With regard to North America’s energy sector, natural gas has always been treated as crude’s poor cousin. For decades, it was burned off as an unwanted byproduct of oil production until it became accepted as a cheap source of heat and peak electricity load demand. But even today, natural gas gets little respect.
But natural gas is on the cusp of a renaissance that could reshape the very nature of the energy sector in North America for the next several decades. ‘We have more gas than anyone else in the world,’ said T. Boone Pickens, a senior petroleum industry spokesman. ‘America is the Saudi Arabia of natural gas. It's time for us to use this abundant resource to end the cycle of foreign oil dependency and addiction that is making us less safe and more economically insecure.’
Rise of the unconventional
The first step for the resurgence of natural gas was set with the advent of unconventional gas. But it wasn’t until the introduction of shale gas that production really took off. Geologists have long been aware that the black rock filling many of the basins around North America can contain as much as 300 billion ft3 of gas/mile2.
Canada is in a similar situation. Some of the most prospective reservoirs lay in the Montney Basin in northwest Alberta and adjacent northeast British Columbia, and the Horn River Basin, located north of Montney in northeast BC. Geological studies indicate that the potential is huge.
Climate change is a second major factor. In order to reverse GHG buildup, the majority of nations around the world signed the Kyoto protocol, agreeing to an emissions reduction to 6% below 1990 levels by 2012. Natural gas, has a much small emission intensity per electricity output; increasing the percentage of gas generated electricity (known as gas to power, or GTP), would reduce GHG output.
The expansion of unconventional natural gas is not without its problems. The economic production of shale gas has been made possible through the development of horizontal drilling, which exposes a much greater percentage of the well bore to the reservoir, and hydraulic fracturing stimulation, which injects water mixed with chemicals into the reservoir at sufficiently high pressures to fracture the rock and release the gas. But the process also raises concerns for nearby residents, who fear contamination of ground water by fracture fluids.
The cost of new natural gas transportation infrastructure is also considerable. Recently, a debate has emerged regarding the long term viability of shale gas. But the biggest headache may be continuing low prices. Thanks to the recession and increased output, North America is suffering from a gas glut. Winter storage levels hit 3.8 trillion ft3 in the fall of 2009, a record.
The market is adjusting accordingly. The Natural Gas Supply Association (NGSA) says that the US annual well completion will fall from the 2008 - 2009 winter season high of 30 951 wells to 18 000 for the 2009 - 2010 winter season. Already, the US peak production rate of 58.5 billion ft3/d reached in February, 2009 has fallen to 55.7 billion ft3/d.
As supply recedes, gas prices should slowly firm up, but for them to strengthen significantly, new demand must emerge. Federal politicians are suddenly keen on natural gas. Bipartisan representatives in both Congress and the Senate have formed gas caucuses to promote the commodity.
In conclusion, natural gas in North America stands to benefit from a confluence of unconventional sources, environmental friendliness, climate change legislation and new uses. But most of all, it may finally get some respect.
Author: Gordon Cope, Hydrocarbon Engineering Correspondent. Read the full version of this article in the February 2010 issue of Hydrocarbon Engineering. Subscribers can log in here to access the downloadable pdf.
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