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North American Gas Taking Unconventional Route

Unconventional natural gas by 2020 will account for 69% of U.S. gas production and 43% of Canada's volumes, according to an indepth report issued last week by the Interstate Natural Gas Association of America. The findings, compiled by ICF International, mirror several recent studies that highlight the quick reversal of fortune for North American gas supplies.

Higher gas prices and technological advances initially pushed the rise in unconventional gas output, but because of the prolific output, that trend is now sustained, the researchers found. Raymond James & Associates Inc. also reported a sustained rise in U.S. gas output in its third quarter survey of U.S. gas producers related to unconventional growth (see related story).

The outlook for unconventional gas shows "how well the natural gas industry in the U.S. and Canada has done in recent years" to reverse the decline of conventional gas production, ICF reported. Tight gas, coalbed methane (CBM) and gas shale across North America have become integral to North America's energy future, it said.

What helped to push unconventional gas resources so rapidly into the North American gas production mix were the higher commodity costs in recent years and new technology, which allowed explorers to efficiently and economically tap tight gas reservoirs in the Rocky Mountains and East Texas, CBM reserves in Wyoming and New Mexico, and shale gas plays that extend across the continent.

Through 2020, tight gas will continue to be the dominant unconventional gas resource, but gas shale is gaining at a rapid pace. "It appears certain that shale gas production will expand in coming decades, and production will emerge in new regions in the U.S. and Canada," ICF noted.

Instead of declining, total North American gas production is forecast to grow to 29 Tcf by 2020, compared with an estimated 25 Tcf in 2007, ICF said. Onshore unconventional gas will drive the increase, which is forecast to reach 64% of North American gas output by 2020 and 72% in 2030. Unconventional gas accounted for about 42% of total production in 2007.

According to ICF, U.S. gas shale output is expected to grow to 4.8 Tcf by 2020, up from 1.4 Tcf in 2007. Tight gas output over that period is expected to jump to 9.2 Tcf from 5.8 Tcf.

North America's total gas reserves now exceed 2,300 Tcf, with shale gas accounting for about 500 Tcf of recoverable reserves, ICF noted. In the Lower 48 states, tight gas reserves total 174 Tcf, CBM totals 65 Tcf and shale gas accounts for about 385 Tcf.

Those totals "may prove to be conservative, especially for gas shales," ICF noted. "It is likely that our forecast of Western Canada is conservative, given the limited available information on shale plays in British Columbia." Several emerging gas plays in the southeastern part of the United States and in the Rockies also were not included in the report because of a lack of data.

For now, the financial crisis, combined with the drop in oil and gas prices, may stall drilling programs, ICF noted. "However, the longer-term need for energy in the United States and Canada should be strong enough to support the future levels of gas production presented here, albeit on a possibly slower pace."

More caveats for unconventional gas include environmental and regulatory issues, which could pressure exploration and production ICF noted. Well and environmental permitting, along with related costs, land access, water use and disposal and surface disturbance are a few of the roadblocks that producers may face going forward, the report found.

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