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Executive Summary
Natural gas has come a long way from the days when it was
largely a waste byproduct sent to the flare. Today, natural gas
meets more than 20% of the world’s primary energy requirements, and
due to technological advances and favorable gas prices, many
previously marginal economic gas resources are now economically
viable.
Sources of natural gas
that are more difficult and costly to extract (usually because of
immature technology) are collectively known as unconventional
natural gas resources (UCG). These unconventional gas sources
are the focus of a comprehensive report recently published by Energy
Business Reports.
Unconventional gas has
become economically viable:
The
natural gas business model has changed drastically in the last
decade. Deregulation and restructuring of the industry opened up new
markets for natural gas, while, at the same time, new environmental
legislation affected fuel demand patterns and led producers to
reconsider the role of UCG in their exploration and development
portfolios. Concurrent with these developments, recovery innovations
significantly raised the recovery rate for unconventional gas
reserves, and new technology advanced the monetization of remote
gas and gas produced in marginal fields.
This ‘perfect storm’ of
influences opened the door of opportunity for development and
exploitation of UCG, and the unconventional natural gas sector is
expected to see double-digit growth in the near term. During the
next five years, demand for unconventional gas will increase
at an average annual growth rate (AAGR) of 10.7%.
Types
of unconventional gas:
-
Coal bed methane (CBM) is formed during coalification, the
process that transforms plant material into coal. The capture of
coal bed methane is important because of its potential for
reducing greenhouse gas emissions. According to the
Environmental Protection Agency, methane gas is twenty times
more harmful than carbon dioxide when released to the
atmosphere. To reduce the effect of vented
coal bed methane, various uses for the resource have been
evaluated, including pipeline injection, power generation, and
direct sales to gas pipelines.
-
Shale gas is essentially natural gas contained
within fine-grained rocks, predominantly shale. Although
it is difficult to extract, most shale gas is fairly clean and
dry due to the fact that heat in the reservoir has broken down
liquid hydrocarbons over time. Shale gas has become an important
part of the energy mix.
-
Methane hydrate is a methane-bearing, ice-like
material that occurs in marine sediments and in permafrost
regions. Methane hydrate was discovered only a few decades ago,
and little research has been done on it until recently. By some
estimates, the energy locked up in methane hydrate deposits is
more than twice the global reserves of all conventional gas,
oil, and coal deposits combined. However, no one has yet
determined how to extract the gas cost effectively or how much
is actually recoverable.
-
Tight gas sands are sandstone formations with
less than 0.1 millidarcy permeability that are known to contain
significant volumes of natural gas. Tight gas sands could aid in
slowing rapidly growing demand for natural gas if utilized and
exploited properly; however significant economic and
environmental challenges exist given the current state of
technology.
Worldwide demand for UCG
is growing:
Technological advancements, together with natural gas’ environmental
benefits, have made natural gas a vitally important component of the
world's primary energy supply. In fact, natural gas is becoming a
preferred fuel in the industrialized world, especially North
America. In 2004, total world natural gas consumption reached 259.5
bcf per day, growing at 10.28% annually from 235.3 bcf per day in
2000.
Natural gas from
unconventional reservoirs is being targeted to contribute a
greater share of the world's natural gas supply in the next two
decades. Independent producers are helping develop many of the new
technologies and well-site strategies necessary to ensure that as
much unconventional gas as possible will be available by
2025, when it will amount to about 44% of US domestic gas
production. The objectives of technologies being used in
unconventional reservoirs include enhanced productivity through
increased exposure of the reservoir to the well bore; improved
fluid-handling and disposal; reduced process-cycle times; declining
materials and services costs; and better management of environmental
risks and compliance.
Although UCG resources
exceed conventional resources by several multiples, the technology
necessary to recover tight sands and
coal bed methane economically has not yet been developed.
Converting the remaining resources into reserves requires a
combination of technological improvement, an appropriate regulatory
environment, and a high level of industry-government cooperation.
The economics of
unconventional natural gas production:
Although unconventional gas resources are abundant, they are
costly to recover. UCG production was boosted in the late 1980s and
early 1990s with the successful implementation of tax incentives
designed to encourage their development. Since then, technological
advancement has sustained production growth even in the absence of
tax incentives, and increased production from unconventional gas
resources has offset a decline in conventional gas production.
The drive to greater
reliance on natural gas will be based in part on economics.
However, government regulatory and taxation policy will also affect
the viability of certain energy commodities, such as gas hydrate.
In the recent past, government subsidies for unconventional gas
resources such as
coal bed methane bolstered their technical and economic
viability. Similar forms of government support could have a
significant impact on the resource viability of gas hydrates.
Another non-economic
factor that will likely affect the resource potential of gas
hydrates relates to concerns about national security and dependence
on foreign energy resources. The governments of many
countries, including the US, often express concern over the heavy
reliance on imported energy resources. Most certainly the
international gas hydrate research programs of Japan, India, and
South Korea have been established in part to address these issues.
Barriers and challenges
remain:
Worldwide development potential for unconventional gas resources can
be realized in the near term, but several obstacles remain. The
biggest challenge is the lack of a comprehensive policy that
encourages development of unconventional gas fields using present
technology. Also missing are policies and funding to encourage new
approaches, exploration of areas with favorable permeability, and
industry R&D. Other challenges facing the UCG industry include
compliance with the Kyoto Protocol, management of carbon dioxide
emissions, and the problem of water pollution associated with
CBM and gas shales.
The Unconventional Gas
Outlook report also includes a breakdown of unconventional gas
potential by geographic regions, a review of existing UCG projects,
an overview of industry initiatives, and a comprehensive list of
major players in the UCG industry.
About the Publisher:
"Unconventional Gas Outlook: Resources, Economics, and Technologies"
is published by Energy Business Reports, an energy industry think
tank and leading source for energy industry information and research
products. Other reports available from
Energy Business
Reports include:
Cellulose Ethanol Market Potential,
Natural Gas Storage Effects on Energy Trading,
Fuel Cell Technology and Market Potential,
Clean Coal Technologies Market Potential 2007, and
Commercialization of Coal Gasification Technologies.
www.unconventionalgasreport.com
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