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March 2016 Exclusive Story

Unconventional Natural Gas

Industry Expanding Reserve Base, Lowering Cost

ENGLEWOOD, CO.–North America’s natural gas resource base is more abundant and lower cost than ever, according to an assessment by IHS, which says the findings show considerable growth in the low-cost segment of the resource base since 2010.

The study, Shale Gas Reloaded: The Evolving View of North American Natural Gas Resources and Costs, concludes that approximately 1.400 quadrillion cubic feet of natural gas in the U.S. lower-48 and Canada is recoverable at a break-even Henry Hub price of $4.00 an MMBtu or less (in real terms).

That represents a 66 percent increase over 2010 estimates, IHS points out, adding that more than half of the resource (800 trillion cubic feet) can be produced at a break-even price of $3.00 an MMBtu or less. “These quantities point to long-term, low-cost energy supplies capable of meeting demand projections for at least the next 30-40 years,” IHS remarks.

The firm says Shale Gas Reloaded updates the findings of a 2010 IHS Energy study, Fueling North America’s Energy Future. IHS reports the new study examines 38 major oil and gas plays in North America and Canada. It finds that not only has the 176 Tcf of gas produced since 2010 been replaced by resource additions, but that the resource base has been extended and the cost of producing many of the remaining resources is significantly lower.

“It has become clear that the unconventional oil and gas revolution in North America has been the most significant energy innovation so far this century. What is truly remarkable is that early estimates for the size of the resource base–game changing in their own right at the time–still proved to be conservative,” observes IHS Vice Chairman Daniel Yergin. “Technological innovation, as is often the case, has proven to be the true X factor behind this growth.”

According to the IHS report, new discoveries, reductions in drilling and completion costs, and major gains in productivity are the major reasons for the resource base expanding and for the lower break-even costs. Key factors it points to include improved understanding of subsurface geology; greater use of technology, including 3-D seismic; the development of new, specialized fracturing techniques; and the emergence of new gas plays such as the Utica Shale.

The spread of shale technology to tight oil plays that produce associated gas also has contributed to the resource expansion, the IHS study finds. Largely undeveloped six years ago, IHS points out that associated gas production from oil and liquids-rich gas plays has doubled in the past four years. The study estimates a total resource base of 250 Tcf of associated gas is contained in plays such as the Bakken, Eagle Ford, Permian Basin, and others.

“All told, this has significant implications for North American and global energy markets,” assesses Michael Stoppard, IHS chief strategist-global gas. “Domestically, continued low gas prices will improve the competitive position of gas in power generation. They also will validate the decisions of chemical companies that have chosen to build up their operations in North America, owing to the low cost of natural gas fuels and feedstocks.

“On a global scale, continued low Henry Hub prices will contribute to the competitive position of North American exports of liquefied natural gas,” Stoppard reflects.

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