on a cost competitive basis.

Figure 1. Principal Interstate Natural Gas Flow Summary, 1987 ³

Federal Offshore (OCS) Gas - Louisiana and Texas

Access-to Louisiana OCS

Until recently, Louisiana OCS gas was dedicated to the interstate pipeline system. Access to this gas was severely restricted and limited. In fact, Louisiana OCS gas had traditionally been more available to other states than to Louisiana where it is landed, processed, and pipilined. This, fortunately, is no longer the case, as actions taken by the Federal Energy Regulatory Commission (FERC) over the last few years have essentially deregulated OCS gas. Louisiana OCS (as well as Texas OCS) gas is now available to Louisiana purchasers on an open access basis.

Louisiana OCS

Though Louisiana OCS gas passed peak production of 4.2 TCF per year in 1979, it is holding relatively steady at 3.2 TCF right now. This production level is anticipated to hold for a couple of years more before resuming a gradual decline. Assuming gas prices have recovered when the decline resumes, the decline rate is expected to be moderated for several years by significant quantities of gas awaiting sufficient economics to justify extending pipelines and gathering systems to fields not yet marketed. Louisiana OCS represents 72% of current U.S. gas production from all federal offshore areas and approximately 89% of cumulative federal offshore production. Proved reserves of Louisiana OCS gas stood at 23.7 TCF at the end of 1987.⁴

Texas OCS

Texas OCS territory was not developed as early, nor has it been developed as extensively as the Louisiana OCS. It is not surprising, then, that Texas OCS production, at 1.2 TCF during 1987, is still rising. Proved reserves of Texas OCS gas were 7.3 TCF at the end of 1987.⁴ Some of this resource can potentially be obtained to supply Louisiana gas consumers.

Canadian Gas

It is unlikely that Canadian gas will be consumed in Louisiana in the foreseeable future. Gas production, though, already competes with Canadian gas on a displacement basis. There is already competition in certain market areas in the Midwest and Northeast in which Canadian gas competes head-to-head with Louisiana gas. This has enabled a recently reported transaction in which Louisiana gas was made available in Louisiana through a deal in which Canadian gas was purchased for indirect use in Louisiana. In effect, Canadian gas was exchanged for Louisiana gas at the other end of the pipeline fed from Louisiana.

U.S. gas imports from Canada set a record of 1.266 TCF 5 in 1988 (7% of U.S. supply) and are predicted to increase by 5% to 1.329 TCF in 1989.⁵ Though present Canadian export pipeline capacity is 1.4 TCF, Canadian exports to the U.S. are expected to continue to increase as the result of several factors:

- Significant expansion of Canadian pipeline export capacity in progress, being planned, or in regulatory approval stages

- Additional pipeline capacity in U.S. consuming areas

- Resolution of U.S. pipeline take or pay obligations

- FERC initiatives toward open access of U.S. pipelines

- Changes in federal Canadian regulations that improved price competitiveness of Canadian gas

- Ratification of the Canadian/U.S. Free Trade Agreement

As Canadian gas imports increase into the Midwest and Northeast, there is less pressure to supply these markets through longer pipelines from the Gulf Coast.

LNG Imports ⁶

Imports of liquified natural gas (LNG) into the U.S. are not presently cost effective. However, Algeria, the principal supplier of LNG to the U.S. in the past, has shown interest in re-establishing U.S. markets through a more flexible position in negotiating price, volume, and contract terms. LNG imports into the U.S. reached a high of only 0.269 TCF in 1979. Distrigas Corporation's LNG terminal in Everett, Massachusetts has been the only U.S. facility to receive LNG since 1985.

Truckline LNG Company has an LNG facility at Lake Charles that has a capacity of 0.165 TCF per year. If this is reactivated, which has been discussed, Pan National Gas Sales, Inc. (Panhandle) would receive LNG from Sonatrach, Algeria's national oil and gas company. Pan National says that imports are not expected to resume until the U.S. spotprice reaches $2.00 per thousand cubic feet.

The Gas Bubble

The infamous two year gas bubble is going into about its seventh year now. Far be for me to predict when the bubble will finally "burst." The general opinion still seems to be that the end is near, that maybe the surplus will be worked down in - you guessed it - about another two years! The best effort at quantifying the bubble is probably the surplus gas data collected by the Energy Information Administration of the U.S. Department of Energy. This information, summarized in Table 1, indicates that the volume of surplus gas is indeed declining. Estimated surplus gas for the six month period January through June 1989, is 1.057 TCF, the lowest level since the period April through September 1982.

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This page updated March 3, 2008