Huge gas reserves are locked in difficult-to-recover reservoirs worldwide. High gas prices and evolving technology will ensure the development of these reserves, but it will not be easy, according to expert Steve Holditch.

Rising demand for gas in North America and the push to adopt it as a clean alternative to other hydrocarbons worldwide is pushing the search for the fuel to near frenzied levels. Questions of gas availability are turning rapidly to unconventional gas reservoirs (UGRs), which industry experts say should hold as much or more gas than conventional reserves. But development and production of UGRs will require the negotiation of several hurdles.
Hart's E&P turned to UGR guru Steve Holditch, Schlumberger fellow, professor of petroleum engineering at Texas A&M University and incoming president of the Society of Petroleum Engineers, for an analysis of the problems associated with development of UGRs.

Hart's E&P: What are UGRs?
Holditch: The best way to explain the importance of "unconventional gas reservoirs" is to review the resource triangle (Figure 1). All natural resources, including gas deposits, are distributed log-normally in nature. What this means is that the higher quality deposits are small and easy to develop once they are discovered. For gas deposits, we are talking about medium- to high-permeability reservoirs, say 10 to 1,000 md.
As we go deeper into the resource triangle, the deposits become much larger in size but more difficult to develop. It takes a combination of higher product prices and better technology to unlock these UGR deposits so that they become economic to produce. In general, it is easier to locate the UGR deposits, but much more difficult to produce them and make money.

Hart's E&P: What makes the reserves difficult to recover?
Holditch: The problems associated with UGRs are varied and dependent upon geologic and other factors. In tight gas reservoirs and gas shales, the biggest problems are low permeability and reservoir compartmentalization. In most cases, finding the gas reservoir is the easy part. The difficult part is finding the most permeable portion of the reservoir - commonly called the "sweet spot."
In coal seam reservoirs, we have to find thick, permeable coals that contain a large volume of sorbed gas. However, the coal seam cannot be too permeable or it is too difficult to dewater the coal and reduce the bottomhole pressure to allow the gas to desorb.

Hart's E&P: How difficult and expensive will overcoming these obstacles be?
Holditch: A key obstacle is cost. Since a typical well in a UGR produces at low flow rates and recovers small volumes of natural gas (compared to most wells in conventional reservoirs), the key to profitability is to control costs. We need to drill, log, complete and stimulate each well efficiently and at as low a cost as possible.
However, the economics for most wells in a UGR ultimately relies on performing a successful hydraulic fracture treatment. Thus, we must spend enough money to obtain accurate data to design, pump and evaluate every fracture treatment.

Hart's E&P: How much gas is in UGRs?
Holditch: In the United States, we have about 170 Tcf of natural gas listed as booked reserves. We consume about 22 Tcf per year in the United States. We produce about 19 Tcf per year, and about 5 Tcf per year comes from tight gas sands, coalbed methane and gas shale reservoirs. Roughly 25% of domestic production is from UGRs.
Estimates of "technically recoverable gas" from UGRs are about 450 Tcf. However, these UGRs will not be developed unless the natural gas prices remain high and more equipment is constructed. The United States does not have enough rigs, logging trucks, fracturing equipment nor personnel at this time to really develop UGRs on a large scale.

Hart's E&P: Where are these reserves?
Holditch: Interestingly, the concept of the resource triangle applies in every oil and gas basin in the world. Therefore, one can conclude that UGRs will be found, and eventually produced, in every oil and gas basin in the world.
In North America, the most UGRs will be found in the Rocky Mountain basins. Also, a lot of UGRs are located in the Gulf Coast basin.

