Summary
New drilling technologies have made it possible to unlock substantial amounts of natural gas from shale rocks. This has prompted the Potential Gas Committee to raise its estimate of gas reserves by 35%. This includes proven reserves, as well as probable, possible and speculative reserves.
Analysis
Natural gas has always been a strong contender as we transition from fossil fuels to a renewable energy forms. The increase comes as concerns about energy security and climate change are impacting national energy policy, an issue that has been an ongoing concern since the Carter Administration.
The "new technology" called hydraulic fracturing, has actually been around since the 1940's, and allows drillers to access unconventional gas supplies, predominantly found in shale rock. This process involves injecting water at high pressure into wells, resulting in a shattering of rocks deep underground and releasing trapped gas. It is important to note that this does not mean that these reserves will be put into production due to regulatory risk and cost.
These drilling efforts are not without critics, who claim that the other compounds (5%) used in hydraulic fracturing pollute the ground water table. These environmental issues are the subject of hearings in the U. S. Congress, aimed at regulating the process under the Safe Water Drinking Act (SWDA). The process is presently exempt.
hydraulic fracturing is regulated by the states, who argue that each play is unique to that state and area, and one size fits all federal regulations will add to the cost of drilling wells by at least $100,000, according to the American Petroleum Institute.
Cost is a definitive factor in tapping these reserves. Industry experts maintain that gas prices need to be in a range of $4 to $6 per thousand cubic feet to justify shale beds. On Wednesday the 17th gas settled at $4.25. Limited demand and dropping prices have led to some wells being taken off line.
Despite these issues conventional and unconventional natural gas reserves will play a long term bridge role in the transition from petroleum, coal and even natural gas to renewable energy. It is important to remember that renewable energy and efficiency is a long term objective, and natural gas is a more efficient method of generation than oil and coal.
However, the Department of energy estimates that demand for gas will rise by 13% by 2030. Within the energy production sector gas accounts for 22% of electrical production.
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