CHAPTER ONE Update on North America Shale-Gas Exploration and Development DAVID G. HILL 1, JOHN B. CURTIS 2, PAUL G. LILLIS 3 1. EnCana Oil & Gas (USA) Inc., Denver Colorado 80202; 2. Department of Geology and Geological Engineering, Colorado School of Mines, Golden, Colorado 80401; 3. U.S. Geological Survey, Denver, Colorado 80225 ABSTRACT In the oil and gas industry, shale has overcome its stigma as an odd unconventional hydrocarbon reservoir to become one of the most sought-after resource plays in North America. Spurred by develop - ment of the Barnett Shale in the Fort Worth Basin, U.S. drilling and exploration for this unique play type is at an all time high at year-end 2006. Recent shale specific consortia, workshops, symposia and confer - ences reflect this increased emphasis on shale plays. Shale-gas plays have emerged as commercially viable and encouraging exploration is ongoing in many basins in North America. Hydrocarbon production from shale-gas systems has a long and important history in North America. The first commercial U.S. natural gas production (1821) came from organic-rich Devonian shale in the Appalachian basin. The first commercial U.S. oil production from shale (1862) came from the Upper Cre - taceous Pierre Shale in Colorado. Both plays are still producing today. With the recent growth of shale-gas plays, defining and classifying shale reservoirs has become increasingly complex. Including both gas and oil productive systems and expanding the definition to include fine-grained source rocks creates a more encompassing taxonomy. Shale-gas systems are generally unconventional, self-sourced, continuous-type accumulations (biogenic, thermogenic or combined bio - genic-thermogenic gas accumulations). The principal shale-gas plays are characterized by widespread gas saturation, subtle trapping mechanisms, seals of variable lithology and enhanced permeability due to nat - ural fractures and/or variable interbedded lithology. It now is commonly accepted that gas is stored in shale-gas reservoirs in a variety of ways including in natural fractures and intergranular porosity as free gas, sorbed onto kerogen and possibly dissolved in bitumen. Shale-oil systems can also be continuous- type accumulations, characterized by widespread oil saturation, subtle trapping mechanisms, primary permeability from natural fractures and interbedded lithologies and seals of variable lithology. Shale oil reservoirs are typically a dual porosity system where oil is primarily stored in the natural fracture net - work and intergranular porosity. Natural gas production from the five principal shale plays has increased 151% from 2000 to 2006. These plays include Devonian Ohio Shale of the Appalachian Basin, Devonian Antrim Shale of the Michi - gan Basin, Devonian New Albany Shale in the Illinois Basin, Mississippian Barnett Shale in the Fort Worth Basin, and Cretaceous Lewis Shale in the San Juan Basin. The great majority of this increase has been in the Barnett Shale. The other principal plays have increased slightly or declined. These plays are being used as analogs for exploration and development in other basins. At year-end 2005, a new shale-gas play, the Fayetteville Shale, has emerged in the Arkansas portion of the Arkoma Basin and is proving to be commer - cially viable and potentially very large. Production is beginning to be established in several other plays such as the Baxter Shale in the Greater Green River Basin and the Woodford Shale in southeastern Oklahoma. Numerous other shale plays in the pilot stage are being worked to establish production. Gas Shale in the Rocky Mountains and Beyond, D. Hill, P. Lillis, and J. Curtis, eds., Rocky Mountain Association of Geologists 2008 Guidebook CD, p. 11-42. 11 David G. Hill, John B. Curtis, Paul G. Lillis New technologies have played a critical role in expanding industrys understanding of shale-gas plays and unlocking their potential. These technologies include advances in hydraulic fracturing, horizontal drilling and reservoir characterization. Operators and service companies have adapted, modified and cre - ated new approaches to exploration and development of shale reservoirs through innovation and trial and error. In the established shale-gas plays, approximately 38,000 shale-gas wells produced an estimated 1.0 Tcf of gas at year-end 2006. Cumulative natural gas production has exceeded 8.7 Tcf from 1979 to 2006 from these plays. The estimated technically recoverable resource ranges from 53 to 114 Tcf. INTRODUCTION predominate in the Michigan and Illinois Basin plays (Schurr and Ridgley, 2002; Schoell, 1980; Martini et al, Gas-productive shales occur in Paleozoic and Mesozoic 1998; Walter et al, 2000). rocks in the continental United States (Figure 1). As with Economic production typically, if not universally, most unconventional or continuous-type accumulations requires enhancement of gas shale’s inherently low matrix (Curtis, 2001; U.S. Geological Survey National