April 11, 2013 at 12:56 PM EDT
Shale Doubles Natural Gas Resources
A recent study by the Potential Gas Committee has shown that recoverable natural gas reserves are much higher than last estimated...

This Article Originally was Published here: http://www.energyandcapital.com/articles/shale-doubles-natural-gas-resources/3273

Advocates of natural gas have cause for celebration.

Potential Gas Committee released a report this week estimating 2,384 trillion cubic feet of recoverable U.S. natural gas reserves, a 25 percent increase from the committee’s previous biennial assessment and double the results of a study from nine years ago. This report includes natural gas in shale, carbonates, tight sands, and coal-bed formations. The report covered areas in the Atlantic, Rocky Mountains, and the Gulf Coast.

This is enough natural gas to keep up drilling operations for at least a century.

According to the report, 741.3 tcf of natural gas were in conventional reservoirs and 17.3 tcf were in coal beds at the end of 2012 in the Atlantic, according to Oil & Gas Journal.

The Gulf Coast had the next best estimate, with 521 tcf of natural gas in conventional reserves and 3.4 tcf in coal beds. And the Rocky Mountain held 421.3 tcf in traditional reserves and 51.9 tcf in coal beds.

1,073 tcf, approximately half of the 2,384 national reservoirs, are concentrated within shale regions.

The U.S. reached a record high of 28.5 tcf of natural gas production in 2011, reaching 29.8 tcf in 2012, according to an EIA report, with a majority of reserves originating from shale regions.

super frackThe leap in estimation can be credited to extensive fracking throughout the nation—allowing oil companies to break through previously unreachable shale formations and other unattainable regions.

Fracking has taken the oil and gas market by storm, having contributed to the shale oil boom around the country and playing a role in lowering natural gas prices on a domestic level. Regardless of environmental objections, fracking produces results, which explains the increase in figures.

And more reserves could be discovered if oil companies continue to use fracking while maintaining investment in drilling technologies.

Fracking is used to extract the natural gas from rocks to the well surface by injecting highly pressurized chemicals, water, and sand into the ground. Companies use either vertical or horizontal drilling in creating new pathways. The combination of fracking and horizontal drilling, however, has proved most successful in spurring the U.S. shale boom.

North Dakota, Texas, and Pennsylvania reached separate booms because of fracking.

The state of New York, a state that heavily regulates drilling campaigns, may be receptive in lifting its fracking ban to get more results from Marcellus Shale.

Shale Gas Hotspots

The new report is great news for oil companies in shale areas.

On the Atlantic side, the Marcellus Shale is the primary natural gas region, and one third of natural gas is concentrated within Pennsylvania and Ohio, according to Bloomberg. Antrium Shale of Michigan is also in play, where companies make heavy use of fracking and horizontal drilling.

Most importantly, the initial estimate of 8 bcf of natural gas per day may be outdated, since some states in the region do not publish regular reports. Experts such as John Curtis, who is professor of geology and geological engineering at Colorado School of Mines and director at Potential Gas, believes there is potential in the upper Utica Shale in New York and Devonian Shale in Ohio, as reported by Oil & Gas Journal.

In the northern Rockies, the Bakken Shale—encompassing Montana, North Dakota, and Saskatchewan—is a major player in the shale oil boom and one of the most lucrative areas to drill in the country.

Hilliard Baxter-Mancos Shale covers Wyoming and Colorado and has more extensive shale gas reserves in the Rockies. There is also Pierre Shale in southern Colorado and Lewis Shale bordering the Colorado/New Mexico border.

On the Gulf Coast, the successful Haynesville Shale, spanning eastern Texas and western Louisiana, has had stellar results in shale oil and natural gas. With the recent Department of Energy approval of a new Louisiana exporting facility by energy company Cheniere (NYSE: LNG), there could be more natural gas exports in the future. And the refinery business on the Gulf Coast may undergo a spike of its own if more natural gas resources are discovered.

More natural gas could mean exports abroad. Many Asian countries are hungry for natural gas, particularly liquefied natural gas (LNG), which is expensive in those nations.

If more companies decide to convert natural gas findings to LNG, and if more export facilities are approved by the Department of Energy, there will be plenty more profits to be had. More natural gas is good news for the government and oil companies looking to explore.

On one hand, the country can benefit from a vital national resource, but other companies can profit with higher-valued exports. There may be more political wrangling over domestic versus export use, but it is one of the better debates to have.

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Companies Involved

The new assessment will certainly give companies an incentive to increase fracking and embark on more drilling operations.

Private firm Lancer Resources has holdings in south-central Pennsylvania, and Range Resources (NYSE: RRC) and Chesapeake Energy (NYSE: CHK) are also conducting drilling in Pennsylvania. Other shale Marcellus drillers include Anadarko Petroleum (NYSE: APC) and EOG Resources (NYSE: EOG).

In the Bakken region of Montana, ConocoPhillips (NYSE: COP), ExxonMobil (NYSE: XOM), EOG Resources, and Burlington Resources are major producers. The amount of companies in North Dakota's Bakken is more extensive, with companies such as Marathon Oil (NYSE: MRO), EOG Resources, ExxonMobil, Northern Oil and Gas Inc. (NYSE: NOG), ConocoPhillips, American Oil & Gas, and many other companies competing in the same region.

Companies doing business in the Haynesville Shale include Anadarko Petroleum (NYSE: APC), Chesapeake Energy EOG Resources, Devon Energy (NYSE: DVN) and EXCO Resources (NYSE: XCO).

The companies that have reaches into multiple regions of the shale market will benefit from the new findings by the Potential Gas Committee if they have enough resources and will to keep up production.

Investing in shale gas is a great opportunity because of expansive growth in drilling technology and well discoveries. Fracking is the spearhead that is driving the oil and gas boom.

And I would not be too concerned with environmental regulations.

Although the Obama administration has sought to regulate oil companies, the EPA and other government departments are staying away from fracking.

Why?

Because officials know that this avenue of technology works, and to restrict its use would mean slowing down ever-increasing production around the country. 

 

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This Article Originally was Published here: http://www.energyandcapital.com/articles/shale-doubles-natural-gas-resources/3273



Shale Doubles Natural Gas Resources originally appeared in Energy and Capital. Energy and Capital, a free daily newsletter, offers practical investment analysis in the new energy economy.
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