estimated at 65 trillion cubic feet with probable reserves proje an additional 72 trillion cubic feet. Most of Mexico's gas is foun 3 conjunction with oil and must be flared or reinjected when the crude oil is produced because gathering and delivery systems and markets have not yet been developed. Construction has been completed for a 685-mile gas pipeline from the Chiapas-Tabasco oil and gas fields in the southeastern isthmus area to northern Mexico. Initially, two branches of the gas pipeline were planned. The Monterey leg for internal gas consumption was completed, while a Reynosa branch to tie into existing U.S. pipelines was not. Six U.S. companies signed a letter of intent with Pemex, Mexico's national oil company, for gas imports at a price tied to No. 2 fuel oil delivered at New York Harbor. However, the tying of Mexican gas prices to world oil prices was rejected by the U.S. Department of Energy, and plans for the northerly U.S. pipeline leg have been suspended by Pemex. The alternatives to selling the gas in the U.S. now appear to be the limited markets available by pipeline or to make the substantial capital investment required for LNG exportation. Renewed negotiations (as of August 1979) between the U.S. and Mexican governments have proved to be complex and difficult, and have broken down on more than one occasion. Nevertheless, we believe that a gas pricing accommodation will be reached by the U.S. and Pemex and that by 1984 annual deliveries will total 0.7 tcf. Limited pipeline and gas treatment capacity is expected to keep Mexican imports at this level through 1990. But even if the initial contract with Pemex is for a short duration, such as the previously drafted six-year term, renewals are expected, due to the continuing lack of attractive alternatives for Mexico. gap. This level of export is small compared to our total projected gas Thus, we do not foresee a situation in which the availability of gas from Mexico eliminates the demand for Alaskan gas. LIQUEFIED NATURAL GAS IMPORTS Although a number of liquefied natural gas (LNG) import projects have been submitted to U.S. regulatory authorities for approval, thus 64 far only three baseload projects have been fully approved: the Distrigas, El Paso I, and Trunkline projects. Conditional approval has been granted for a fourth, the Pacific Indonesia project, with final approval requiring resolution of the California terminal siting problem. The first two of these projects are expected to result in combined LNG imports of 0.4 tcf in 1980. By 1985, LNG imports are expected to rise to 0.8 tcf, reflecting additional supplies from the Trunkline and PacIndonesia projects. Despite the recent DOE rejection of the El Paso II and Tenneco TAPCO projects, it is expected that at least one additional project will be completed between 1985 and 1990, bringing LNG import levels up to 1.0 tef by 1990. OTHER SUPPLEMENTAL GAS SOURCES During the early 1970s, when real U.S. energy prices were escalating and U.S. gas production was falling, interest in non-conventional sources of gas was high. Some supplemental gas sources such as synthetics produced from liquid petroleum feedstocks (SNG) and low-Btu coal gas are based on technologies that are well known and proven. Other supplements such as high-Btu coal gas, coal seam gas and gas extracted from tight rock formations are dependent on the evolution of new technologies. Because of escalating capital investment requirements, generally unfavorable economics, regulatory controls on feedstock availability in the case of SNG, and environmental restrictions, the outlook for gas supplements is substantially more pessimistic today than it was a few years ago. Synthetic gas production is forecast to be 0.4 tcf in 1980, 0.6 tcf in 1985 and 0.9 tcf in 1990. The contribution of new technology gas to Lower 48 supply is expected to be relatively insignificant during the forecast period, possibly reaching a total of 0.3 tcf per year from geopressured aquifers and tight formations. These new technology volumes are included in the Lower 48 production figures of Table III-1. ALASKAN GAS FORECAST Alaskan gas transported from the Prudhoe Bay area to the Lower 48 is shown in Table III-1 to contribute 0.7 tcf in 1985 and 1.1 tcf by 1990. This forecast assumes construction of the Alaska Highway Pipeline Project with an initial delivery rate of at least 2.0 bcf per day, beginning in 1984 and reaching 3.0 bcf per day by the late 1980s. EXHIBIT F A REVIEW OF ALASKA NATURAL GAS TRANSPORTATION Submitted to the Federal Energy Regulatory Commission May, 1979 57-087 080-38 ICF INCORPORATED 1850 K Street, Northwest. Suite 950, Washington, DC 20006 |