Drilling & Fracturing
Horizontal Drilling and Hydraulic Fracturing: It’s Not Just for Shale Gas Anymore
Thanks to the combined technologies of horizontal drilling and hydraulic fracturing, which opened up the blockbuster frontier of shale gas, the U.S. is awash in natural gas. Natural gas supplies keep increasing every month.
The resulting surplus is keeping the price of natural gas so low that it is below the cost of drilling and producing most shale gas. So, if shale gas is uneconomic, why does the supply of natural gas keep increasing?
What has not been widely reported is that while shale gas is the major component of current gas supplies, a lot of the surplus of natural gas is coming from conventional oil wells that are being drilled horizontally and hydraulically fractured.
A report from the financial advisory firm Raymond James included this comment from J. Marshall Adkins: "We believe that there are a number of underlying supply trends that the 'supply rollover pundits' are simply not factoring into their models now that the gas rig count has finally begun to move lower. The biggest one is the fact that there are a bunch of horizontal oil wells being drilled today that are producing way more associated gas (most more than five times more productive) than the average vertical gas well drilled just five years ago. Remember, we are not even counting these as gas wells!”
Adkins and Raymond James go on to say that, “Based on our recently completed survey of publicly traded operators for 3Q2011, we now believe that the Energy Information Administration's (EIA) next release of its monthly 914 U.S. gas supply data (on Nov. 29) should show a significant upward spike in the September gas supply figure - to the tune of plus-1 Bcf/d more than August."
It is interesting to note that a great deal of media attention has been devoted to shale gas as if it is somehow different from any other source of natural gas, such as conventional gas wells and the associated natural gas from oil wells. What hasn’t been reported is that the combination of horizontal drilling and hydraulic fracturing has become so common that an estimated 90% of all oil and gas wells now being drilled are using the combination of the two techniques. In fact, the EIA reported that domestic crude oil reserves increased in 2009, reversing a 40-year decline.
The lesson here is that an inordinate amount of human resources is being expended to examine and regulate shale gas exploration when, in fact, the activity is no different than all oil and natural gas exploration and production. The question now is will all oil and gas exploration be subjected to hyper-scrutiny and new regulations that could limit, if not prohibit, such exploration—or will some level of sanity prevail?