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

11 August 2008

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

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

Resources

• North American Natural Gas Supply Assessment