Methane Hydrates Low Perm Sandstones Deep Gas Coal Bed Natural Gas Liquefied Natural Gas Reference Shelf Detailed Project Info Technology Transfer

The root cause of this difficulty is the progressive change in the remaining resource base. Industry has picked much of the Nation's “low-hanging fruit,” and remaining resources are increasingly found both in deeper, more remote, more complex reservoirs (high cost and high risk), or in shallow, drilling-intensive, low-productivity reservoirs. Policy actions alone cannot change the nature of the resource base – dramatic cost-and risk-reducing technological improvements are needed in order to make the nation's vast oil and gas resources viable to produce. These resources are not being developed by the major oil and gas companies; instead, they are in the hands of thousands of small independent operators who have little capability or incentive to pursue long-term/high-risk R&D.

The government's role in natural gas supply R&D is to 1) ensure that the Nation's valuable gas resources are used wisely, without waste or significant environmental impact, and for the benefit of the public; 2) expand the gas resource base to include vast deposits that are currently viewed as “unrecoverable,” in order to secure the long-term supply of reasonably-priced domestic natural gas. These actions, when used in prudent combination with carefully-considered policy initiatives, will provide economic growth and increased energy security until such time as the next generation of sustainable energy sources comes available.

NETL's efforts in low-permeability formations (tight gas sands) are focused on expanding access to vast stores of gas trapped in complex, low-quality reservoirs. The USGS has estimated that five basins in the American west alone contain as much as 6,000 Tcf of natural gas in place in tight sandstones; however, currently, less than 2 percent of this resource is recoverable with current technology. Large resources are also present within untapped coal seams and gas shales. History has shown that these resources are dependent on advanced technologies for production, and it is clear that further advances in remote technologies for gas and natural fracture detection and improved drilling, completion, and stimulation technologies have the potential to expand the Nation's access to these resources.

The Deep Gas program targets resources that face tremendous technical and cost challenges related to an inability to image any but the largest deep prospects. Also, these deep reservoirs maintain high temperatures and pressures that exceed the capability of modern drilling and evaluation technologies. Deep reservoirs currently account for about 7% of domestic gas production but only about 1% of the Nation's gas wells drilled. Vast regions of the Nation remain virtually unexplored for deep gas.

NETL also coordinates a unique multi-agency program to investigate the potential of methane hydrate. The USGS has estimated that deposits of methane hydrates likely hold 200,000 Tcf natural gas in-place within the U.S. Exclusive Economic Zone alone. Technical recoverability has been established through Arctic field tests; however, recoverability of the vast deepwater accumulations has not yet been demonstrated. Clearly, hydrate will face significant economic challenges; however, if only 1 percent of the resource can be rendered recoverable, the United States could more than double its current natural gas resource base. In addition, the role of methane hydrate in global climate and its potential as a deep sea safety hazard remain poorly understood.

An important new source of domestic oil and gas supply is the deepwater Gulf of Mexico. Water depths exceeding 1,000 feet account for about two thirds of the gulf's oil production, a share expected to continue to rise. Deepwater fields in the Gulf of Mexico contribute 17% of the Nation's oil production and 7% of its gas output. Technology advances, coupled with a strong Federal leasing program, have helped industry accelerate its drilling success rate in the deepwater gulf. Since the start of 2000, new deepwater drilling added oil and gas reserves totaling over 4.5 billion barrels of oil equivalent (BOE), a 58% increase over the total deepwater reserves discovered from 1974 to 1999, according to the U.S. Minerals Management Service (MMS). In 2000, MMS estimated that more than 50 billion BOE of recoverable oil and gas remains to be discovered in the deepwater Gulf of Mexico.

Extraordinarily high development costs pose a daunting hurdle for this promising petroleum province. Several NETL-sponsored technologies will have applications in deepwater areas and could help expand resource recovery there. Among them are:

• Advances in high-temperature/high-pressure drilling technology—a critical area as deepwater drilling fans out into deeper-pay plays.
• Composite-material lightweight drill pipe that provides better flexibility for horizontal wells—often a cost-effective alternative to vertical wells offshore.
• Hard-wired “smart” drill pipe that can rapidly transmit downhole data to allow real-time drilling decisions.
• Ultrasmall-diameter wellbores (“microholes”) that can slash drilling costs and reduce environmental impacts offshore.

Recent NETL-sponsored studies suggests that U.S. oil shale development could be economic in the coming decades at oil prices of less than $50 per barrel, in today's dollars. (DOE's Energy Information Administration, in its latest annual energy outlook, projected a U.S. benchmark oil price of $54 per barrel, in 2004 dollars, in 2025.) A mature oil shale industry producing 3 million barrels per day of oil 30 years from now could provide America with direct and indirect economic benefits of as much as $40 billion per year while pressuring oil prices downward, according to one NETL study.