AMENDMENTS TO THE NATURAL GAS ACT

TUESDAY, APRIL 15, 1947

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee met in room 1334, New House Office Building, at 10 a. m., pursuant to adjournment, Hon. Charles A. Wolverton (chairman) presiding.

The CHAIRMAN. The committee will come to order.

We will proceed with the hearings which we started yesterday.

I would like to call to the attention of the prospective witnesses the necessity of conserving time. I have had an opportunity to go over some of the statements that are to be given before the committee. They would seem to be repetitious in effect. I wish that, therefore, it would be possible for the witnesses who are called to condense as far as possible the statements that they have made, giving to the committee the parts which they wish emphasized, and on behalf of the committee I assure you that the full statement will go into the record; but if you will have in mind what I have just stated as to the necessity of conserving time it will help in that respect and it will be greatly appreciated by the committee.

The first witness will be Mr. John H. Murrell.

STATEMENT OF JOHN H. MURRELL, GENERAL PARTNER IN AND GENERAL MANAGER OF THE FIRM OF DeGOLYER & MacNAUGHTON, DALLAS, TEX.

Mr. MURRELL. Mr. Chairman and gentlemen of the Committee. The CHAIRMAN. Mr. Murrell, will you give your name, state your position, and proceed with your statement?

Mr. MURRELL. My name is John H. Murrell. My address is 1000Continental Building, Dallas, Tex. I am a general partner in and. general manager of the firm of DeGolyer and MacNaughton, petroleum geological and engineering consultants. I am a registered petroleum and geological engineer in the State of Texas and licensed to practice the profession of petroleum and geological engineering under the laws of the State of Texas.

I graduated from the United States Military Academy in 1930 and' served in the Army about 3 years, at which time I was retired because of a physical disability incurred in the line of duty. From that time until 1941, except for 1 year of study at the University of Texas, I worked in the field, and as an engineer and geologist.

In 1941 I joined the staff of Dr. E. DeGolyer, Director of Conservation and Reserves Division of the Petroleum Administration for War. Under Mr. DeGolyer's direction I was continuously engaged in the work of estimating and reviewing estimates of gas, condensate, and oil reserves of all the fields of the United States and of all sources of hydrocarbons in the world.

Since leaving the Petroleum Administration for War in the fall of 1943, I have been associated with the firm of DeGolyer and MacNaughton. I have been directly in charge and have done a considerable amount of the detail work in preparing estimates of the gas, condensate, and oil reserves of the fields of the United States and of the gas, condensate, and oil fields of other countries of the world.

Our firm, DeGolyer & MacNaughton, has had in hand for the past 3 years a detailed study of the Nation's natural gas resources and I am here today to present our opinion of the recoverable natural gas reserves of the United States.

Petroleum reserves can only be estimated if the basic facts on reservoirs are available. This information can only be obtained from the operators of the wells. To make our estimates on our previous annual estimates of natural gas reserves, we have obtained much of the necessary data from a great many operators and on a wholly confidential basis and on our promise not to break our estimates down to the individual fields. It was only by such promise that we were able to obtain the information upon which to make our estimates. Therefore I must tell you at the outset that no individual field estimates will be given nor will any of the basic data upon which the estimates are predicated be released by us.

It is our opinion that as of January 1, 1947, the United States had a recoverable gas reserve in excess of 151,000,000,000,000 cubic feet. This estimate, except for the States situated in the Petroleum Administration for War District No. 1-Appalachian area-includes only those fields which our data indicate have reserves of 20,000,000,000 cubic feet or more. Reserves have been calculated on a pressure base of 16.4 pounds per square inch and at 60° F. temperature.

We are still at work on some of the fields and it will be at least a month before we shall have completed our review of the oil and gas reserves of all fields in the United States as of January 1, 1947.

Reserve estimates are based on (1) geological data, (2) information obtained from the drilling and testing of wells, and (3) production performance of wells. However, after an analysis of all available evidence, any estimate of reserves rests on judgment.

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Available data can be contradictory; therefore, the total evidence must be weighed. Complete information is seldom available and must be filled to the best judgment of the appraiser. Two skilled appraisers may arrive at estimates varying as much as 20 percent, working independently with identical data, because of the personal equation, experience, if you will.

Our estimate of the gas reserves of the United States is predicated upon our judgment of the fundamental engineering and geological data available. The reserves for the Appalachian area, Indiana and Illinois, which are comparatively unimportant volumewise, were based on analysis of composite decline curves and pressure data.

The gas reserves of the fields in the other States were appraised, horizon by horizon, and field by field. In preparing our estimates, all the detailed data available were used, including well logs, formation analyses, structure and isopachous maps, and reservoir performance data.

In regard to the basic data, it is our opinion that the information was adequate and substantiates our estimate that the gas reserves of the United States are in excess of 151,000,000,000,000 cubic feet. My personal opinion is that this estimate is low, as are all estimates which must be proved by available information.

From a broad standpoint, we are still of the opinion expressed by Mr. DeGolyer at the Federal Power Commission hearings, Docket G-580, that for any national planning, we would be well advised to consider our gas reserves to be of the order of magnitude of 200,000,000,000,000 cubic feet.

