NGI The Weekly Gas Market Report
Unconventional gas resources — coalbed methane, tight gassands and gas shale — could contribute as much as one quarter ormore to the 30 Tcf demand market that the natural gas industryexpects to materialize over the next two decades, according to anew paper released by the Energy Information Administration (EIA).
The Department of Energy (DOE) agency projects that annualunconventional gas supplies will account for about 28% of totalU.S. gas production by 2020, reaching 7.5 Tcf/year. This comparesto a production level for unconventional resources of 4.5 Tcf in1998.
The projections hinge on the assumption that progress willcontinue in the development and refinement of recovery technologiesfor unconventional resources, whose production in the past has beenhampered by high finding and drilling costs.
Brisk technology advancements could result in an additional 25Tcf of unconventional supplies being added to the U.S. supply basebetween 1998 and 2020, as well as a drop (by 78 cents) in thewellhead price for gas, according to the EIA paper, entitled”Impact of Unconventional Gas Technology in the Annual EnergyOutlook 2000.”
Continued progress in drilling and completion technologies willby far have the “greatest projected impact” in the years ahead,with the EIA projecting that such technologies alone will boost theaggregate unconventional gas production by 11.4 Tcf between 1998and 2020 and reduce average wellhead prices by 33 cents.
Most of the benefits of technological advancements are expectedto be seen in the Rocky Mountain region for tight sands and coalbedmethane, and in the Northeast for gas shale, the EIA paper said.Cumulative production from tight sands in the Rocky Mountains couldreach 43.1 Tcf between 1998 and 2020 if the technology environmentis favorable, compared to a total of 31.7 Tcf under a scenario inwhich little or no advancements are achieved, the DOE agency noted.The second largest tight sands producing region will be the GulfCoast, which the EIA projects could achieve an aggregate productionoutput of 21.6 Tcf over the next 20 years if the technology climateis right.
The agency also expects the Rocky Mountain region to dominatecoalbed-methane production, reaching a cumulative 25.1 Tcf over thenext two decades if advancements in recovery technologies continue.This compares to a total of about 19.4 Tcf under a no-progressscenario. The Northeast Appalachia region will be the hands-downleader in production of gas from shale, the EIA reported, withaggregate production targeted at about 11 Tcf between 1998 and 2020if recovery technology continues to flourish.
Proved reserves of unconventional gas in the United States —reserves that are recoverable with reasonable certainty — tend tobe on the low side, but the resource potential of certain regions,especially the Rocky Mountains, is believed to be vast.
Proved reserves of tight sands and coalbed methane are highestin the Rocky Mountain region, while proved reserves of gas shaledominate the Northeast, according to the EIA. Approximately 51%(16.2 Tcf) of tight sands and 77% (8.1 Tcf) of coalbed methaneproved reserves are situated in the Rocky Mountains, and 93% (3.4Tcf) of gas shale proved reserves are located in the Northeast, itsaid.
Undeveloped resources — which are unproved resource volumesthat could yet be added to proved reserves — of unconventionalgas are most bountiful in the Rocky Mountain region, the EIA said.In the Rockies, the agency estimated the potential for undevelopedtight sand gas at 191 Tcf, and coalbed methane at 42 Tcf. In theNortheast region, undeveloped gas shale resources were pegged at 45Tcf.
An even greater amount of unconventional gas resources, about120 Tcf, has been categorized by the U.S. Geological Survey (USGS)as hypothetical resources. “Because insufficient information existsconcerning these plays, producers have less ability to explore foror develop them within an expedient time frame,” the EIA said, butit expects the development of these resources to pick up as theUSGS conducts basin assessments to help producers locate productiveplays.
The agency also said it expects to see accelerated developmentof emerging unconventional gas plays in basins such as Power Riverin Wyoming, Piceance, Raton and Wind River. “Because of [a] lack ofinformation, it [has been] often difficult to match to a givenreservoir within a particular gas play the technology that wouldallow for the most efficient development of that reservoir. As aresult, industry [has attached] a higher risk to these emergingplays and tends, therefore, to proceed at a slower pace in theirdevelopment,” the EIA noted. But it expects this to change asresearch and development activities focus on better definingemerging gas plays for producers, which in turn would help toreduce the time and money needed to fully develop them.
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