North America's conventional onshore and offshore natural gas production continues to decline, and two sources will prove to be ever more crucial to supply: unconventional production and liquefied natural gas (LNG) imports, an energy consultant said Thursday.
Don Warlick of Houston-based Warlick International offered his take on the future of North American gas in a webcast held in conjunction with Oil & Gas Financial Journal. Between now and 2010, he said, conventional, onshore gas output is expected to fall to 20 Bcf/d from 22.7 Bcf/d. Offshore, gas output is forecast to fall to 6.5 Bcf/d from 7.6 Bcf/d; Canadian imports are forecast to fall by about the same margin.
"As fast as we drill, we're still hitting smaller and smaller plays, and less attractive plays," Warlick said. "We have a huge fleet of very modern wells managed very well," but "we're drilling gas prospects that have diminishing potential." By 2010, energy experts estimate U.S. conventional gas output will fall by more than 2 Bcf/d.
"Our huge rig fleet is aimed at drilling wells whose best day is the very first day of production...We're going downhill on roller skates with our conventional production," he said.
Growing LNG capacity and imports will solve part of the dilemma of less conventional output. However, it also shows the "immediate significance of unconventional gas supply to the U.S. and Canada." Energy experts estimate that unconventional gas production will grow to 24 Bcf/d from 22.5 Bcf/d between now and 2010. Gas shales and coalbed methane (CBM) are seen as leading the way.
Of greatest importance to independents and more majors are the gas shale basins, which now account for about 8% of total U.S. gas production. CBM accounts for another 8% of gas output in the United States and 2% of Canadian gas production. However, "gas shale has the potential to go from 8% of total production to more than 11% in five years," Warlick said. CBM production also will grow, "but not as fast."
Warlick noted that there are nearly 20 significant gas shale plays in the United States with around 40,000 producing wells today. Gas shale in the Western Canadian Sedimentary Basin (WCSB) is minimal, but it also is showing the potential to grow.
Of those gas shales, nine account for about 95% of the current production:
Gas shales with growing potential include the Caney/Woodford, Floyd/Conasauga, Excello/Mulky, Bakken, Gammon, Niobrara, Green River, Monterey, McClure and Cane Creek basins, Warlick said. "In the next two years, I think we'll hear a lot of news out of some of these."
In North America, Warlick estimated there are 15 CBM areas with "at least" some production and drilling. The "important" CBM basins include:
Other CBM areas with strong production include the Raton, Piceance, Denver, Illinois, North Central coal region, Wind River, Western Washington coal region, Greater Green River and Uinta basins.
What will move both gas shale and CBM going forward will be technology -- especially what is learned from the Barnett, said Warlick.
"Early development in the Barnett was all vertical, but horizontal completions and smart fracs have opened up the basin and opened up our knowledge of other basins," said Warlick. With an expected producing life still in the 30-year range, it has become "a great R&D [research and development] lab helping other basins plan and execute smartly."
The Barnett, he said, is "the biggest concentration of directional/horizontal business in North America, and the producers are now exporting that technology and experience to the Fayetteville, Arkoma, other gas shale plays." Producers take what is learned in the Barnett to work on not only other gas shale but also CBM and conventional gas.
"The payoff is not only for exploration and production but also for service companies. The Barnett has become a great place to run the 'test track' for new technology. If you run enough seismic track, you pretty much have a manufacturing approach to doing those wells. The payoff, is that you can go to Northwest Arkansas and see how to apply what they learned in the Barnett, and they can establish technology that works."
A price collapse for gas could stifle unconventional production, but Warlick said that's doubtful.
"Two things drive the band for gas," he said. "On the consuming side, the biggest consumer is power generation, and that's going to be there; that's not going to change. The other part is, I think that the only way aside from landed LNG and regasifying it, is for the unconventional gas. The pressure is on for gas shales first and then coalbed methane. We're going to see tremendous gains over the next few years. Technology is winning the day."
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