Documentation of the Oil and Gas Supply Module (OGSM)

The purpose of this report is to define the objectives of the Oil and Gas Supply Model (OGSM), to describe the model`s basic approach, and to provide detail on how the model works. This report is intended as a reference document for model analysts, users, and the public. It is prepared in accordance with the Energy Information Administration`s (EIA) legal obligation to provide adequate documentation in support of its statistical and forecast reports (Public Law 93-275, Section 57(b)(2)). Projected production estimates of U.S. crude oil and natural gas are based on supply functions generated endogenously within National Energy Modeling System (NEMS) by the OGSM. OGSM encompasses domestic crude oil and natural gas supply by both conventional and nonconventional recovery techniques. Nonconventional recovery includes enhanced oil recovery (EOR), and unconventional gas recovery (UGR) from tight gas formations, Devonian shale and coalbeds. Crude oil and natural gas projections are further disaggregated by geographic region. OGSM projects U.S. domestic oil and gas supply for six Lower 48 onshore regions, three offshore regions, and Alaska. The general methodology relies on forecasted drilling expenditures and average drilling costs to determine exploratory and developmental drilling levels for each region and fuel type. These projected drilling levels translate into reserve additions, as well as a modification of the production capacity for each region. OGSM also represents foreign trade in natural gas, imports and exports by entry region. Foreign gas trade may occur via either pipeline (Canada or Mexico), or via transport ships as liquefied natural gas (LNG). These import supply functions are critical elements of any market modeling effort