The unconventional-natural-gas revolution—or "shale gale"—blew through talks at IHS Cambridge Energy Research Associates' 29th annual CERAWeek held recently in Houston. It even buffeted panels devoted to crude oil markets and electric power.
Speakers from government, industry, academia and IHS CERA touted the clean, abundant, cost-effective benefits of gas. U.S. Energy Secretary Steven Chu, White House economic advisor Larry Summers, International Energy Agency head Nobuo Tanaka, Statoil chief executive officer Helge Lund, and BP president of E&P Andy Inglis said gas can be the required partner for power generation, transportation, expanding renewables and reducing greenhouse-gas emissions.
According to IHS CERA, a new role is emerging for unconventional gas as a shock absorber that can respond relatively quickly to changes in demand compared to other energy sources. Price spikes remain a worry for electric utilities using gas, however.
Unconventional gas did not fully enter the national energy dialogue until second-half 2009, but now, "it is the most significant energy innovation so far this century," declared Daniel Yergin, chairman of IHS CERA and author of The Prize.
"If oil is 'The Prize,' than natural gas is 'The Gift,'" said ConocoPhillips chairman and chief executive James Mulva. "The full magnitude of nature's gift is now apparent. Gas is more than a bridge fuel. It is part of the energy solution."
That magnitude has been calculated by a new IHS CERA study to include a discovered resource base of 2,000 trillion cubic feet (Tcf) in North America, with another 1,000 Tcf expected to be found.
"This is an order of magnitude larger than the proved reserves recognized by the U.S. Energy Information Administration only two years ago," according to the study. "Fueling North America's Energy Future" assessed 300 plays in North America, including all the shales. "In addition, the estimated shale-gas resources in Canada exceed 500 Tcf."
"We believe the shales are real," said Jonathan Parry of IHS CERA. "Production in 2010 of 11 billion cubic feet (Bcf) a day will rise to 35 Bcf a day in 2018, based on a count of 800 gas rigs." (At press time the horizontal gas-directed rig count had already risen to about 900. That is an increase of 259 rigs, or 75%, since its 2009 low. It is now higher than the 580-gas-rig peak of October 2008, according to Tudor, Pickering, Holt & Co.)
Shales accounted for just 1% of U.S. gas supply in 2000. Today they account for 20%. By 2035, that could be as much as 50%, according to the study.
The IHS researchers think the Haynesville shale alone has a low case of 192 Tcf of commercial resource potential, and up to 481 Tcf in a high-case scenario. Parry said the firm found substantial differences across the play, but in general, the Haynesville is economic at $3.10 per thousand cubic feet (Mcf). The study included distribution of IPs (initial production rates) across the play, estimated breakeven costs and more.
"Most shales will disappoint because they are so big," said Parry. "There is only so much gas that can fit into the North American market, and we don't believe in LNG exports from North America. There has to be a shakeout in high-cost areas like the Rockies and the Permian Basin."
Parry said the U.S. can produce more than 50 Bcf a day at a gas price of between $3.50 and $4 per Mcf, and do so with fewer than 400 rigs—far lower than the gas-rig count seen today.
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