Major US supply role seen for unconventional gas
Sam Fletcher, Oil & Gas Journal, December 20, 2004

Over the last 20 years, unconventional natural gas in the US has grown from "just modest expectations back in the early 1980s" to become one of the dominant forces of gas supply, said Scott R. Reeves, executive vice-president of Advanced Resources International Inc., Houston, at a 2-day conference in Denver.

"Over that time, coalbed methane and gas shale in particular came from being viewed as scientific curiosities to being two of the major contributors to US natural gas supply today. As we look forward over the next 20 years, we expect unconventional gas will play an increasing role towards supplying US domestic gas," said Reeves Dec. 13, the first day of the meeting sponsored by Strategic Research Institute, New York.

Unconventional gas resources include tight gas sands "that some have described as simply at the low-quality end of conventional gas resources. However, they are also unconventional trapping mechanisms," Reeves said.

US gas supplies increased overall to 19.4 tcf in 2003 from 19.2 tcf in 2000. Yet conventional gas production declined in that period, while unconventional gas production increased by 1 tcf. Production of tight sands gas increased to 4.6 tcf from 4 tcf, while CBM production rose to 1.6 tcf from 1.4 tcf.

"The largest percentage increase was in gas shale, from 0.4 to 0.6 tcf, largely coming from the Barnett shale, the most active and by far the largest producing gas shale play in the US today," Reeves said. "From the early 1980s to the early 1990s, what spurred the development of CBM and the production increase was the combination of performance-based incentives in the form of the Sect. 29 [federal] tax credits, as well as research under both the Department of Energy and the Gas Research Institute," he said. Both programs have since ceased.

"Yet we still see tremendous growth in production. This demonstrates the commercial viability of CBM without any types of incentives today," Reeves said. "We see in the future perhaps new technologies such as enhanced CBM recovery opening up some of those basins of CBM that today cannot be commercial on a stand-alone basis of primary production because perhaps they are too deep or permeability is too low."

Gas shale slower

Production from gas shale, too, began in the early 1980s at low rates with the help of Sect. 29 credits and research support from DOE and GRI.

However, he said, gas shale "did not grow as fast as CBM; it's a little behind the curve. Still, there was growth in gas shale production from 1992 through today, commercial without incentives." US gas shale production grew to 600 bcf in 2003 from 65 bcf in 1980.

For gas shale, said Reeves, "We see perhaps not anything like enhanced CBM as being a driver of commercial production, but really since gas shale's development and plays are much less mature, we see the growth there to be in new plays that have not yet been developed and gas shales that have not yet been fully assessed today."

Various forecasters agree that unconventional gas production in the Lower 48 will continue to increase and will be one of the primary drivers and suppliers of the future US gas market.

"We're seeing a decline in CBM production from the San Juan basin, which historically has been the 'big granddaddy' of production, but Powder River basin production is continuing to increase, and other basins are coming on stream. So CBM production is expected to continue to grow for the foreseeable future," Reeves said.

The National Petroleum Council's 1999 assessment of technically recoverable gas resources said 633 tcf was expected to come from future new fields. More than half of that, some 356 tcf, was projected as coming from tight sands (230 tcf), CBM (74 tcf), and gas shale (52 tcf). "So yes, there's a sizable resource out there," Reeves said.

Of the 12 largest US natural gas fields listed by the US Energy Information Administration, 9 are unconventional, he noted. Unconventional gas "can be large plays and company-maker plays," Reeves said. "Both the DOE and the National Petroleum Council have found that unconventional gas resource bases are very large. The tight gas sands are by far the largest resource base, followed by CBM and lastly gas shale."

In 1990, the US Geological Survey assessed the Barnett shale at 1 tcf of potential gas production.

"It has produced considerably more than that today," Reeves said. "By 1998, our company along with USGS re- looked at that [1990] assessment, and we bumped it up to 10 tcf. This play has not produced that much but is expected at this point to produce more than that. Nevertheless in 2003, the NPC only assessed the Barnett shale at 7 tcf. Earlier this year, the USGS came out with another assessment of 26 tcf."

Such assessments grow as experience in a particular play and basin grows and understanding of the reservoir and technology develop, Reeves said.

"Many of these unconventional gas resources are assessed low, particularly in the early stages of their development," he said.

'Game-changing' technology

Cavitation cycling, a fracture method using compressed air or foam in the San Juan basin, was cited by Reeves as one of the previous "game-changing technologies" developed for unconventional gas production. Others included multiple-zone completions in the Black Warrior basin, reservoir simulation, and horizontal drilling. Many of the same technologies were successfully applied in gas shale development, along with nitrogen fracs and water fracs.

There also was a shift in thinking when the industry began developing CBM from the shallow, low-rank coal formations of the Powder River basin, which many in the industry at first shrugged off, said Reeves.

Game-changing technologies of the future could include the next-generation "sweet spot" exploration techniques that are applied before the well is spudded. "What you really want to know is where to drill in the first place," Reeves said. "Natural fractures are going to be the key to and have been the key in the past to commercial production from gas shales, tight sands, and CBM. The cleat system is not sufficient in coal in and of itself to provide commercial [production] rates. You have to have an overlying natural fracture system that is open for these things to be commercial," he said.

"What you're really looking for is areas of enhanced fracturing, perhaps fault-related fracturing or flexure-related fracturing," said Reeves. Other new development techniques could include intensive resource development with improved drilling and completion practices, intelligent optimization of operations, and enhanced recovery.

Tomorrow's giants

As for the emerging plays that could be tomorrow's giants, Reeves said, "We don't know." However, he noted that there is "not a lot of development yet" in northern and central Appalachia, among coal deposits along the Gulf Coast, and in Green River basin.

"The Green River basin contains 314 tcf, by far the single largest resource base of CBM. We think that's going to be a place of increasing activity. The coals are very deep there and will require special technology. We think something like enhanced CBM technology will help unlock that," said Reeves.

Enhanced CBM technology could also prove effective in the high-rank tight coals of Appalachia, he said.

The Gulf Coast features "a low-ranked coal that's been overlooked in the past. Everyone has been focused on the Powder River basin, but we think [the Gulf Coast] is going to be an area of increasing activity. You see a not-insignificant amount of activity in leasing and pilot projects in north Louisiana today," he said. Potential gas shale plays are being identified "all over the US," said Reeves, but there is not a lot of international gas shale activity. However, CBM development is widespread around the globe.