US Mulls Shrinking Oil Supply

SOONER or later, the United States' domestic supply of oil and natural gas will run out. The problem for policymakers is that no one can really say when. A large part of the problem is determining just how much gas and oil the US has left. Documenting proven reserves is fairly straightforward. But estimating undiscovered oil and gas resources is another matter.

The Interior Department's US Geological Survey and Minerals Management Service now estimates that US undiscovered oil reserves are 40 percent lower than USGS's 1981 estimates.

Estimates of undiscovered natural gas reserves fell 30 percent.

If USGS is correct, the US has about 49 billion barrels of undiscovered oil, only 35 billion of which are economically recoverable now. The 1981 estimate was 83 billion barrels. The agency puts natural gas reserves at 399 trillion cubic feet, 263 trillion of which are economically recoverable. Its 1981 natural gas estimate was 594 trillion cubic feet.

The estimates have broad implications. The federal Energy Information Agency says proven US oil reserves are about 27 billion barrels. US annual oil consumption now is about 6.2 billion barrels, a little less than half of which is imported oil. If proven and undiscovered reserves are added together and divided by the consumption figure, it appears that the US has a 20-year supply of oil left. But both government and private energy analysts say such a worst-case scenario rests on several assumptions, any one of which could change.

First, the lower USGS estimates could be wrong. The 49-billion-barrel estimate is only a midpoint estimate between extremes that range from 33.2 billion to 69.9 billion barrels.

``Estimates of unproven reserves are at best educated guesses,'' says Jack Ekstrom, editor of Petroleum Information newsletter. He notes that, in 1909, USGS predicted that the country had only 10 years of oil left.

Or there could be new discoveries of oil and gas. Mr. Ekstrom points to the recent discovery of a natural gas field in the Arkoma Basin of eastern Oklahoma.

The scenario could also change if the US gets a boost from new recovery technology. One promising method is horizontal drilling for oil, which ``means we can ultimately recover a lot more of the crude oil that's in the ground,'' Ekstrom says. Current vertical drilling recovers only about 30 percent of the oil in a field. Another promising development, according to Jim Newcomb of Cambridge Energy Research Associates, is the tapping of natural gas from coal seams.

Finally, the price of oil could return to historic highs of over $30 a barrel or more. This would enable the development of currently unprofitable fields.

But even if the picture improves, ``everyone agrees that domestic supply will go down and imports will go up, and that something must be done,'' says Energy Department spokesman Phil Keif.

The administration is attacking the problem in several ways, Mr. Keif says:

Increasing domestic production. President Bush wants Congress to grant tax incentives to US oil producers.

Research into alternative energy sources. One possibility is running more cars on methanol or ethanol. The Energy Department is also putting $700 million into clean-coal research so that ``utilities can meet environmental standards with coal-burning plants so they don't have to switch to oil,'' says Bob Spier, an analyst with the department's Office of Oil Policy.

Development of a national energy security strategy. The Energy Department this week will begin public hearings around the country on energy policy. Energy Secretary James Watkins will issue recommendations in December.