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Unconventional Gas Outlook: Resources, Economics,
and Technologies
Energy Business Reports releases its latest findings the market potential for UCG
Phoenix , AZ – December 22, 2006 – Energy Business Reports has just released its latest research report: " Unconventional Gas Outlook: Resources, Economics, and Technologies." Energy Business Reports is an energy industry think tank and leading source for industry information and research products. See full details at www.unconventionalgasreport.com
Natural gas has come a long way from the days when it was largely a waste byproduct sent to the flare. Today, natural gas meets more than 20% of the world’s primary energy requirements, and due to technological advances and favorable gas prices, many previously marginal economic gas resources are now economically viable.
Sources of natural gas that are more difficult and costly to extract (usually because of immature technology) are collectively known as unconventional natural gas resources (UCG). These unconventional gas sources are the focus of a comprehensive report recently published by Energy Business Reports.
Unconventional gas has become economically viable: The natural gas business model has changed drastically in the last decade. Deregulation and restructuring of the industry opened up new markets for natural gas, while, at the same time, new environmental legislation affected fuel demand patterns and led producers to reconsider the role of UCG in their exploration and development portfolios. Concurrent with these developments, recovery innovations significantly raised the recovery rate for unconventional gas reserves, and new technology advanced the monetization of remote gas and gas produced in marginal fields.
This ‘perfect storm’ of influences opened the door of opportunity for development and exploitation of UCG, and the unconventional natural gas sector is expected to see double-digit growth in the near term. During the next five years, demand for unconventional gas will increase at an average annual growth rate (AAGR) of 10.7%.
Types of unconventional gas:
- Coal bed methane ( CBM ) is formed during coalification , the process that transforms plant material into coal. The capture of CBM is important because of its potential for reducing greenhouse gas emissions. According to the Environmental Protection Agency, methane gas is twenty times more harmful than carbon dioxide when released to the atmosphere. To reduce the effect of vented CBM , various uses for the resource have been evaluated, including pipeline injection, power generation, and direct sales to gas pipelines.
- Shale gas is essentially natural gas contained within fine-grained rocks, predominantly shale. Although it is difficult to extract, most shale gas is fairly clean and dry due to the fact that heat in the reservoir has broken down liquid hydrocarbons over time. Shale gas has become an important part of the energy mix.
- Methane hydrate is a methane-bearing, ice-like material that occurs in marine sediments and in permafrost regions. Methane hydrate was discovered only a few decades ago, and little research has been done on it until recently. By some estimates, the energy locked up in methane hydrate deposits is more than twice the global reserves of all conventional gas, oil, and coal deposits combined. However, no one has yet determined how to extract the gas cost effectively or how much is actually recoverable.
- Tight gas sands are sandstone formations with less than 0.1 millidarcy permeability that are known to contain significant volumes of natural gas. Tight gas sands could aid in slowing rapidly growing demand for natural gas if utilized and exploited properly; however significant economic and environmental challenges exist given the current state of technology.
Worldwide demand for UCG is growing: Technological advancements, together with natural gas’ environmental benefits, have made natural gas a vitally important component of the world's primary energy supply. In fact, natural gas is becoming a preferred fuel in the industrialized world, especially North America . In 2004, total world natural gas consumption reached 259.5 bcf per day, growing at 10.28% annually from 235.3 bcf per day in 2000.
Natural gas from unconventional reservoirs is being targeted to contribute a greater share of the world's natural gas supply in the next two decades. Independent producers are helping develop many of the new technologies and well-site strategies necessary to ensure that as much unconventional gas as possible will be available by 2025, when it will amount to about 44% of US domestic gas production. The objectives of technologies being used in unconventional reservoirs include enhanced productivity through increased exposure of the reservoir to the well bore; improved fluid-handling and disposal; reduced process-cycle times; declining materials and services costs; and better management of environmental risks and compliance.
Although UCG resources exceed conventional resources by several multiples, the technology necessary to recover tight sands and CBM economically has not yet been developed. Converting the remaining resources into reserves requires a combination of technological improvement, an appropriate regulatory environment, and a high level of industry-government cooperation.
The economics of UCG production: Although unconventional gas resources are abundant, they are costly to recover. UCG production was boosted in the late 1980s and early 1990s with the successful implementation of tax incentives designed to encourage their development. Since then, technological advancement has sustained production growth even in the absence of tax incentives, and increased production from unconventional gas resources has offset a decline in conventional gas production.
The drive to greater reliance on natural gas will be based in part on economics. However, government regulatory and taxation policy will also affect the viability of certain energy commodities, such as gas hydrate. In the recent past, government subsidies for unconventional gas resources such as CBM bolstered their technical and economic viability. Similar forms of government support could have a significant impact on the resource viability of gas hydrates.
Another non-economic factor that will likely affect the resource potential of gas hydrates relates to concerns about national security and dependence on foreign energy resources. The governments of many countries, including the US , often express concern over the heavy reliance on imported energy resources. Most certainly the international gas hydrate research programs of Japan , India , and South Korea have been established in part to address these issues.
Barriers and challenges remain: Worldwide development potential for unconventional gas resources can be realized in the near term, but several obstacles remain. The biggest challenge is the lack of a comprehensive policy that encourages development of unconventional gas fields using present technology. Also missing are policies and funding to encourage new approaches, exploration of areas with favorable permeability, and industry R&D. Other challenges facing the UCG industry include compliance with the Kyoto Protocol, management of carbon dioxide emissions, and the problem of water pollution associated with CBM and gas shales .
The Unconventional Gas Outlook report also includes a breakdown of UCG potential by geographic regions, a review of existing UCG projects, an overview of industry initiatives, and a comprehensive list of major players in the UCG industry.
About the Publisher: " Unconventional Gas Outlook: Resources, Economics, and Technologies" is published by Energy Business Reports (www.EnergyBusinessReports.com), an energy industry think tank and leading source for energy industry information and research products. Other reports available from EBR include: Weather Risk Management, Natural Gas Storage Effects on Energy Trading, Fuel Cell Technology and Market Potential, and Understanding the China Energy Market. This reports sells for $497and can be ordered at www.unconventionalgasreport.com
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