High natural gas prices and new technology for unconventional plays are needed to overcome equipment cost challenges and the impact of imported liquefied natural gas, a new study shows. But per-well performance, not the cost of services, is the key driver of increasing well costs, especially as more wells are drilled in unconventional gas formations. "Higher market prices, along with advances in technology, can unlock the resource potential of unconventional gas," says Robert Ineson, director of North American gas research at Cambridge Energy Research Associates (CERA), an IHS company. "However, continued strong market prices will be necessary to motivate a sufficient level of drilling to maintain production." The study, a diminishing-returns analysis, gathered data on 273 individual plays in 50 gas basins in the U.S. and Canada and analyzed the past few years of production and development. "The study suggests that there is a limit to the unconventional resource potential at market prices within the $4- to $10-per-thousand-cubic-feet range analyzed." Without supportive prices, domestic gas used for power generation may become uneconomic compared to imported LNG or coal. For more on this, see the August issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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