AVAILABILITY, ECONOMICS, AND PRODUCTION POTENTIAL OF NORTH AMERICAN UNCONVENTIONAL NATURAL GAS SUPPLIES Prepared for The INGAA Foundation, Inc. by: ICF International 9300 Lee Highway Fairfax, VA 22031 USA Authors: Harry Vidas and Bob Hugman F-2008-03 Copyright ® 2008 by The INGAA Foundation, Inc. November 2008 This page intentionally blank 2 Table of Contents Table of Contents........................................................................................................................ 3 1 Executive Summary .............................................................................................................. 9 1.1 Introduction................................................................................................................. 9 1.2 Resource Definitions ...................................................................................................11 1.3 Objectives...................................................................................................................13 1.4 Major Conclusions of Study.........................................................................................13 1.5 North American Natural Gas Production Forecast.........................................................16 1.6 Report Findings by Category of Unconventional Gas ....................................................18 1.7 Conclusions ................................................................................................................23 2 Introduction........................................................................................................................25 3 Data Sources.......................................................................................................................29 4 North American Natural Gas Production, Reserves, and Drilling Activity.................................31 4.1 Natural Gas Production Trends ....................................................................................31 4.2 Production by Resource Type.......................................................................................33 4.3 Natural Gas Reserves and Reserve Additions ................................................................37 4.4 Drilling Activity – U.S. and Canada...............................................................................38 4.5 Expected Future Contribution from Unconventional Natural Gas ..................................40 4.6 Implications of Forecast for Future Drilling, Industry Outlays, and Water Use .................46 4.7 Unconventional Natural Gas Production “Upside”........................................................46 4.8 Comparison of Forecast to EIA Annual Energy Outlook ................................................47 5 Tight Gas, Shale Gas, and Coalbed Methane Resources........................................................49 5.1 Published U.S. Resource Estimates ...............................................................................49 5.2 Published Canadian Resource Estimates.......................................................................55 5.3 Technology Advances Impacting Tight Gas, Coalbed Methane, and Shale Gas ..............57 5.4 Comparison of Selected Shale Play Assessments...........................................................63 5.5 Preliminary Assessment of Potential in Frontier Shale Gas Plays.....................................64 5.6 Comparison of ICF Lower-48 Shale Play Assessments with Published Assessments ........68 5.7 Natural Gas Composition and Quality ..........................................................................70 6 Regional Tight Gas, Shale Gas, and Coalbed Methane Production and Activity ......................73 6.1 Introduction................................................................................................................73 6.2 Characteristics of Major Plays ......................................................................................73 6.3 Activity Summaries and Discussion of Existing and Emerging Plays................................76 North America Play Level Production....................................................................................76 Rockies ...............................................................................................................................76 Mid-Continent ....................................................................................................................83 North and East Texas...........................................................................................................87 Texas Gulf Coast .................................................................................................................91 Southeast............................................................................................................................93 Appalachian and Midwest Basins and Eastern Canada..........................................................98 Permian Basin ...................................................................................................................104 Western Canada ...............................................................................................................107 3 7 Well Recovery and Resource Development Costs ................................................................113 7.1 National Upstream Costs...........................................................................................113 7.2 Resource Cost Approach and Results .........................................................................115 7.3 Sensitivity of Costs to Lease Bonus and Royalty Rates .................................................121 7.4 Resource Cost Summary............................................................................................121 8 Other Categories of Unconventional Gas ...........................................................................123 8.1 Oil Shale – Horizontal Drilling (Bakken Shale and Barnett Shale Oil Leg) ......................123 8.2 Oil Shale –Thermal Methods......................................................................................124 8.3 Offshore and Arctic Natural Gas Hydrates..................................................................130 8.4 Aboveground Coal to Methane.................................................................................136 8.5 Underground Coal Gasification .................................................................................144 8.6 Landfill Gas...............................................................................................................151 8.7 Biologic Methane......................................................................................................157 Agricultural Biogas ............................................................................................................157 Digester Biogas .................................................................................................................161 Wastewater Treatment Biogas ...........................................................................................164 9 Closing Discussion.............................................................................................................167 4 List of Tables Table 1 Summary of Report Findings ..........................................................................................19 Table 2 U.S. Lower-48 Dry Natural Gas Production and Reserves.................................................37 Table 3 Unconventional Well Completion Activity in the U.S. ......................................................39 Table 4 Coalbed Methane Drilling in Western Canada ................................................................40 Table 5 Summary of Natural Gas Production Forecast .................................................................45 Table 6 Summary of Published U.S. Unconventional Natural Gas Resource Assessments...............50 Table 7 ICF Natural Gas Resource Base.......................................................................................51 Table 8 Summary of Lower-48 Tight Gas Assessments................................................................52 Table 9 Summary of Lower-48 Coalbed Methane Assessments ...................................................53 Table 10 Published Lower-48 Shale Gas Assessments..................................................................55 Table 11 Published Canadian Unconventional Natural Gas Assessments ......................................56 Table 12 WCSB Shale Vertical Well Assessment for the 2003 National Petroleum Council Study ..57 Table 13 Comparison of Recent U.S. Shale Gas Assessments – Selected Plays (Not Including Recently Announced Frontier Plays).............................................................................................64 Table 14 Analysis of Existing and Emerging Shale Formation Volumes and Gas- in- Place .............67 Table 15 Comparison of Current ICF and Other Published Lower-48 Shale Assessments ..............69 Table 16 Characteristics of Major Shale Plays..............................................................................74 Table 17 Characteristics of Major Coalbed Plays .........................................................................75 Table 18 North American Basin Level Unconventional Natural Gas Production .............................77 Table 19 Rockies Unconventional Natural Gas Production by Play................................................78