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Study: Unconventional Natural Gas Resources Boost US Reserves to 118 Years Worth at Current Production Levels

11 August 2008

Nci
NCI’s estimate of proved and recoverable resources is significantly larger than other estimates. Results from the NCI study are represented in the right-most bar. Click to enlarge.

A study released by the American Clean Skies Foundation (ACSF) and conducted by Navigant Consulting, Inc. (NCI) concludes that the United States has 2,247 trillion cubic feet (Tcf) of natural gas proved reserves and unproved technically recoverable resources, including major contributions from unconventional resources from three sources: tight sands, coalbed methane and especially from shale. Reserves at that level would supply natural gas for 118 years at current production levels, according to the report.

After nine years of no net growth in US natural gas production through 2006, production in the Lower 48 states made a large upward shift. Production grew 3% between first-quarter 2006 and first-quarter 2007, followed by an exceptionally large 9% increase between first-quarter 2007 and first-quarter 2008, according to the US Energy Information Administration (EIA).

Total US natural gas production reached 19.3 Tcf/year (52.9 Bcf/day) by the end of 2007, a 4.3% increase over the 18.5 Tcf/year (50.7 Bcf/day) level at the end of 2006. Over the last decade, production from unconventional sources has increased almost 65%, from 5.4 Tcf/year (14.8 Bcf/day) in 1998 to 8.9 Tcf/year (24.4 Bcf/day) in 2007. Unconventional production has increased from 28% of total production in 1998 to 46% in 2007.

The EIA ascribes the sudden increase in production to the improved technology, developed over many years, that now allows economic production of resources in deep water and large unconventional resources, which are difficult to produce. High and increasing natural gas prices have spurred more natural gas drilling and the trend to move from drilling simpler vertical wells to horizontal wells. Horizontal drilling is fast becoming the primary method used to produce gas from geologic formations like shale.

As one indicator of the transition from conventional to unconventional production, the number of rigs drilling horizontal wells has grown to 519 rigs (28% of the total) from about 40 rigs (6% of the total) in the late 1990s. In the Barnett Shale in Texas, the wells go down about a mile and a half, make a turn and go horizontally about a mile, running through the rocks that hold natural gas.

The EIA has historically underestimated and understated the contribution and potential of unconventional natural gas, according to the ACSF, which engaged NCI to develop a comprehensive assessment of the current state of North American natural gas production, with a particular focus on analyzing the future of rapidly expanding natural gas production from unconventional formations such as shale.

The assessments and estimates on natural gas supply are very impressive and have, frankly, caught industry forecasters off guard. The extent of this ramp-up has not been fully captured by many reserve estimators, probably because their emergence has been too rapid for existing models to capture accurately.

—Rick Smead, study co-author and project manager for NCI
Nci2
US natural gas shale basins and gsa pipeline networks. Click to enlarge.

The study found that while all three unconventional gas sources have increased production over the past decade, natural gas production from shale formations is growing exponentially, increasing from less than a billion cubic feet a day in 1998 to about 5 billion cubic feet a day currently—a compound annual rate of growth of more than 20%, and more than 600% for the time period.

There are approximately 22 shale basins located onshore in more than 20 states in the US including Texas, Oklahoma, Arkansas, Louisiana, West Virginia, Wyoming, Colorado, New Mexico, West Virginia, Pennsylvania, New York and Michigan.

NCI’s researchers formulated the study’s snapshot of domestic natural gas reserves by analyzing production and reserve data by basin and by type of gas on as current a basis as possible. Sources included studies, state agencies responsible for minerals management, and corporate investor data, as well as direct outreach to more than 60 large natural gas producers nationwide. Researchers then compared this snapshot with current models including ones produced by the US EIA.

Recent technological innovation has transformed the natural gas exploration and production industry, particularly as it pertains to shale. The findings in this study indicate significant potential for expanded use of domestically produced natural gas for many purposes, including power generation and even transportation fuel for many years to come.

—Dr. Kenneth B. Medlock III, co-author and professor of economics at Rice University

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This is a pretty amazing development since many people believed that North American natural gas supply had already peaked. Still, the nat gas is a non-renewable resource that releases CO2, and we can't get away from that fact.

