America’s proven gas reserves hit new record

Estimates of proven gas reserves in the United States reached have a record high – following another record-setting year in production from these reserves in 2013, according the Energy Information Administration (EIA). It attributed both increases to shale.  

In its US Crude Oil and Natural Gas Proved Reserves 2013 report published last week, the EIA said proven US gas reserves rose by 9.7% – from 9.14 trillion cubic metres to 10 tcm – offsetting the large decline reported in 2012. 

The country’s crude oil reserves also rose by 9% in 2013, amid the highest production in four decades. Gas production reached 750 billion cubic metres for the year, accounting for 20.6% of world gas production – more than any other country, according to BP’s Statistical Review of World Energy.  

“An increase in gas prices used to characterise existing economic conditions contributed to the reported 2013 increase in proven gas reserves,” the EIA said. 

“For example, the 12-month, first-of-the-month average spot gas price at Henry Hub increased from $2.75/MMBtu in 2012 to $3.66/MMBtu in 2013. Proved gas reserves had declined between 2011 and 2012 as the gas price declined,” it stated, noting that, for example, the Henry Hub’s 12-month first-of-the-month average spot gas price dropped from $4.15/MMBtu in 2011 to $2.75/MMBtu in 2012.

More than 90% of the increase was a result of producers increasing their recovery expectations for extensions of existing fields, the agency said. Its estimates are based on a survey of 480 producers nationwide.

Industry experts say shale gas producers are continuing to reduce their per-well costs, making more reserves economic to extract. However, the EIA cautioned the new 2013 figures “did not completely offset the large declines of 2012, suggesting operators are cautious about committing to drill gas prospects, or are diverting their attention to oil- or liquids-rich prospects”.

But with the new shale additions, total proven reserves are now at an all-time high, exceeding the previous record of 9.9 tcm estimated in 2011. Adding in “unproved resources” – gas believed to be recoverable if costs are not considered – puts America’s “technically recoverable” gas at more than 62.7 tcm, the EIA said.

Texas has the largest amount of proven reserves, with nearly 2.8 tcm – 27% of the national total. The state encompasses the Barnett Shale, where the fracking boom started, a portion of the Haynesville/Bossier shale play, and the Eagle Ford shale play, where associated gas production has soared, along with oil production.

Pennsylvania and West Virginia

However, Texas accounted for just 14% of the 2013 reserves increase, while 70% of the 886 bcm increase came from Pennsylvania and West Virginia, which include the huge Marcellus shale reserve. Pennsylvania’s reserves went up by 382 bcm and West Virginia’s by 235 bcm. Pennsylvania is second to Texas in total reserves with 1.4 tcm, or 14% of the national total.

Shale drilling in West Virginia has increased recently. The state now has 6.5% of US reserves – overshadowing the state’s shrinking coal industry, which has long been the backbone of its economy.

The northern part of West Virginia overlies the Marcellus, Utica and Upper Devonian reserves, including a region that extends from southwest Pennsylvania where shales are ’stacked‘ in geologic layers. According to producers such as Range Resources, that means more than one shale can be tapped from a single well location, increasing both the quantity and range of gas and liquids products that can be extracted.

Critics contend that the reserves estimates – including the EIA’s – are optimistic, and that reserves are actually in decline. 

David Hughes of the Post Carbon Institute said in a study last year the steep first-year decline rates of shale wells mean the industry is on an “exploration treadmill”, and must keep drilling new wells just to offset the declines in existing ones. The best drilling locations, or ’sweet spots’, are already in production, he argued. And as new shales are not being found, the industry’s search will become increasingly difficult and costly.

Hughes pointed to reduced production, and production per well, in most dry gas shales such as the Haynesville. According to EIA data and industry experts, operators have deferred new drilling, completions and restimulations in most dry gas shales because of low gas prices. Gas output continues to increase, largely as a result of associated gas from liquids-focused drilling in wet shales.