Historical Trends and Current Production of Gas From Tight Formations (includes associated papers 16461 and 16645 )
- M.R. Haas (Lewin and Assocs. Inc.) | J.P. Brashear (Lewin and Assocs. Inc.) | F. Morra Jr. (Lewin and Assocs. Inc.)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- January 1987
- Document Type
- Journal Paper
- 77 - 88
- 1987. Society of Petroleum Engineers
- 4.2 Pipelines, Flowlines and Risers, 4.1.2 Separation and Treating, 5.4.2 Gas Injection Methods, 4.6 Natural Gas, 5.8.1 Tight Gas, 4.1.5 Processing Equipment, 3.2.3 Hydraulic Fracturing Design, Implementation and Optimisation, 7.4.4 Energy Policy and Regulation
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Summary. Low-permeability (tight) formations are an acknowledged major source of future U.S. natural gas supplies. The unproven recoverable resource potential, as estimated by the Natl. Petroleum Council (NPC), is on the order of 500 Tcf [14.2 x 10 m ] at prices and technologies current at the time of the study. The NPC study and other analyses have pointed to the significance of tight gas in future supplies, but the role it plays in current reserves and production has not been so clearly defined.
We have estimated the volume of gas produced from tight sands in recent years, calculated ultimate recovery and proved reserves associated with this production, and compiled quantitative descriptions of 663 fields currently producing tight gas. Data limitations constrained the study to the western and southwestern states, which account for about 85% of U.S tight-gas production. To provide national tight-gas production volumes, however, estimates based on aggregate data were also made for Appalachia.
In the late 1960's and early 1970's. low-permeability (tight) gas-bearing formations were recognized as the next major source of natural gas. offsetting, the predictable decline in conventional reserves. This realization expanded rapidly after the 1980 publication of a major assessment of the tight-gas technical and economic Potential, conducted over 2 years by a multicompany, working group of the NPC. NPC estimated that, given specified technology advances, as much as 500 Tcf- [14.2 x 10-12 m3 ] of tight gas could be produced at prices up to the gas equivalent of the world oil price.
Several studies, sponsored by the federal government, the NPC, and the Gas Research Inst. (GRI), have analyzed the overall resource and its potential response to economic and technological stimuli. An automated version of the NPC study data and methodology has been constructed to allow sensitivity analyses using updated resource, technology, and cost data. None of these, however, quantified the actual role of tight gas in supply in recent years. This role needs to be clarified to determine whether tight gas is beginning to be produced in the amounts suggested by studies of its potential. Specifically, this paper distinguishes how much of recent gas production has come from tight formations. This study does not production has come from tight formations. This study does not address the extent to which estimates of the undiscovered tight-gas resource may coincide with estimates of nontight or conventional undiscovered resources.
Special Economic Incentives for Tight-Gas Production. The Natural Gas Policy Act of 1978 (NGPA) gradually phased out price controls on new gas and provided phased out price controls on new gas and provided incentive or decontrolled pricing for certain types of gas deemed to be high cost, including gas from tight formations. To receive the incentive price established for tight gas, an operator must first secure the approval of state regulatory bodies to designate an individual formation in a specific geographic area as "tight" in accordance with criteria established by the Federal Energy Regulatory Commission (FERC).
In addition, in a provision of the Crude Oil Windfall Profit Tax Act of 1980, the Internal Revenue Service Profit Tax Act of 1980, the Internal Revenue Service provides for an unconventional gas tax credit in lieu of the provides for an unconventional gas tax credit in lieu of the incentive price in any tax year except those in which an incentive price is taken. This tax credit is a function of the price of oil so that declining oil prices are met with a corresponding increase in the tax credit. The intent of this provision, in effect a price support, is to minimize the incentive to switch from tight gas to oil when oil prices decrease.
The nature of these two economic incentives-providing either higher prices when gas is in short supply or tax credits when it is not-creates a situation that is beneficial to tight-gas producers. Regardless of gas market conditions, these incentives are available only for gas produced from wells in FERC-designated formations. produced from wells in FERC-designated formations. Thus, at all times, this encourages operators to seek designation for qualified tight formations. This study assumed that, because of these available economic incentives, those areas designated as tight by the FERC will make up the areas where the majority of tight gas will have been produced in the past and will likely be produced in the near produced in the past and will likely be produced in the near future.
By Aug. 1984, FERC had approved 171 separate area/formation designations throughout the U.S., mostly in the west and southwest. where tight gas is known to have been produced for some time.
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