Global Unconventional Gas - It Is There, But Is It Profitable?

Abstract

Management Gas reservoirs are often classified as conventional or unconventional. Conventional gas reservoirs are characterized by high permeability with the gas stored in sand or carbonate formations in pore spaces that are interconnected. A gas resource is generally considered conventional if it does not require a large stimulation treatment to be able to produce oil and gas at economic flow rates. An unconventional gas reservoir can be defined as a natural-gas reservoir that cannot be produced at economic flow rates or in economic volumes unless the well is stimulated by a large hydraulic fracture treatment, a horizontal wellbore, or multilateral wellbores (Holditch, 2006). The three most common types of unconventional gas resources are tight sands, coalbed methane, and gas shales.  Unconventional gas reservoirs are characterized by low permeability, in the microdarcy range (Fig. 1) or less. As the permeability deceases, the economic risk of developing the resource increases, and the investment required also increases because more wells have to be drilled to produce the reservoir, as each well recovers less gas per well than one can recover per well from a conventional reservoir. The US Department of Energy’s (DOE’s) Energy Information Administration (EIA) defines the total natural-gas resource base as all of the gas that has ever been trapped inside the Earth, including the volumes that have already been produced. The part of the total natural-gas resource base that interests investors most, however, is the remaining natural gas waiting to be extracted. Research indicates the existence of large, unconventional gas reservoirs located throughout the world. Rogner (1997) estimated that there are 9,000 Tcf of original gas in place (OGIP) reserves in coalbed methane, 16,000 Tcf of OGIP in shale gas, and 7,400 Tcf of OGIP in tight gas sands around the world (Table 1). Since Rogner published his paper, the oil and gas industry has discovered enormous volumes of natural gas in unconventional gas reservoirs in North American and in several other basins around the world. It is believed that the OGIP estimates in Table 1 are very conservative. The industry will be updating the values in Table 1 and it is expected that the values of OGIP will increase substantially. With declining conventional gas reserves in the United States, unconventional gas reservoirs are emerging as critical energy sources to meet the increasing demand for energy. The US DOE April 2009 report, Modern Shale Gas Development in the United States: A Primer, stated that over the last decade, production from unconventional resources in the US has increased almost 65%, from 5.4 Tcf/yr in 1998 to 8.9 Tcf/yr in 2007. This increase in production indicates that approximately 46% of today’s US total gas production comes from unconventional resources (Navigant 2008).