As per the Pickens plan, he wants to eliminate nat gas peaking power plants and replace them with wind power, using the substituted nat gas as an auto fuel. This is all fine and dandy, but so long as you are using a finite resource to fuel the economy, you have a constrained growth scenario. If you want unlimited economic growth, the only way to accomplish it is a transition to completely renewable energy. That needs to happen sooner rather than later.

I hope we leave most of this unconventional methane in the ground.

Natural gas / Methane produces significantly less CO2 per energy unit than coal. In addition: A combined cycle plant is significantly more efficient than a coal power plant.

And a gas power plant is more flexible than a coal power plant and less costly per Watt (capital costs) than a coal power plant.
Thus, a gas power plant is a much better candidate to be combined with wind power than a coal power plant.

Internationally, large increases in Natural Gas production are coming online. That with the US reserves may help to keep a cap on energy prices while we transition to renewables (I hope). Also, as noted above, NG is more flexible for power generation. It can be used for micro turbine generation as a backup for wind in a smart grid.

The obvious downside is that if oil prices do not increas, people may not change over to renewables as fast. I don't think that will be an issue, however, as renewable technology is advancing rapidly.

anon
while you are correct that capital investment for natl gas is less than coal, natl gas plants are significantly more expensive to run than coal plants. it is for this reason that natl gas is used as a peak power generator and coal as baseline power.
it is a horrible idea to use natl gas as baseline power as prices have already seen a large upward trend in the last few years and would certainly turn MUCH higher.
also, there can be combined cycle coal plants, though it would probably required coal gasification. the only reason no-one's thought about it is because coal is so cheap and plentiful.

While this approach may be best, for now, it should not impede an all out effort to develop renewables.

Currently that is algae based bio-fuels and cellulosic alcohols.

We just can't convert food to fuel. That is immorality of the worst kind.

If you take the natural gas and put it towards vehicles I would suggest having it (nearly) exclusively for use by our freight trucks/tractor-trailers and push for electric with standard autos (with the midterm PHEV/HEV on gasoline or diesel).

This way, no amount of supply disruptions from the mideast/africa/S. America has a large impact on our ability to get goods transported.

Marc, who's anon?

Btw, Wind can provide baseload: stanford.edu/group/efmh/winds/aj07_jamc.pdf
Wave can provide baseload:
pelamiswave .com

Geothermal can provide baseload.

And water turbines and gas turbines can still provide peak load or only be used when the wind is not blowing and thus reduce the gas consumption.

And cheap PV at $0.7 per Watt can still reduce peak load and reduce maximum peak capacity required (air conditioners).
guntherportfolio.blogspot.com/2007/09/oerlikon-solar-almost-at-work-ersol.html

And solar cooling can still reduce peak load and maximum reduce peak capacity required.
solarserver.de/solarmagazin/anlage-e.html

And combined heat and power can still increase efficiency in the winter.

And there's no reason why the US should forgo efficiency and consume double as much energy as Western Europe without providing a higher living standard.


And as far as electricity prices are concerned:
Somebody ought to invent cheap rent! Now this would give the world a break!

Wow, a front group for the natural gas industry says a cornucopia of natural gas is everywhere! I am deeply disappointed that this is taken at face value.

"Anon" refers to the person commenting with no name. This should not be possible, but alas it is.

Natural gas saw increased development in 2002 and then not in 2003 when the price went down. It increased again 2007 and will probably decrease soon do to prices dropping.

The wholesale price for a therm of natural gas was $1.20 less than a month ago and is now about $0.80 a therm. It is that price instability that play free market yoyo with development.

If we were to utilize this resource over the short-term as a transportation fuel to help offset our oil demand, rather than modifying the entire vehicle fleet, wouldn't it make more sense to build GTL plants? Assuming we sequester the carbon or use it to feed algae and produce even more oil, wouldn't it be an easier and quicker implementation? I thought GTL technology was economically viable at current oil prices? Why isn't this even mentioned?

