Future Natural Gas Supply Reactions to Higher Prices - Projections of the A.G.A. TERA Model

Abstract

Future Natural Gas Supply Reactions to Higher Prices - Projections of the Prices - Projections of the A.G.A. TERA Model American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc. Abstract The paper describes the total energy resource analysis (TERA) model developed by the American Gas Association. Emphasis is given to the submodel on natural gas supply. U.S. gas supply projections developed by TERA, using three quite different gas pricing policy scenarios, are reviewed for the time period 1975 to 1985. Study results indicate that significant gas supply increases during the period 1980 to 1985 will require substantial near-term producer price increases and other policies favorable to price increases and other policies favorable to domestic energy development. Introduction In the spring of 1971, when the U.S. natural gas supply shortage was becoming increasingly apparent as the number one problem facing gas transmission and distribution utility companies, the American Gas Association (AGA) initiated design of the "total energy resource analysis model," or TERA model. As now developed, TERA is a computerized simulation model of energy supply, demand, and prices, with special emphasis on the gas industry. TERA incorporates data on all fuels and electric energy in different market sectors for each census region of the U.S., including factors that influence the energy industries-demographic, economic, technological, environmental, regulatory, legislative, and competitive. TERA has been developed to assist the AGA staff and member companies in developing long range planning studies, policy positions on issues facing the gas industry, and responses to the many questions being asked about the future of this industry. TERA is helping to answer such questions as the following.What producer prices for natural gas will be required to reverse the 6-year reserves decline being experienced now, and when could this reversal occur?How much will natural gas demand be reduced as producer prices increase?What impact will supplemental gas supplies have on total supplies, demands, and consumer prices for gas?What effect will environmental regulations have on gas prices, demands, and supply schedules?What effect will various pricing and supply scenarios for competitive fuels have on the supply and demand for natural gas? TERA is now answering these types of questions and showing how the answers vary under the influence of changing input variables.