While there are probably no significant shale gas supplies coming out of Nevada any time soon, there are some longer-term prospects, and in the meantime state oil and gas stakeholders are keeping an eye on shale developments in the Rockies and Western Canada, according to a gas engineering specialist at the Nevada Public Utilities Commission (PUC).
"My impression is that some [E&P] companies feel that geologically there are enough natural gas shale possibilities for them to procure land leases in the central-eastern part of the state for future development," Jon Davis, a PUC gas engineer, told NGI's Shale Daily.
Davis said some of the energy players see shale gas in the state as a "future development," even though no rigs have been placed in the geographical area in question. "Based on this, it appears this land must be low in the pecking order of gas shale development."
Oil shale development stands in stark contrast, with a small existing oil production field in central-eastern Nevada in Railroad Valley where it is speculated that horizontal drilling eventually could stimulate even more drilling. "Older fields in Alberta are being redeveloped in this manner right now," Davis said.
The essence of Davis's outlook on shale in Nevada is that while it is not being developed now he sees sufficient interest in the future based on the amounts of land being acquired in the Chainman Shale region (central-eastern Nevada) that has potential for future development in and around the Railroad Valley region.
Davis cites industry reports outlining Chainman's potential in a broad swatch covering parts of both Nevada and neighboring Utah to the east. It is part of the Big Sand Spring Valley and is described as a new discovery that has triggered a "scramble" for mineral rights leasing, particularly in Nye County. The report cited Cabot Oil & Gas as the primary company targeting shale possibilities in the Chainman, but the emphasis has been on oil potential -- not gas.
In terms of Nevada's growing use of natural gas for power generation, particularly in the largest population centers in the southern half of the state, shale gas developments in the U.S. Rockies and Western Canada are what Davis called "very important energy sources" for the state. He pointed out that almost all of NV Energy's southern Nevada utility operations rely on natural gas (60-70%) and the vast majority of those supplies come from the Rockies.
In northern Nevada, Davis said the supply picture is "a bit more complicated" as NV Energy's utility operations there are less reliant on gas than the southern Nevada sister utility. Only about 50% of the electric generation in the north is powered by gas; coal and geothermal make up the rest of the fuel supplies.
"The [NV Energy north utility] electric and natural gas retail customers receive about two-thirds of their natural gas via pipelines owned by TransCanada," Davis said. "The gas supply is mainly Canadian, and this gas is from a mixture of traditional vertical-drilled wells, coal seam gas and shale gas in the British Columbia area."
Natural gas production has never been Nevada's strong suit. Between 2003 and 2008 Nevada produced no more than 6 MMcf of natural gas per year.
Currently there are only six companies that produce oil in the state, according to the Nevada Commission on Mineral Resources. They are Berry Petroleum Co., Breck Energy, Frontier Exploration Co., Makoil Inc., Grant Canyon Oil & Gas and Western General.