An Old Field Holds Lessons for Shale Gas Development

Author: Kurt Wilson

Following the financial crisis and the commodity price collapse of 2008, something peculiar occurred in the Barnett Shale of northeast Texas, the oldest and most established shale gas play. Drilling rigs left the area in droves, with nearly two thirds packing up and seeking work elsewhere (Figure 1). Yet gas production from the field, far from collapsing as was feared by local governments, merely stabilized and has only now begun to decline some four years later. This turn of events is instructive because conventional wisdom holds that shale resource development is similar to mining, with extraction rates proportional to the intensity of development.

Barnett Shale production stabilizes despite drop in activity (IHS)

Two important factors contributed to the persistence of Barnett Shale gas production during this time. The first factor is the nature of production decline rates in shale gas reservoirs. Although these wells experience rapid initial decline, they often continue producing at low but stable rates for decades. As the field ages, a base of low-decline, later-life wells constitute a larger share of production. The average Barnett Shale well produces about 400 thousand cubic feet (mcf) per day; however, newly drilled wells may initially produce ten times that rate. Studies indicate that adsorbed gas, or gas chemically bonded to the rock, may extend the life of these older wells. Once producing, the marginal cost of gas from these wells is less than $1/mcf, which has led to an over-supplied market and a gas glut nationwide. This low-cost, long-life gas supply has spurred the interest of chemical companies and raised the possibility of  the United States exporting liquefied natural gas.

The second factor influencing shale gas development is rapidly improving technology. Large efficiency gains have been made in developing shale resources, allowing more gas from fewer rigs. Wells are drilled faster even as the horizontal sections have been lengthened on average. Placing multiple wells on a single pad site can eliminate downtime and lessen surface impact. One company active in the Barnett, Devon Energy, completed 36 wells under a lake from a single pad near the shoreline. The geological understanding of shale, once neglected by the industry in search of more permeable formations, has also improved. Advances in electric logging tools enable better characterization of the shale reservoir and allow more efficient fracturing in the most promising intervals. In a recent report on shale gas, the IEA estimated that better fracturing techniques alone could save $400,000 for a typical well.

The treatment of fracture flowback water, of fracwater, is one of the biggest obstacles in expanding shale gas production*

Technology is also helping to mitigate environmental concerns around shale gas production. Strides have been made in recycling fracture flowback water, particularly in Pennsylvania where the freshwater supply is closely regulated. GasFrac, a small Canadian company, fractures wells using liquefied propane, eliminating the need for water entirely. Efforts to implement environmentally benign substitutes for harmful chemicals are making progress and fracturing fluids in the future may be nontoxic, alleviating the most pressing groundwater contamination concerns. Still, more can be done to increase the transparency of operations. Fracture fluid disclosure is required only in certain states but should be expanded to the national level. Fugitive methane emissions have also become a point of contention and further efforts should be made to quantify and minimize their size.

With shale gas entering the mainstream of America’s energy mix, it’s important to recognize that it is a nascent and evolving technology. The decline in shale gas drilling during this period of low gas prices provides a time to pause and allow environmental understanding and government regulation to properly develop. Just as the Barnett Shale has proven more resilient than expected, the shale gas industry continues to use improving technology to overcome criticism as it matures into a stable supply of low-cost energy.