In early July, Jimmy Rogers told us, "Longer term, natural gas production is declining in North America."
A few weeks later, in our interview with Sprott Asset Management CBM research analyst Eric Nuttall he echoed those remarks, saying, "North American natural gas production has been in decline for several years."
Nuttall added, "Most incremental production is coming from smaller, more expensive-to-drill, thinner economic, higher decline pools and reservoirs." He pointed to CBM as where the action would be, "The growth areas have largely been unconventional."
And that is where the Chinese may be headed in order to obtain additional gas reserves.
A researcher for China United Coalbed Methane (CUCBM) wrote, "By 2010 and 2020, the shortage for the natural gas supply in China will be 30 billion to 40 billion cubic meters and 90 billion to 100 billion cubic meters respectively."
Professor Sun Maoyuan wrote on behalf of the CUCBM, "It is estimated that the coalbed methane resource is between 30 trillion and 35 trillion cubic meters, which is equivalent to the resource of natural gas.
In China's 13 major coal-bearing basins, 10 coal-bearing basins are located in North China with 22.27 trillion cubic meters of coalbed methane resource, accounting for 68% of the total coalbed methane resource in China."
He explained China's goal was to reach 10 billion cubic meters by 2010 and double that goal five years later. He wrote, "It is estimated conservatively that coalbed methane will account for 20 – 25 percent of the gas energy."
Since 1998, when CUCBM signed its first production-sharing contract (PSCs) with Texaco, nearly thirty such CBM concessions have been awarded. Major oil companies, and those with the closest connections to Chinese government officials, were the earliest awarded, such as Arco, Phillips, Greka and Australia's Lowell oil.
Smaller U.S. firms, such as Far Eastern Energy, were later invited to participate.
James Finch contributes to StockInterview and other publications. Visit http://www.stockinterview.com to read all of his archived articles.