Hart's E&P: How much gas can be produced from the UGRs around the world?
Holditch: The gas-in-place in UGRs will be several orders of magnitude higher than what is found in conventional or medium- to high-permeability gas reservoirs. The reserves, however, in UGRs will be less than one order of magnitude higher, because the recovery efficiency in UGRs will be much less than in conventional reservoirs. For example, a conventional reservoir will normally recover 70% or more of the original gas-in-place. In UGRs, the recovery can vary from 10% to 60%, normally closer to the lower end, and is dependent upon the well spacing. As we reduce well spacing in UGRs, the recovery efficiency increases.
Therefore, the reserves from UGRs in a given basin should eventually be equal to or greater than the reserves from conventional reservoirs. This means that areas such as Russia and the Middle East, where very large gas reservoirs are known to exist in conventional reservoirs, will have even more gas trapped in UGRs.

Hart's E&P: What new and existing technologies will be required to recover these reserves?
Holditch: We need to learn how to drill smaller boreholes more rapidly and less expensively. We need better logging tools that are calibrated for low-porosity rocks. We need better fracture fluids and propping agents. We need better models for designing and evaluating hydraulic fractures. We need better reservoir simulators that are economic to run, just to name a few of the most important technologies.
One key to success is finding the sweet spots, the portion of the reservoir that is the most porous and permeable. To find sweet spots, we use 3-D seismic data, production data and open-hole geophysical logs. We can always use better seismic techniques to find the porous, permeable portions of the reservoir. We also need seismic that has a better vertical resolution, since many UGRs contain thin, permeable streaks that are very important to the overall development of the reservoir.
In older basins, where production data are abundant, we can use statistical production data analyses to find sweet spots than have been missed or require infill drilling.
We also need better logging tools to identify the most permeable layers in the often multilayered UGRs. In addition, new logging methods to determine values of pore pressure, in situ stress and other rock mechanical properties would be very useful.
But the key to the development will be the natural gas price and demand for the technologies. If the natural gas prices remain high enough to spur more drilling, then the demand for new technologies will follow.

Hart's E&P: Is the industry prepared for, and capable of, developing the necessary infrastructure and technologies?
Holditch: The industry is ready to go as far as I can tell, especially in countries like the United States, Canada, Mexico and Australia. Today, there is a great deal of activity in the Rocky Mountains and in Canada. Service companies are building new rigs, and operators are developing prospects and buying new acreage. The service companies are aware of the pending boom in UGR development and are developing the technologies we will need.
In other parts of the world, the development of UGRs is just beginning.

Hart's E&P:Can the technologies and infrastructure be developed fast enough to avoid growing shortages of gas?
Holditch: The biggest impediment to developing UGRs is not new technology but the lack of equipment and personnel to drill, complete, stimulate and operate the tens of thousands of wells that will need to be drilled. A typical gas well in a UGR will recover less than 1 Bcf of gas during its life, and will produce at flow rates of only tens to hundreds of million cubic feet per day. As such, to increase gas deliverability by 1 Tcf per year, hundreds of rigs will be needed to drill thousands of wells. Currently, the rigs, equipment and people needed to drill these wells are not available.

Hart's E&P: How important is technology transfer in the process of developing the necessary technology?
Holditch: If there is one problem that haunts the optimum development of UGRs, it is technology transfer. I have dedicated my career to the study of hydraulic fracturing and to teaching the technology at the university level and through industry short courses. I am often disappointed when I review well files and see what decisions others have made when designing fracture treatments.

Hart's E&P: What are the possible stumbling blocks in the development of UGRs?
Holditch:If the natural gas prices are not high enough to spur development of UGRs, then there will be no incentive by the service companies to develop the technology. However, I do not see this as the most likely scenario.
Another possibility would be a technical breakthrough in some other energy source that reduces the demand for natural gas. One possibility would be gas-to-liquids (GTL) technology. There is a lot of stranded gas around the world, in conventional reservoirs, that cannot come to market now. If GTL technology allows the gas stranded in conventional reservoirs to become more accessible, it could delay the development of UGRs. However, at some point in time, (it could be 50 to 100 years from now), UGRs will be in production in every oil and gas basin in the world.

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