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ICF Official: Shale Accounts for Half of U.S. Rig Activity

Shale development currently accounts for about half of the total rigs targeting natural gas development in the United States, a top executive with ICF International said.

Speaking at the winter meetings of the National Association of Regulatory Utility Commissioners in Washington, DC, Bruce B. Henning, vice president of energy regulatory and market analysis for Fairfax, VA-based ICF, estimated that gas rigs operating in areas where predominantly shale is being developed have recently risen to more than 500, or about half of all rigs drilling for gas in the U.S.

And he believes the number of rigs drilling for shale gas will remain above the 500 level, with most of the development being undertaken by the largest exploration and production operators due to the capital-intensive nature of shale activity.

Henning said ICF has more than doubled its estimate of U.S. and Canadian shale resources to 1,900 Tcf from 825 Tcf in April 2010. And it has concluded that 1,500 Tcf of that gas can be developed at or below $8/MMBtu.

Production from the Haynesville in Louisiana, Marcellus in Pennsylvania and Fayetteville in Arkansas will account for almost all of the growth in future years, he said. "The Barnett [Shale in the Fort Worth Basin] has matured and is likely to decline," while Eagle Ford in South Texas "rises as gas is a byproduct of liquids production," and the Woodford Shale in Oklahoma "increases modestly in pockets," Henning said.

He said there were three periods where natural gas prices spiked in the last decade, with the first coming in 2000, the second in 2005 and the third in 2008. The development of shale gas will moderate the supply disruptions that ultimately trigger price spikes.

"The development of shale gas technology has made the resource economic. Shale gas development can now occur more rapidly and with fewer wells. As a result, the market can respond more quickly than in the first price spike," Henning said.

"Shale gas and other unconventional supplies are geographically dispersed and are less susceptible to disruptions from offshore damage [such as that from Hurricane Katrina] that resulted in the second price spike," he said. And "natural gas prices are not 'linked' to oil price movements to the degree that they were in the third price spike period."

Henning concluded that "sufficient natural gas resources are available to supply gas at competitive prices for decades to come."

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