Key success factors for US shale

[US shale gas production]

[US shale oil production]

Natural gas production from shale gas and tight oil plays now makes up about half of the US total dry natural gas production.

Production from shale gas and tight oil plays is projected to grow from about 14 trillion cubic feet (Tcf) in 2015 to 29 Tcf in 2040, making up 69 percent of the 2040 total dry natural gas production (US EIA, June 7, 2016).

The US Energy Information Administration (EIA) estimates in the Annual Energy Outlook 2016 (AEO2016) that about 4.9 million barrels per day of crude oil were produced directly from tight oil resources in the United States in 2015, or about 52percent of total US crude oil production.

Abundant shale reserves

Shale gas was developed later than tight gas or coalbed methane largely because of its difficult geological features. Shale gas, however, has become the most important unconventional gas because of its large recoverable reserves (Wang & Krupnick, p. 29).

Hydraulic fracturing and horizontal drilling

Advancements in hydraulic fracturing and horizontal drilling have already unlocked vast new natural gas resources from shale rock. Wang & Krupnick’s review suggests that a number of factors converged in the early 2000s, but the most important factor was technology innovation.

Land/Mineral ownership

Private land ownership contributed to the development of shale gas in that it offered entrepreneurial natural gas firms a method of obtaining reasonable returns from their early investments in technology innovations necessary for developing a new shale play (Wang & Krupnick, p. 30).

Water availability

Slick water fracturing of shale gas wells requires a few million gallons of water per well. In the US, water needed for fracturing has generally been available, although in some areas shortages are a growing concern (Wang & Krupnick, p. 31).

Pipeline infrastructure

The United States already had an extensive network of pipelines to transport natural gas to market before shale gas became a major gas resource.

References:

• US Energy Information Administration (EIA), Annual Energy Outlook 2016
• US Energy Information Administration (EIA), “Most natural gas production growth is expected to come from shale gas and tight oil plays,” June 7, 2016
• Zhongmin Wang and Alan Krupnick, “A retrospective review of shale gas development in the United States: What led to the boom?” Discussion Paper, Resources for the Future, April 2013.