With Gas so Cheap and Well Drilling Down, Why is Gas Production so High?
Natural gas prices have declined to below $3.00/mcf, levels not seen for years, yet the EIA posted the highest gas production ever in October, 2011. U.S. gas production is growing despite annual well completion rates that are half that at the peak of the drilling boom in 2008, when gas price topped $12.00/mcf. Proponents of shale gas as a “game changer” suggest that, despite the well known high decline rates of shale gas wells, their productivity is sufficient to grow production with far fewer wells at historically low prices. Others, such as Arthur Berman, claim that shale gas plays require much higher prices to be economic. The answer may lie in the gas produced in association with oil drilling, which is near all time historical highs.
Each of the points in the last paragraph is debatable, with the methane in groundwater being the most contentious, frackwater dumped on the surface being pollution the least.
Figure 1 illustrates the annual number of gas wells and gas production documented by the EIA. Although drilling is still well above 1990’s levels, it is only half that of the all time record drilling levels reached in 2008.
Natural Gas Production versus Annual Drilling Rates, 1990-2011Figure 1 – Annualized U.S. natural gas production and drilling rates, 1990-2011.U.S. natural gas production has reached production levels of 4.6 percent above the previous 1973 peak, and nearly 16% above the recent 2001 peak. While some of this increase is likely due to delayed tie-ins from the 2008 drilling boom, and some due to the high initial productivities of shale gas wells, these are not likely the whole story.
Hydraulic fracturing has certainly changed the game with respect to gas production from shales and tight rocks, albeit with widely reported collateral damage including methane leakage into groundwater, pollution from produced frackwater disposal on the surface, induced earthquakes from frackwater injection into disposal wells and the environmental footprint of industrialized landscapes. Equally important is the game changing nature of applying hydraulic fracturing to producing oil from shales...MORE
The rest of the article gets into the Energy Return on Investment which is a subject of some interest, see corn ethanol, for example.