In the second biggest natural gas market in the United States, California energy officials have kept a keen eye fixed on shale gas, and their revised energy plans and forecasts next year and beyond will reflect a greater impact from North America's energy game-changer, the author of the California Energy Commission's (CEC) latest report on shale gas told NGI during an interview this week.

The author of the CEC's 2010 review of shale gas's potential, Leon Brathwaite, an engineering-geologist with 25 years tracking oil/gas developments in the private and government sectors, said there is nothing overblown about the current bullishness permeating the U.S. natural gas industry. If anything, some of the forecasts for shale may be too conservative, Brathwaite said.

Brathwaite and the CEC are tracking the shale developments nationally and throughout North America as they see the developments in the major shale plays shifting the current volumes and flows of natural gas and eventually impacting what happens in the West.

In the Marcellus Shale play in Pennsylvania and New York state, Brathwaite said the Pennsylvania parts of the play alone have grown so big that some Rockies supplies flowing east are likely to be stopped and sent back west in the years ahead.

"We haven't done any specific analyses on shale's impact on wholesale prices, but if you look at Henry Hub prices, you can see the impact of shale," Brathwaite said. "The outlook at Henry Hub is for very low prices for the foreseeable future, and we believe that shale has had a huge impact on that."

Noting that shale gas has exploded over the past five years from well under 1 Bcf/d to about 15 Bcf/d currently in an overall North American gas market of about 60 Bcf/d, Brathwaite said this impact is already huge and yet he thinks "we haven't really scratched the surface on shale gas production as yet because the Marcellus and Haynesville plays are still mostly undeveloped.

"So we still have a long way to go in terms of shale production, and that will add that much more downward pressure on prices."

Although his latest report at the CEC acknowledges some potential environmental and groundwater issues with shale gas, and New York state (see Daily GPI, Aug. 5) may resist developing its part of the Marcellus play as a result, Brathwaite does not think this will slow down shale's overall accelerating rise. There is a sizable carbon footprint with shale, but because it requires markedly fewer wells than traditional vertical drilled formations, he thinks the impact is about the same. In addition, Brathwaite is among those monitoring the industry that thinks there is a lot more room for technological advances on shale.

"As natural gas exploration and production companies develop shale resources, research will further illuminate the complete dimensions of the carbon footprint," he wrote in the CEC report.

Could environmental concerns eventually slow the shale gas growth nationally, or is New York state more of an isolated case?

"I think it is possible that New York could wind up significantly under-developing its portion of the Marcellus, or it may just leave it alone because some of its parts of Marcellus are, indeed, in very sensitive areas. But in areas like Texas and Louisiana and other areas that have a very long history with the production of oil and gas, I think the shale fracking will be ongoing and impact production in those areas.

"Fracking is a technology that has been used quite successfully for well more than 60 years, and I have been involved in quite a number of them myself [while in the oil/gas industry]. Eventually I think it will all be worked out with regulations, technology, etc. For the most part, I expect to see continued development of the shale [in most areas]."

While he thinks it is impossible to say when and where it will happen, Brathwaite is convinced that other major technology breakthroughs will happen in the shale industry in the years ahead.

Brathwaite's boss, Ruben Tavares, CEC project manager on shale gas, cited a presentation given to some of the CEC in October by a fracking expert and petroleum engineering professor at the Colorado School of Mines, Jennifer Miskimins, who outlined a new mixture of chemicals that is being developed that could greatly expand natural gas production.

"There is a lot of research going on right now in that area," Tavares said.