Displacing Imported Oil with Natural Gas

Last year’s invasion of Kuwait by Iraqi forces and the resulting Persian Gulf war have again thrown into question our degree of dependence on foreign oil. While the world oil market has adjusted to the Persian Gulf events and the U.S. is not in immediate danger of an oil shortage, it is incumbent upon the interstate natural gas pipeline industry to examine its ability to make up any energy shortfall which may result from future oil disruptions.

With these concerns in mind, INGAA conducted a survey of its membership to determine the extent to which natural gas could displace oil in certain electric utilities and industrial plants. Pipelines representing roughly half the market responded that use of 1.24 Bcf per day of natural gas in such utilities and plants could displace 236,000 barrels of oil per day, or 37% of the average daily crude oil imported to the U.S. fiom Iraq and Kuwait before economic sanctions were imposed. To supply the 1.24 Bcf of natural gas, pipelines would have to build facilities costing a minimum of $1.29 billion. Included in this figure is the construction of $541 million worth of lateral pipe, with each segment an average length of nine miles.

Although the survey results were necessarily incomplete to accommodate the fast-moving events in the Persian Gulf, they conservatively indicate that natural gas could make up a significant portion of imported oil. A more complete survey would doubtless show a greater potential for oil displacement.