May 12, 2008
Impediments proliferate. But natural gas will keep flowing. Interestingly, it will come mostly from coal-bed methane and shale -- sources that are now the growth segment within the industry.
Accessing natural gas supplies are difficult because of environmental laws. And getting to unconventional sources is not any easier. But the difference is that the conventional fields are becoming depleted while output from coal-bed methane and shale are expanding. Today, such fuel sources that can be transformed into natural gas represent a trend in energy production.
"We see unconventional gas exploding," says Cathy Conner, CEO of Universal Wellsite Solutions in Fort Collins, Colo. "Traditional wells may have a four-year lifespan. But an unconventional one may have a life of 50 years and very rarely is there a dry hole. New forms of automation also mean there is a much smaller footprint."
Roughly 13 percent of the land in the lower 48 states has coal in the ground. Practically all of that has methane in it. An estimated 100 trillion cubic feet of coal-bed methane is now recoverable in this country. The goal is to make a greater use of that resource -- to close the gap between what this country imports and what it produces.
Today, natural gas supplies about 20 percent of electric generation, although the nation must import some of that gas from Canada that is now stretched. Coal-bed methane now makes up about 7.5 percent of all natural gas production here. Over the next two decades, it is expected to comprise a quarter of all natural gas use.
The Rocky Mountains, the San Juan Basin of New Mexico and Colorado and the Powder River Basin in Wyoming are rich with coal-bed methane resources. In Wyoming alone, drilling is planned for 66,000 new wells before 2012. In Appalachia, the Marcellus shale that is based in southwestern Pennsylvania is said to hold more than 2 billion cubic feet that has the potential to generate 3 million cubic feet per day.
The Barnett Shale in Texas, though, is the place to be. Take Devon Energy, which is the biggest producer in Texas: It entered the Barnett Shale natural gas field in 2002. It now produces a half billion cubic feet of natural gas per day there that come from 2,500 wells. It also has coal-bed operations in the San Juan Basin, which are expected to produce 1.3 billion cubic feet a day of natural gas. The company is also exploring in Wyoming, Montana, Oklahoma and western Canada.
Meantime, Chesapeake Energy is also involved in the Barnett Shale. It has 38 drilling rigs covering 230,000 net acres there in what it says may hold reserves of 7 trillion cubic feet. At this time, it says that it has only accessed 25 percent of the potential there. "Underlying the Dallas-Fort Worth Airport (could) be a treasure of natural gas that could be worth billions of dollars if properly developed by a company with vision and skills."
Paying Off
Coal-bed methane is a form of natural gas that is embedded beneath coal reserves and held in place by water pressure. When the gas is removed, sodium and other salty substances contained in the water must be released. And while there are some promising technologies to purify or isolate the dirty water, it now goes mostly into rivers. That's harmful to farmers who are now spar over the matter with producers.
Increasing the nation's energy resources is a national priority. But regulators are sensitive to all concerns. Nationally, the parties agree that if more sites are permitted then better monitoring is essential. Beyond making sure water supplies are not polluted, regulators are also concerned with limiting the drilling footprint and any subsequent methane releases once production has begun.
"We believe that responsible development of coal-bed methane resources in ways that are sensitive to the environment and community concerns are in the best long-term interests of our country, natural gas companies, and their shareholders," says a letter written to the Independent Petroleum Association of America by Social Funds, which is a socially-responsible fund.
WellDog, which develops technologies to explore for coal-bed methane and shale, says that it can prevent the unnecessary discharge of water by reducing the growth of wells that do not produce gas and do not contribute to the dewatering of a field. Universal Wellsite Solutions, meantime, uses wireless equipment to monitor production and to diminish its footprint. Other companies use horizontal drilling that implements a drainage network to siphon off the unconventional natural gas.
Developers must employ more sophisticated technologies, particularly if they are to reach unconventional fuel sources that are deeply embedded in rock. With the high price of natural gas, those investments are paying off both financially and environmentally. In fact, the Natural Gas Supply Association says that one gas well today can produce two times as much as it did in 1985. The drilling footprint of well pads, meanwhile, has decreased by as much as 70 percent.
Coal bed methane and shale, along with imported liquefied natural gas, will each play bigger parts in America's energy picture. But if those fuel sources are to reach their potential, developers must remain mindful of their environmental obligations and pursue the most ecologically-benign technologies.
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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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