18 May 2016
The natural gas revolution that has gradually unfolded in the last three and a half decades in the United States is nothing short of remarkable. The unique combination of technological advancements, early government support, a regulatory and incentive system (landowners are entitled to rights to subsoil resources, thus profiting from the proceeds), and an entrepreneurial, risk-taking culture has resulted in a dramatic uptake of gas production from unconventional resources primarily in the Barnett, Haynesville and Fayetteville, and later the Bakken, Marcellus and Eagle Ford shale basins.
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Shale gas was extracted first in the early 19th century in the United States from shallow, low-pressure fractures. Yet it took more than 150 years for industrial-scale shale gas production to pick up. The role of the US government was critical all along. Declining conventional gas well production prompted the federal government to invest in research in an attempt to boost productivity. The Eastern Gas Shales Project which took off in 1976 aimed to evaluate the gas potential of the extensive Devonian and Mississippian organic-rich black shales within the Appalachian, Illinois, and Michigan basins in the Eastern US. The purpose of the program was to “determine the extent, thickness, structural complexity, and stratigraphic equivalence of all Devonian organic-rich shales throughout the three basins; and to develop and implement new drilling, stimulation, and recovery technologies to increase production potential.” The Gas Research Institute was also established in 1976 to spearhead natural gas research and development (the Institute’s funding was provided by a surcharge on shipments of natural gas sold by the interstate pipelines). The Department of Energy, working with private companies, completed the first multi-fractured horizontal well in 1986. Tax credits for unconventional gas producers through the so-called section 29 proved to be very effective in incentivizing further production in the 1980s and 1990s. Mitchell Energy, using new technologies such as microseismic imaging in addition to horizontal drilling and hydraulic fracturing, achieved the first commercially viable shale fracture in 1998.
Since the 1990s and especially from the mid-2000s unconventional natural gas production has been on a steady rise, reaching 47 percent of total dry gas production in the US in 2013. Total gas production in the US increased by 35 percent between 2005 and 2013 to approximately 680 Bcm. Despite depressed oil prices affecting associated gas production in the US, total US gas production will continue to grow. Gas production is projected to further increase by 45 percent to 1005 Bcm by 2040 on the back of the growth of Marcellus and Utica shale plays and flattening decline rates in other plays, though with some caveats over the actual production increase, which is contingent upon the size and cost of tight and shale gas resources in Alaska, the Midcontinent region, the Gulf Coast and the Dakotas/Rocky Mountains, as well as technology improvements, domestic and international natural gas demand, and the relative price of oil among other factors.
Figure 1 | US dry natural gas production
Source: Adam Sieminski, The U.S. Natural Gas and Shale Production Outlook, for North American Gas Forum, 29 September 2014.