Oil and permeability (<0.001 md) (Hill and Nelson, 2000). Well Gas Resource Assessment Team, 1995), these systems rep - completion practices employ hydraulic fracturing technol - resent a potentially large, technically-recoverable gas ogy to access the natural fracture system and to create new resource, even though past production and proved reserve fractures. Less than 10% of shale-gas wells are completed estimates are small (Figure 2). The resource pyramid con - without some form of reservoir stimulation. Early attempts cept depicted in Figure 2 was first used in the late 1970s to fracture these formations employed nitroglycerin, pro - for analyzing natural gas accumulations in low-permeabil - pellants and a variety of hydraulic fracturing techniques ity reservoirs (Sumrow, 2001). If exploration and develop - (Hill and Nelson, 2000). ment companies are to access the gas resources towards the This paper is an update on shale-gas activity in North base of the pyramid, some combination of incrementally America reviewing the original five principal shale-gas sys - higher gas prices, lower operating costs and more advanced tems in the U.S., and discussing several emerging shale-gas technology will be required to make production economic. plays and plays that are in the early stages of exploration Production of gas deeper within the resource pyramid is and evaluation (Figure 1). required to fully realize the potential of this type of petro - leum system. More than 38,000 shale-gas wells have been drilled in HISTORICAL PERSPECTIVE the United States since the early 1800s (Hill and Nelson, 2000). Paucity of shale-gas production outside the United The birth of the oil and gas industry occurred in the States may be attributable more to uneconomical flow Appalachian Basin. Although the start of the oil industry is rates and well-payback periods than to the absence of commonly attributed to the Drake well drilled near Oil potentially productive shale-gas systems. Creek, Pennsylvania in 1859, the first gas well was report - These fine-grained, clay and organic carbon-rich rocks edly dug in 1821 to the Devonian Dunkirk Shale by are both gas source and reservoir rock components of the William A. Hart in Chautauqua County, New York. This petroleum system (Martini et al, 1998). Gas is thermogenic well produced natural gas that was used to illuminate the or biogenic and may be stored as free gas in fracture and town of Fredonia, New York (Roen, 1993). Both of these intergranular porosity, sorbed onto kerogen, and perhaps historic wells were shallow, and both of these areas are still dissolved in bitumen (Martini et al, 1998; Schettler and commercially productive. Parmely, 1990). Trapping mechanisms can be ambiguous Shortly following the oil discovery by the Drake well, oil with gas saturations covering large geographic areas (Roen, production was established west of the Mississippi river in 1993). Postulated seal-rock components differ among the 1862 in what is now Fremont County, Colorado. This pro - major shale-gas plays, including bentonites (San Juan duction came from the fractured Cretaceous Pierre Shale Basin), shale (Appalachian Basin and Fort Worth Basin), establishing the Florence-Cañon City field (Mallory, 1977). glacial till (Michigan Basin) and shale/carbonate facies Like the Devonian age shale in the Appalachian Basin, oil is changes (Illinois Basin) (Hill and Nelson, 2000; Walter et still being produced from the Pierre Shale in this field today. al, 2000; Curtis and Faure, 1997). While oil production spread quickly across the U.S. Thermogenic and biogenic gas components are present from east to west, shale-gas production was much slower in shale-gas reservoirs; however, biogenic gas appears to to develop. Production was concentrated in the eastern Gas Shale in the Rocky Mountains and Beyond 12 The Rocky Mountain Association of Geologists UPDATE ON NORTH AMERICAN SHALE -G AS EXPLORATION AND DEVELOPMENT . s y a l p e l a h s d n a s n i s a b y r a t n e m i d e s . S . U r o j a M . 1 e r u g i F Gas Shale in the Rocky Mountains and Beyond 13 The Rocky Mountain Association of Geologists David G. Hill, John B. Curtis, Paul G. Lillis U.S., mainly due to proximity to markets and infrastruc ture. Natural gas production from the New Albany Shale in the Illinois Basin was established in 1863. Growth stalled until the 1920s. By 1926, the Devonian shale-gas fields of east - ern Kentucky and West Virginia comprised the largest known gas occurrences in the world (Roen, 1993). The next period of revitalization for gas shales came with the shortages of natural gas during the early 1970s. Several initiatives increased gas production from approxi - mately 70 Bcf per year from one basin to over 400 Bcf per year in 2000 from 5 basins. These efforts included focused research and development and a federal tax incentive for producing gas from shale. In 1976, The Energy Research and Development Administration (ERDA), forerunner of U.S.