While the federal Energy Information Administration (EIA) may have first logged shale gas development and production as far back as the mid-1990s, it has only been in recent years that shale plays have become universally recognized as a game-changer for the energy industry.
As a result of the Shale Gas Revolution, dry gas production grew 15% to 11.3 Bcf/d between 2009 and 2012, and analysts expect that growth to continue, reaching an annual average of 69.1 Bcf/d by the end of 2014. This is despite currently limited takeaway and gas-processing capacity and the expectation of production declines in several major producing basins during the coming year, according to energy market analytics company BENTEK’s 2013-2014 Outlook.
There are, at last count, 77 gas processing expansions and new projects scheduled to come online in 2013-2014, adding 14.1 Bcf/d of processing capacity, much of that accessible to shale plays. At the same time, 15 pipeline projects are expected to boost takeaway capacity by 4.7 Bcf/d — the lion’s share of that targeting bottlenecks in the Marcellus and Eagle Ford shales.
Additionally, Ohio’s emerging Utica Shale, which has almost no infrastructure to date, will benefit from several projects, including Tetco’s 300 MMcf/d pipeline expansion from Uniontown to Gas City.
As a whole, BENTEK estimated that limited capacity alone created an inventory of at least 1,800 non-producing or under-producing wells. Among that number were roughly 1,000 gas wells drilled in the Marcellus in 2012, even as some relief came in the form of eight Marcellus-related pipeline expansions, adding 2.0 Bcf/d by the year’s end.
“One thing to remember, to my understanding many of the producers had drilled wells simply to avoid leases expiring,” said Mark Bridgers, a design and construction consultant at Continuum Advisory Group in Raleigh, NC. “They are either waiting until there is a processing facility close by or, alternatively, the price of gas rises a little bit. Some of those wells that were drilled will be producing.”
He added that the ability to build processing plants in less than 24 months – and in some case less than a year – along with the “relatively easy” permitting process for such projects, make these projects easier to undertake than other types of infrastructure.
“Building a big one [processing plant] is not that problematic, either,” Bridgers said. “You need a little bit larger footprint, but these are not big land hogs.”
Said Don Warlick president of Houston-based unconventional oil and gas analysis company Warlick Energy, “There are new additions to petrochemical capacity going forward, right now. Essentially, all of these have a gas feed. That’s a very positive happening that, I think, will help gas prices.”
As additional gas processing, gathering infrastructure and pipeline capacity are built, particularly in the Northeast and South Texas, producers are beginning to tap into Marcellus and Eagle Ford well inventories and bringing production onstream.
While production volumes have flattened, BENTEK analysts expect dry gas to resume growth in the second half of 2013, due largely to the impact of the shale boom and the rapid growth of gas demand.
Lower Cost, Increased Efficiency In addition to reduced cost, gains in drilling efficiencies are expected to quicken the rate at which the supply is delivered. BENTEK points, for example, to the Bakken, where the time to drill a well now averages 22 days, down from 36 days in late 2010. Keep in mind that gas-directed rig counts have declined 72% since peaking at 1,054 in September 2009, yet gas production grew by 15% during that period.
“The active count is a poor indication of production trend,” BENTEK said. “Drilling rigs can be vertical, horizontal, directional – with variation in horsepower, rotary steerable systems and torque/drag models, all of which affect drilling times and efficiencies.”
Additionally, production declines in several major basins are expected to be much slower in 2013, in part, because mature wells decline at a slower rate. BENTEK anticipates nine basins will grow in 2013, accounting for a 4.9 Bcf/d gain; however, declines in 10 others will drop the net gain down to 2.0 Bcf/d.