Technology improving productivity, costs of shale gas developments

By Lauren Krugel (CP) – 1 hour ago

CALGARY — It was in the shale of north-central Texas around the beginning of this decade that huge technological leaps ushered in a new era for North America's natural gas industry.

The Barnett Shale was the testing ground for many of the techniques firms are using today to tap into bountiful, but tough-to-access, natural gas reservoirs throughout the continent.

Now producers are working on tailoring the technology to adjust to the particular nuances that come with other emerging areas, like the Horn River Basin in northeastern British Columbia or the Marcellus in Pennsylvania.

"We're at a quantum change in terms of natural gas exploration and development within North America," said Mike Dawson, executive director of the Canadian Society for Unconventional Gas.

"There's an awful lot of gas out there now, available for companies to explore."

The Barnett was a tough nut to crack.

Companies had been drilling in the massive formation, which encompasses 17 counties in Texas, since the early 1980s, but had limited success. It wasn't until around 2002, that the region took off with the use of horizontal drilling technology.

Now the Barnett is likely the most prolific on-shore natural gas field in North America, containing an estimated 26 trillion cubic feet of natural gas.

Horizontal of wells start out the same way as a traditional vertical one, but a portion of its drilled along a horizontal plane.

"You're accessing more of the rock that contains the gas," Dawson said.

Another technology that has helped unlock unconventional gas plays is multi-stage fracturing, in which water, sand and chemicals are injected into the ground at high-pressure to essentially break the rock and free the gas.

The "multi-stage" element means gas can flow out along the whole length of the well bore, as opposed to from just one spot.

The technology has been improving continually over the years.

In the beginning about 10 to 15 per cent of the gas trapped in the Barnett could be recovered. Now as much as 40 per cent of the gas can be accessed in some places.

The big challenge continues to be costs, said Dawson.

"The economics of these plays are pretty skinny at the best of times. They really are low-margin plays that work because of the economies of scale," he said.

"And so the companies have to try to figure out how they can squeeze that extra dollar out of the drilling costs."

Calgary-based EnCana Corp. (TSX:ECA) is one of the continents biggest natural gas producers. It recently spun off its oil business into a new company called Cenovus so that it can focus exclusively on developing its mammoth unconventional natural gas reserves.

About three or four years ago, workers would have been "high-fiving" at the prospect of drilling a well that made $5-or $6 million, Eric Marsh, a vice-president with the company, told a natural gas conference last week.

"If you would have told me three years ago that shale wells would be making $20 million a day, I would have just shook my head. I just can't hardly believe that, and that's what we see almost every day."

Neither horizontal drilling nor fracturing are new concepts on their own, said Darren Gee, president of Peyto Energy Trust (TSX:PEY.UN), which is starting to use those techniques in its Deep Basin operations in Alberta.

"It's just the combination of those two technologies really that's taken hold most recently and caught a lot of fire," Gee said.

Unlike shale plays like the Horn River Basin and Montney in neighbouring B.C., Alberta's Deep Basin can be exploited with traditional vertical wells.

However, Peyto and some other producers want to see whether the new methods yield better results.

"Perhaps there's a way that we can skin this cat and make a little more off it at the end of the day," Gee said.

"But it's still early days. We don't know yet whether we're going to make more money this way and it's going to be more commercial and more profitable this way than to do it the old way."

Copyright © 2009 The Canadian Press. All rights reserved.