A break-down of the estimated proved recoverable reserves and the estimate of 1946 production segregated to Petroleum Administration for War Administrative Districts with a partial break-down by States is detailed on the following page.

Data on recoverable gas reserves of the United States as of Jan. 1, 1947

Not.-All gas igures are in billions of cubic fect of gas at a pressure base of 16.1 per square inch and at a temperature of 60° F.

However, in connection with the reserves, any effort to arrive at any expression of years' supply, the reasons are many why such arithmetic should not be undertaken, but the most important one is that the reserves shown as indicated on the detail, are only for some 600 comparatively large pools, whereas the gas-producing fields are far in excess of 600 individual pools.

Natural gas reserve estimates made since 1919 indicate a steadily increasing quantity of available proved natural gas. The following estimates, unless otherwise noted, are as of the first of the given year:

1 Pressure base of 16.4 pounds per square inch absolute and at 60° F.

2 Pressure base of 14.65 pounds per square inch absolute and at 60° F.

It will be noted, however, that in 1945 we made an estimate and found the natural gas reserves to be about 140,000,000,000,000 cubic feet; in 1946 about 144,000,000,000,000 cubic feet and in 1947 about 151,000,000,000,000 cubic feet. Those are the reserves that we estimated are still available as of the first of each one of those years and do not take into consideration the production from the fields during those years.

Today's healthy condition of natural gas reserves has been brought about by accident and not by administrative planning. Gas has been found as a byproduct in the search for oil. To prospect for natural gas itself is virtually unknown, except in California, the Appalachian area, and a few Northern States. On this basis, one might assume that future oil prospecting will result in the discovery of gas reserves in approximately the same ratio to the discovery of oil reserves as in the past. We do not think this will be the case.

Until quite recently, the oil industry was little concerned with gas. In the past, while drilling wildcat oil tests, many gas shows were plugged and abandoned or neglected because of inaccessibility to market or because of the prevailing low price paid for gas. This practice will not continue in the future.

Now when gas is encountered, it will be exploited because additional markets and uses have been and will continue to be developed. If there is a steadily increasing market demand for gas, underground reserves will acquire values not previously recognized and exploration for gas itself will be carried on in favorable areas instead of in a comparatively few localities where additional supplies of gas are required.

In our opinion one of the greatest opportunities for the discovery of additional petroleum reserves is deeper drilling, not only on the

crest of known pools but on their flanks. When one considers stratigraphic type traps as well as structural traps-and in passing our quest has been for oil and not for structural traps-it seems probable that a geological abnormality, such as occasions a normal structure, should give rise to a dozen traps rather than to a single one. For the most part, our prospecting to date has concerned itself only with the central locus. Flank drilling should result in the discovery of many additional stratigraphic traps.

Within the last decade, drilling to greater depths has resulted in the discovery of an increasingly greater proportion of mineral hydrocarbons in the gaseous phase than in the liquid phase. In other words, the deeper prospecting of the past 10 years has resulted in the discovery of a greater proportion of gas to oil than previously. Data available make it appear likely that this proportion will continue to increase with continued drilling to greater depths. If oil is found by drilling to greater depths, it will usually contain a greater quantity of gas in solution than would be found at shallower depths. Also greater concentration of hydrocarbons in the gaseous phase will be discovered. These statements are practically basic axioms to those engaged in the search for additional reserves. Of course there are exceptions to these axioms but by averages they will hold true.

With the above knowledge at hand and with the search for petroleum in the United States at an all-time high, and expected to increase as materials become available-and right in that connection we are having a hard time getting casing just for oil wells, not talk about gas wells-there can be no reasonable doubt left in the minds of intelligent men that large quantities of additional gas will be found. Producible oil in place in the earth contains gas in solution somewhat as gas is in solution in a bottle of soda water. The amount varies from the very low 20 to 30 cubic feet per barrel in certain fields to the very high thousands of cubic feet per barrel in some of the condensate fields.

A fair, average, normal figure for oil horizons found at depths from 4,000 to 10,000 feet would be 400 to 1,000 cubic feet of gas per barrel, respectively. Oil cannot be produced without producing this gas and, once the gas is produced, only one of three things can be done with it: It can be utilized, put back into the ground, or flared. Although much gas is being put back into the ground at present, under our system of divided ownership of oil fields, such procedure is not always feasible because it can disturb the relative rights to the oil still unproduced. In other cases it is not feasible because of the comparatively small amount of gas and the expense involved.

This brings us to our next points: Markets and expansion of markets. Our natural gas, like other minerals, is a source of wealth only when it can be exploited and made available to the country in usable form.

Those long in the oil industry will remember that there have been recurrent alarms that the oil resources would soon be exhausted. Certain interests are now trying to invoke so-called gas conservation measures for what seems to be ulterior motives. Ears willing to listen are being filled with the story that the reserves of gas are not sufficient to justify the construction of new transmission lines and expansion of present facilities. Nothing is further from the truth.

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