The Haynesville Shale — a “booming new resource play” — could become the fastest growing shale play to date in the Lower 48, based on initial results from operators, according to a new report from consultancy Wood Mackenzie.

“Our models suggest that the Haynesville shale, if developed in our most bullish case, could be bigger than the current size of the Barnett within five years,” said Robert Clarke, Wood Mackenzie upstream analyst.

Chesapeake Energy Corp. announced its discovery in the Haynesville near Shreveport, LA, in March of this year, and CEO Aubry McClendon said then the play could have a larger impact on the company than the Barnett or Fayetteville shales (see NGI, March 31). The core area of the Haynesville is designated as 3.5 million acres in and around Caddo, De Soto and Bossier parishes in northwest Louisiana, according to Wood Mackenzie.

Currently wells are being drilled on 640-acre spacing to hold leases, but downspacing to 80 and 60 acres per well will occur, the report says. “Chesapeake in particular is still leasing and plans to further increase its position by at least 100,000 acres. The company also plans to use its experience in urban leasing gained from operations in the Barnett Shale to assemble smaller tracts of land in the more residential and commercial ares of Bossier City and Shreveport,” Wood Mackenzie said.

Wood Mackenzie’s initial conservative production forecast, based on data from the largest participants in the play, shows unconstrained supply peaking at 4 Bcf/d in 2014.

“Enough data points have been released to allow us to build an initial production forecast for the play,” the report says. “Under our base case of 100 rigs by 2010 and average well recoveries of 6.5 Bcf (unrisked), we forecast unconstrained supply peaking at 4 Bcf/d in 2014.” The firm said its forecast is consistent with data operators have shared so far, but it could still prove to be conservative.

“The knowledge operators have gained from the Barnett and Fayetteville shale plays has contributed greatly to the Haynesville early success,” said Clarke. “To put it in perspective, over the last eight years, the Barnett has grown from producing 140 MMcf/d to 3.8 Bcf/d, but over the past 36 months, the Barnett has grown from 1.3 [Bcf/d] to 3.8 Bcf/d. In our view, while the magnitude of Haynesville’s production growth is not surprising, the pace at which operators are expected to achieve those levels is remarkable. Unlike the Barnett and Fayetteville, Haynesville should not require thousands of successful wells to surpass production of 1 Bcf/d.”

The main challenge for operators is the inability of current infrastructure in the Haynesville area to support the production growth without significant investment in additional takeaway capacity. The current system can only absorb another 1 Bcf/d. The report notes that rapid supply growth in North Louisiana beyond an incremental 1 Bcf/d could lead to gas-on-gas competition with limited available takeaway capacity. Bentek Energy LLC has said it expects volatility to increase in the Gulf Coast region as new supplies and takeaway capacity come on-line (see related story).

“Early stage economics look strong with $6.5 million completions yielding 6.5 Bcfe gross. However, with this limited takeaway capacity in the short term, we expect operators will face fierce competition to get their gas to market as pipeline constraints emerge. Midstream firms will need to respond expediently if our forecasts prove accurate,” said Clarke.

The play’s three largest operators are EnCana Corp. in partnership with Shell (see NGI, June 23), and Petrohawk Energy Corp. (see NGI, July 7a). Evidence of early Haynesville success is seen in the reported per well productivity (where horizontal wells have flowed at rates between 8 MMcf/d and 16.8 MMcf/d, and the play is still in its early stages), the pace of leasing, and operators’ aggressive development schedules.

This month Chesapeake said it sold a 20% stake in its Haynesville holdings to Plains Exploration & Production Co. for $1.65 billion in cash and an agreement from Plains to fund half of the drilling and completion costs for Chesapeake’s 80% stake until another $1.65 billion has been paid (see NGI, July 7b).

If pipeline and storage infrastructure can keep pace, gas produced from U.S. shale basins is expected to account for 18% of Lower 48 supply by 2015 — compared with the 8% of supply that shale gas accounted for in 2007, EnCana said last month.

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