Early in his career, Devon Energy’s Brad Foster worked for Columbia Gas in Ohio where he was involved in the company’s shale gas exploration and production activity. He spent two summers working on shale projects before deciding, “I will never work a shale project again.”
Now, Foster is eating those words, and happily so. Devon Energy is a big player in the hot Barnett Shale and is getting more excited by the day about its activities in the Caney and Woodford shales.
Foster told attendees at IHS Energy’s 2006 Summer NAPE Expo Forum Tuesday in Houston that he’s tired of talking about the Barnett and it’s too early to say much about the Woodford and Caney. Still, he gave it a shot.
“If you look right now where the industry is in exploration and production (E&P), everybody is trying to grow production and reserves, and unconventional seems to be the way that everybody wants to do it. And it’s created quite a heated market,” Foster said.
The NAPE Expo is a three-day swap meet for upstream players in the oil and gas industry. Many right now are interested in unconventional resources, including gas from shales. Foster said it’s still early. “We’re just all running around marking our territory.”
That may be true, but it doesn’t seem early for the Barnett Shale any longer. Gas production from the Barnett in 2005 was twice what it was in 2003, Tom Harris of Kerogen Resources Inc. told the crowd of about 170 at the IHS event. Now, six of the top 10 producing fields in the United States are unconventional. Harris cited a recent industry paper that claims worldwide shale gas potential is equal to coalbed methane and tight gas sands combined. “Shale gas is coming at you,” he said.
Producing from shales is viewed by many as virtually equivalent to manufacturing gas, like producing from source rock, some say. That’s not entirely true. Devon, and before it George Mitchell and his Mitchell Energy, did a good bit of homework on the unconventional Barnett. The Barnett didn’t really take off until the late 1990s, though, after the industry embraced slickwater fracturing at about the same time gas prices started to rise. Horizontal wells have been another boon to shale success.
Devon has drilled about 400 horizontal wells in the Barnett Shale, Foster said. “And the real point here is that there’s no silver bullet for any of these plays. There may be some silver BBs, but you have to have several of them to make it work.”
The learning curve is still pretty steep for those just starting out, and they have to learn quick.
“With the current euphoria that is going on in the industry, the game has changed a little bit from what traditional conventional resources were,” Foster said. “Geological uncertainty is really not the dominant risk in these plays. But I will caution you, don’t paint it all with the same brush because it’s not all the same… The real issue you’re going to have to figure out real quickly is is the in-place resource there. Is there enough cubic feet per square mile to make this thing work and get some attractive economics?”
While finding the gas might not be as difficult with a shale gas E&P operation, making it work can be tricky. Stimulation, cost control, infrastructure and capital efficiency are all critical, Foster said. “What I mean by that is really the planning. With the amount of exploration that is going on right now you have to be pretty diligent and have a lot of tenacity to get from point A to point B.
“You have continuous drilling that has to be going on before you even understand the real play. So the question in your mind is how much capital and how much time am I willing to put into one of these plays before I call it good or bad.”
Going forward, it’s important to keep pushing the envelope on operational techniques to increase recoveries. Devon has increased recoveries in its core area of the Barnett by about 6% from 2002 to 2006, Foster said. That means an additional 1.2 Tcf. Much of the success is due to a shift to 20-acre well spacing.
“We’ve gone through an awful big learning curve,” Foster said. “The lessons we’ve learned here we are applying to the other non conventional gas areas that we’re experimenting with right now.
“I think there’s a tremendous amount of upside in these plays that will come with time.”
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