After hitting a low point five years ago, associated gas is projected to grow to more than 12 Bcf/d, or about 15% of the North American natural gas supplies in 2020, according to a report released Tuesday by Canadian-based Ziff Energy.
The overriding implication from the projection is that shale gas production in various dry gas basins will remain relatively flat, said Senior Vice President Bill Gwozd. Ziff analysts looked at nine major sources of tight oil-produced associated gas, or “solution gas,” as it is designated in Western Canada.
Gwozd said the data is “quite significant” because it identifies a supply source that soon will account for 15% of North America’s gas demand. “That is going to dampen activity in tight plays and shale plays until the overall market grows. Associated gas just hasn’t gone away.”
Oil prices are a major driver for associated gas production. If prices for oil were to drop precipitously, which is not expected, associated gas output would drop and more shale gas likely would be produced, Gwozd told NGI. Tight oil production is projected to be more than 10 million b/d in 2020, compared with slightly more than 6 million b/d in 2008, he said.
“The conclusion is that associated gas over the past decade and for the decade ahead will vary between 10% and 15% of the North American supply at any point in time,” Gwozd said. “As long as oil prices are robust, this gas will be produced and it will have to go somewhere.”
Among the nine sources identified in the study, the Permian Basin (tight oil), Western Canada (British Columbia, Alberta and Saskatchewan), and the Eagle Ford Shale are the top three producers of associated gas, according to Ziff. The Bakken Shale, which increasingly is producing a lot of associated gas, ranks fifth.
“I would say that the Eagle Ford is double that of the Bakken,” said Gwozd. He noted that the Permian Basin is the biggest associated gas producer based on its tight oil output; it also is a major source of conventional oil associated gas. “Collectively, whether it is tight oil or conventional, the Permian is the dominant source of associated gas.”
Sources of associated gas have changed dramatically during the past decade, according to Gwozd. In 2000, he noted, other conventional basins and the Gulf of Mexico (GOM), which is now ranked sixth, were the dominant sources. Add in Western Canada to the U.S. conventional and GOM supplies, and that is where 80% of the associated gas came from 12 years ago, he said. “Now those three provide less than half.”
He attributes the shift in associated gas supply locations to technology advances and the transfer of horizontal drilling to the oil space, along with robust increases in oil prices.
“This is good news for the United States in terms of currency support, jobs and the general economy,” Gwozd said.
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