With 118 years of reserve of natural gas domestically i think that it's abouth time politic power stop ranting abouth oil import and push domestic car manufacturers to sell car and s.u.v with natural gas tank. Natural gas can be obtain by some other source like town sewage, cow manure, trash destruction. It's a cheap invesment for car customers and they should save easily 50% fuel cost and breath cleaner air. The problem with petrol is it's a fuel saturated by toxic black ash and it need to be refine a lot before it can be use and all the ash content end-up in the air or in the water and soil. Natural gas pollute 10 time less from extraction/production to end use and cost less. I think
that petrol is still use because when it start to be use
by the industry at the beginning of the 1900 century a big industry was created and they never wanted to change anything.

If some politician decide anything it will be unfortunatelly a big war because there is more money to be made in petrol and it's the only thing(money) that drive passion. Maybe the next president can experiment a change of heart...

While I'm not about to take this organization's word for much of anything (I've been to their website). They do have a point about the non-conventional resource size. I've also heard of some pretty amazing drilling (more like melting) technologies that will make huge reserves of deep gas available as well. While I'm not so sure that's a fantastic thing (that would depend of where you stand on AGHGs), I'd rather only have to deal with one "peak" at a time. We should therefore continue to use NG at reasonable rates and try to displace oil with renewables in the total energy picture. Put too many eggs in the NG basket and you're just going from the frying pan to the fire.

This does not include the massive hydrate formations in the Gulf of Mexico and Permafrost. Something like 5000-8,000,000 trillion cubic feet or about 2-10 times the energy reserves of all conventional and unconventional liquid hydrocarbons. The Mallik test site proved gas can be recovered using existing drilling technologies at 4-6$ MMBtu as is over $9 MMBtu and has been over 15 a couple of times in the last few winters.
As a side benefit the Barnett Shale has provided 50000 new jobs in North Texas high paying skilled labor and degreed professional jobs not low income service industry jobs. Fort Worth/Dallas is having a boomtown growth rate right now. Dallas being the fastest growing city and job market in the nation last year and probably this year too.Coil on tube drill rigs are revolutionizing horizontal drilling and as such the tight-gas shale market. They can drill with a 4 man crew in a very small foot print at twice to three times the depth per day of a conventional rig. I should know my exploration company does 3D seismic analysis all over the shale. It’s extremely profitable to be in the drilling industry these days an experienced Geologist is making 150 an hour for consultant work. Good high paying jobs abound in North Texas thanks to the shale.

Geothermal is not as green as most people think. For one large amounts of CO2 gas are vented from the outgas products of the produced water, why because hot water dissolved carbonate ions from the source rocks which become CO2 gas once the water is depressurized. Second and more importantly large amounts of radioactive radon gasses are generated when geothermal waters are produced from granite sources why? Because every granite rock on earth has at least 2ppm and sometimes as much as 200ppm of Uranium in it this is unavoidable all granites contain uranium. Using hot dry rock technology to fracture deep hot granite rocks for heat mining releases the natural decay products from the ever present uranium the earth is 4.6 billion years old plenty of time for a significant amount of radon and other daughter products of the U238/235 decay chain to accumulate in deep granites. Sending water down and getting it hot only makes it a better solvent for the daughter products it is essentially hot solution mining of the granites. In fact work is being done on using deep fracture solution mining to recover the uranium present in all granites as one KG of yellow cake (U3O8) has the energy equivalent of 10 tons of coal. Same can be said for coal, coal has significant quantities of Uranium in it so much in fact that the ash from a coal power plant has more energy contained in uranium in the ash than was released by burning the coal in the first place. China, and india are actively going to mine coal ash piles from the Uranium contained in them most are over 300ppm above the level found in most commercially viable mines now, hence coal ash is a uranium mine with out having to mine it.simple solution solvency recovery can leach the U238/235 out of it.

Lets not forget stranded gas too from this board no less…

http://www.greencarcongress.com/2007/11/velocys-toyo-en.html

“More than 3,000 trillion cubic feet of natural gas are currently stranded (without access to world markets)—enough to produce over 350 billion barrels of synthetic fuels, the equivalent of 70 years of US oil imports.”

Even if the US runs short domesticly LNG and now CNG tanker transport is economical at any price over $6 MMBTU for Ngas. Gas is trading north of $9

http://www.spegcs.org/attachments/studygroups/6/CNG_vs_LNG.ppt

Leave it to the Aggies, this is NON-FT sysntisis of 95 ocatane gas drictly from natural gas. Again take the mobile process to stranded Natural Gas bring back gasoline small scale with much much lower capital costs than larger FT GTL projects. Yet another innovation coming from the Great State of Texas.

http://www.synfuels.com/technology.html

Cars transition to biofuel PHEVs and coal utilities to natural gas. Conversion of commuter vehicles is a boondoggle - only new car sales of NG equipped ICEs will pass current EPA CARB requirements.

