The gas demand is a user specified variable which will grow over time. Near the start of the 20th century, gas demand was around 1 TCF/yr. Demand is satisfied by gas production which drains the stock of proven reserves. The reserve production ratio is used to measure the adequacy of proven reserves. If there were 20 TCF of reserves at the start of the century, for example, the ratio would have been 20 years. In other words, demand could be satisfied for 20 years even if there were no further discoveries.
Figure 1. Introductory model of gas reserves.
To explain the discovery of gas, we need to know the industry rational for investing in exploration and the likelihood that the investments will lead to new discoveries. Naill assumed that the industry strives to keep the proven reserves at an adequate level, as measured by the reserve production ratio. He selected 20 years as the target value. Figure 2 expands the introductory model to simulate the discovery of gas based on this target. Let's initialize the model with 20 TCF of proven reserves, 1,000 TCF of unproven reserves and a gas demand of 1 TCF/yr. The initial value of the reserve production ratio is 20 years, and the target ratio is set at 20 years.
Figure 2. Simple model to experiment with a "thousand year supply" of natural gas.
The model assumes that the discovery of gas is identical to the discovery required to keep the proven reserves sufficiently large to provide "20 years of gas." If gas demand were to remain constant over time, the discovery of gas need only be 1 TCF/yr to replace gas production. With 1,000 TCF of unproven reserves, it appears that we are creating what might be called the