North America's potential natural gas resource base has risen by two-thirds since 2010, and more than half could be produced at a current Henry Hub breakeven of $3.00/MMBtu or less, according to IHS Inc.
Researchers said 1,400 Tcf of potential gas resources combined in North America is recoverable at current, real-term Henry breakeven prices of $4.00/MMBtu or less, which is 66% higher than 2010 estimates. About 800 Tcf of the total could be produced at current Henry breakeven prices of $3.00 or less, IHS estimated.
"It has become clear in recent years that the unconventional oil and gas revolution in North America has been the most significant energy innovation so far this century," IHS Vice Chairman Dan Yergin said. "What is truly remarkable is that early estimates for the size of resource base -- game changing in their own right at the time -- still proved to be conservative. Technological innovation, as is often the case, has proven to be the true X factor behind this growth."
The IHS report, "Shale Gas Reloaded: The Evolving View of North American Natural Gas Resources and Costs," updates research issued five years ago (see Daily GPI, March 11, 2010). In the update, researchers examined 38 major oil and gas plays in North America. Not only has the 176 Tcf of gas produced since 2010 been replaced by resource additions, but the resource base has been extended while the cost of producing many of the remaining resources has been reduced sharply.
The reductions in drilling and completion costs, new discoveries and productivity gains "are the major reasons for the expansion of the resource base and lower breakeven costs," researchers found. They pointed to several factors:
Improved understanding of subsurface geology;
More use of technology, including 3-D seismic;
Development of specialized hydraulic fracturing techniques; and
Emergence of new gas plays, such as the Utica Shale.
Unconventional gas technology also was transferred to tight oil plays, which produce associated gas, and that also has contributed to booming gas resources.
"Largely undeveloped six years ago, associated gas production from oil and liquids rich gas plays has doubled in the past four years," the report noted. Researchers estimated that about 250 Tcf of associated gas is estimated to be contained in many onshore plays, including the Permian Basin, as well as the Eagle Ford and Bakken shales.
"All told, this has significant implications for North American and global energy markets," IHS chief strategist for global gas Michael Stoppard said. "Domestically, continued low gas prices will improve the competitive position of gas in power generation. It will also validate the decisions of chemical companies that have chosen to build up their operations in North America owing to the low cost of natural gas fuels and feedstocks. On a global scale, continued low Henry Hub prices will contribute to the competitive position of North American exports of liquefied natural gas."