Growing shale activity sends potential US gas resources to new peak

Growing activity in shale formations led potential US natural gas resources to a record 1,836 trillion cubic feet, the Potential Gas Committee said as it released its latest biennial estimates on June 18.

Shale gas accounts for 616 Tcf, or 33%, of the year-end 2008 total, which was 515 Tcf, or 39%, more than its 1,321 Tcf estimate two years earlier, the PGC said. The number of plays, the level of production, and the magnitude of perceived in-place resources climbed to a point that the committee published a separate shale gas tabulation for the first time.

The shale gas estimate may prove to be conservative in the next two years as more wells are drilled, suggested John B. Curtis, a geology professor at the Colorado School of Mines and director of the Potential Gas Agency, which provides guidance and technical assistance to the PGC.

“The opening of these new plays has improved our perception of this part of the resource base. But we’re not saying we understand shales completely. There are many formations we have not tried to produce yet. We’re just taking our first technical look,” he told reporters during a briefing at the American Gas Association’s headquarters.

“I think it’s time for all of us, the public as well as policymakers, to get over this notion that we’re running out of natural gas. This reliable resource will be available to us for many more years,” said Christopher B. McGill, AGA’s managing director of policy analysis, who also participated.

Base-line estimates

Curtis emphasized that the committee’s assessment contains base-line estimates of technically recoverable potential US gas resources which assumes neither a time schedule nor a specific market price for discovery and production of future supplies.

“These are the resources which back up proven reserves: what’s been discovered to date, what could be discovered, and the effects of technology and economics,” he said. When combined with the US Energy Information Administration’s estimated 238 Tcf of proven domestic gas reserves (the latest available EIA figure), Curtis said that the nation’s total available future supply could be 2,074 Tcf, 545 Tcf more than the previous evaluation.

The latest estimate consists of 1,673 Tcf of gas attributable to traditional reservoirs, 519 Tcf or 45% more than two years earlier, and 163 Tcf of coalbed methane, 3 Tcf or 2% less, the PGC said.

It said that overall, the Gulf Coast, including the Gulf of Mexico continental shelf, slope, and deepwater, remains the nation’s richest resource area, followed by the Rocky Mountain, Atlantic, and Mid-Continent regions, which together represented 87% of the year-end 2008 assessed traditional resource.

Changes from two years earlier arose primarily from analyses of new geologic, drilling, well-test, and production data from these four regions, the PGC said. The largest volumetric and percentage increases resulted from reassessments of active and newly developing shale gas plays in the Appalachian Basin within the Atlantic area, the Arkoma and Fort Worth basins of the Mid-Continent area, and the Uinta Basin in the Rocky Mountains, it indicated.

Hydraulic fracturing

Curtis said that the PGC’s shale gas estimates would not be affected if proposals to federally regulate hydraulic fracturing, the technology used to produce gas from shale formations, become law. But a Denver producer who previously chaired the committee warned that such a move could restrict future shale gas production.

“Increased regulation would increase our costs at a time when it’s not necessary. The states already have regulations,” said Michael R. Decker, executive vice president and chief operating officer of Gasco Energy Inc.

Shale gas producers increasingly use slick-water completions, which are a combination of water and potassium chloride, instead of heavier cross-link gels which don’t break down as quickly, he added. Gas is produced several thousand feet below drinking water aquifers and contained within the well bore by metal and concrete, he said.

Producers nevertheless have become more efficient, Decker continued. Gasco’s latest well in the Uinta Basin’s Mancos Shale potentially could produce 4 Bcf after costing $4.3 million to drill, complete, and connect, he said. That would provide a 10% return at a $2.75/Mcf price, he noted.

“Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment,” said Curtis. “Furthermore, new and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources, especially unconventional gas which, not all that low ago, was considerable impractical or uneconomical to pursue.”

Contact Nick Snow atnicks@pennwell.com