A Methodology to Determine both the Technically Recoverable Resource and the Economically Recoverable Resource in an Unconventional Gas Play

Abstract

Abstract During the past decade, the worldwide demand for energy has continued to increase at a rapid rate. Natural gas has emerged as a primary source of US energy. The technically recoverable natural gas resources in the United States have increased from approximately 1,400 trillion cubic feet (Tcf) to approximately 2,100 trillion cubic feet (Tcf) in 2010. The recent declines in gas prices have created short-term uncertainties and increased the risk of developing natural gas fields, rendering a substantial portion of this resource uneconomical at current gas prices. This paper quantifies the impact of changes in finding and development costs (F&DC), lease operating expenses (LOE), and gas prices, in the estimation of the economically recoverable gas for unconventional plays. To develop our methodology, we have performed an extensive economic analysis using data from the Barnett Shale, as a representative case study. We have used the cumulative distribution function (CDF) of the values of the Estimated Ultimate Recovery (EUR) for all wells in a given gas play, to determine the values of the P10 (10th percentile), P50 (50th percentile), and P90 (90th percentile) from the CDF. We then used these probability values to calculate the technically recoverable resource (TRR) for the play, and determine the economically recoverable resource (ERR) as a function of F&DC, LOE, and gas price. Our selected investment hurdle for a development project is a 20% rate of return and a payout of 5 years or less. Using our methodology, we have developed software to solve the problem. For the Barnett Shale data, at a F&DC of $3 Million, we have found that 90% of the Barnet shale gas is economically recoverable at a gas price of $46/Mcf, 50% of the Barnet shale gas is economically recoverable at a gas price of $9.2/Mcf, and 10% of the Barnet shale gas is economically recoverable at a gas price of $5.2/Mcf. The developed methodology and software can be used to analyze other unconventional gas plays to reduce short-term uncertainties and determine the values of F&DC and gas prices that are required to recover economically a certain percentage of TRR.