01.21.14
Electric Vehicles – Passing Fad or Paradigm Shift?
There has been a lot of discussion about the electric vehicle revolution and what its impacts will be.
01.13.14
Where are Natural Gas prices headed?
Having spent more than 25 years in the oil and gas industry I have seen my fair share of hydro-carbon price fluctuations. So it has not come as a complete surprise to me that the “shale gas” phenomenon has had such a dramatic impact on North American Natural Gas prices.
At the beginning of the 21st century Natural Gas prices were about $4.00/Million BTU and thereafter they rose rapidly to $8-$10/Million BTU in the years 2005-2007. The economic crisis that started in the fall of 2008 coincided with increasing production due to the success of shale gas development which translated into a very rapid decline in Natural Gas prices to just over $2.00/Million BTU in 2012. Since then prices have recovered somewhat to about $4/Million BTU.
The low prices since 2008 have resulted in a very predictable decline in the number of drilling rigs exploring for new natural gas reserves. The impact is displayed in the graph shown below.
There are a few very striking features of this graph.
First, the almost total elimination of vertical drilling rigs is interesting. In traditional gas fields widely spaced vertical wells are able to drain the reservoir efficiently because the gas flows quite freely through the rock. In technical terms this type of reservoir has relatively high permeability.
Reservoirs that consist of rocks with lower permeability cannot be produced very efficiently with vertical wells. It is much more efficient, although also much more expensive, to develop these reservoirs using horizontally drilled wells as shown below.
As horizontal drilling grew more common in the late 1990’s it was possible to economically produce reservoirs that previously had been difficult or impossible to exploit. These so-called “tight gas” reservoirs became an ever more important source of Natural Gas in North America.
Because “tight gas” does not flow freely through the reservoir rock these wells produce a lot more gas in the first year of production than they do in subsequent years.
@enrgy_manifesto
