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IHS: Tech to Push Domestic Reserves 'Well Over' 3,000 Tcf

The United States likely will add 11 Bcf/d of natural gas to its reserves this year at total finding, development and completion costs under $3.00/Mcf, while a review of 45,000 unconventional oil wells is finding "tremendous" growth in oil reserves, preliminary IHS Inc. data indicate.

IHS industry relations chief Pete Stark said "key evidence" indicates that technology will push domestic gas reserves "well over" 3,000 Tcf, which would be higher than federal and private analysts have pegged. According to IHS, gas production has grown 15.7 Bcf, or 31%, from January 2007 to March 2012.

Stark, the senior research director for IHS CERA and a trained geologist, shared some preliminary proprietary data from new research as part of a panel discussion earlier this month at the 2012 Rocky Mountain Energy Epicenter Conference in Denver, presented by the Colorado Oil & Gas Association.

The impact of evolving technology in unconventional gas and oil cannot be overstated, said Stark. IHS consultants have been "revisiting" technically recoverable reserves numbers in the United States and all signs point up, he said.

"The industry is alive, well and growing," Stark told the audience. "Look at what happened in 2004 to 2012 in U.S. gas production. We had a plateau of about a decade [before that period] where, in spite of drilling more, the industry was only able to sustain."

Today, the United States is in the "third wave" of the unconventional evolution. The first wave rolled in from the Barnett Shale, followed by the Fayetteville and Woodford shales, he noted. The second wave followed in 2010, post recession, with massive technically recoverable reserves numbers tallied in the Haynesville and the Marcellus.

"Now we are in the third wave, that of natural gas liquids and gas associated with tight oil plays," said Stark. "We've added 15.7 Bcf/d since 2007. That's a huge, huge plus. Over the same period of time gas rigs that numbered 1,700 were down to a week ago to 495. That's a tremendous change in gas supplies...

The reason for that is multi-fold, but primarily it's liquids [gains] associated with new plays and also technology," said Stark. Technology "is enabling companies to hone their costs and to be successful in a low-cost environment."

Stark wasn't able to share some of the data since IHS clients have yet to receive it. But the company's proprietary research is a bellwether in the industry.

In March IHS said the Marcellus contained an estimated 267-534 Tcf of technically recoverable reserves, which was at least three times above a recent estimate by the U.S. Geological Survey. IHS's latest estimates would swallow those by the Energy Information Administration, which last year pegged U.S. technically recoverable shale reserves at around 750 Tcf.

The new IHS data took a "look forward from the bottom" of the North American plays, with the Haynesville and Fayetteville now bottoming out in terms of where there is production ongoing, to heavy drilling areas, such as the Granite Wash, which was considered an oil play but which is producing a lot of gas. Also in the growing mix of gas supplies are the Rocky Mountains, which "continue to deliver significant supplies," said Stark. The Rockies almost were left behind in the early unconventional waves because tight sands cost more to produce less. Technology has changed that.

The positive impact on the jobs market and state coffers hasn't been lost in the debate, but Stark said no one's talked about the impact to future gross domestic product (GDP) from not having to import liquefied natural gas (LNG) from foreign sources.

"We've offset 9 Bcf/d from projected LNG imports," he told the audience. "That's not trivial. That's almost $30 billion a year in GDP to the U.S. that wouldn't have been here otherwise. We would have had money flowing out of the country...Now we're talking about launching U.S. exports...

"There's enough on the drawing board to make substantial volumes between now and 2020."

Tight oil supplies are following the same path, said Stark.

IHS has analyzed 45,000 domestic oil wells to date and looked at the sum of the estimated ultimate recoveries, play by play. The Bakken led all producers, followed by the Midland/Wolfberry play in the Permian Basin and the Eagle Ford Shale. What IHS determined is that there is around 5.2 billion boe from the 45,000 wells "so far," which will "drive a tremendous increase in oil supplies." For example, the United States has added 800,000 b/d in just the past two years, he said. In the Rockies, where tight oil production has become king, the United States added 161 million bbl between 2002 and 2011.

"The issue is horizontal wells, all of the drilling horizontally," said Stark. "It's happening all over the country. Technology has leveraged a number of impacts. When you look at the early developments from the shales, it was in the Barnett and the Pinedale [Anticline]. Those took a long time to ramp up. But look what happened in just two years in the Haynesville, Marcellus and Eagle Ford. It's translated into rapid development on the oil side as well...

"As companies learn how to fine-tune their riling, fracking and completions, it will drive profitability and new supplies. The North American liquids supply outlook has tight oil and oilsands leading the way...The U.S. is poised to deliver 3-5 million b/d in the 2010-2020 time frame in the onshore."

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