Meanwhile our big energy footprint will go down as RPUs begin their inevitable march to mass adoption.

We need to stop buying foreign oil ASAP to save the dollar, and stop supporting our enemies. Whatever it takes. I would prefer solar, wind, and other clean technologies, but we should use whatever is most doable and relatively clean and safe.

The gas was obviously under dust in some bottom drawer.
Landfill, sewage other sources.

Always was useful for peaking plants as small (localised) as you like. This helps hold up remote areas of the grid with associated benefits there.
While this may be more expensive per Kilowatt hour, will likely still be cheaper if used to its greatest small load following plant potential.
These plants dont operate at max very often and reserves may accumulate in the periods of low demand (buffer). This equates to a supply following option

The insistence on measuring costs on a KW basis is quite misleading when the real costs are passed on to future generations like a credit card on high or impossible interest rates.

In areas where renew ables can be pressed into service, they should. Then the real value of the gas fuels is preserved for the longest time.
Gases that need to be removed at leaky sites and explosive risks could be bottled for transport. If not practical for on site generation. Otherwise on site direct storage and intermittent or load following options are best use of the resource.

Where in all the proposals for "clean", renewable or substitution with this or any other energy source does any proposal to see dirty filthy or deadly emitters ever be shut down - while there's the possibility of making a dollar?

So perhaps we should take away the 2 billion dollar annual subsidy for drilling for tight sands, coal bed methane, and from oil shale?

Natural gas with the lifecycle CO2 quantity of Coal isn't really something we should be subsidizing.

greyfalcon.net/afpc.png
eia.doe.gov/oiaf/servicerpt/subsidy/box_txt.html

_

Whats more, that "118 years" figure is "at current levels of consumption".

If we go whole hog and replace all our transportation with it, especially if we do something stupid and F-T it into liquid, then thats only a few decades worth of supply.

_

As for renewable energy, Concentrating Solar Thermal with Molten Liquid Salt Heat Storage looks best to me.

92x92 miles of this stuff in Nevada is enough to power the entire country, day and night.


greyfalcon(dot)net/solarthermal
greyfalcon(dot)net/ausra
greyfalcon(dot)net/92x92
greyfalcon(dot)net/ausra2

Angelo,

The reason why people are looking at CNG directly in vehicles vs the widespread use of natural gas in GTL is the capital cost involved in GTL.

Sasol is the world's most experienced operator of GTL and CTL plants. Yet their 34,000 barrel per day nigerian GTL project has had its capital cost blow out from $1.7bn to $6bn! At a capital cost of 10% (low given the obvious risks involved in developing this sort of project) that gives a required return per barrel of oil equivalent of $48 without even factoring in operating costs, depreciation or the cost of the input gas!

$6bn x 10% = $600m per annum of required return.

$600m / 34,000 barrels per day / 365 days = $48 per barrel of required return.

Meanwhile gas at c$8.4 per mmBTU is trading at an effective price per barrel of oil equivalent of roughly $50 (6x as much energy per barrel as in one mmBTU).

I wish I could believe these guys, but I don't. I'm thinking they read of some extraction process and then extrapolated it optimistically over a bunch of different drill sites. I don't know who the ACSF is really, but Aubrey McClendon seems to have some ties with T. Boone Pickens. So I think this is all part of the Pickens plan media push. Maybe NG is the new silver and these guys are the new Hunt brothers.

BTW, I'm not a huge fan of Pickens plan. He should use PHEVs, for one, and wind will not easily displace NG electric (though it could charge PHEVs).

@ NorthTexasDriller

It would appear that rig capacity has increased to the point where new production is exceeding decline from existing wells. However, this does not address demand. Will the new production keep LNG imports from growing?

An interesting lesson for the more pessimistic "peak" folks. The peak may be real but it really is unpredictable and, if you strictly predict the worst case scenario, you're likely to be wrong. (That includes me, I thought NA NG was at peak)

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