The U.S. is set to become the world’s leading producer of natural gas — and is on track to become an exporter of the same. And yet you hear none of this on the radio or see it in other mass-media outlets.
T. Boone Pickens isn’t a stupid man. He’s made billions from oil. In the last few months, he has spent $60 million advertising his belief in the future of natural gas for use in transportation and electricity. (And why not; we have plenty of natural gas.) Perhaps you’ve seen his commercial?
A few years ago, the talk was in building liquid natural gas terminals to import gas from Russia and Africa. But now, the talk in certain circles is about the U.S. exporting natural gas. The landscape for hydrocarbons is changing rapidly. It’s not 2006 anymore.
The reason that natural gas sold off over the past two months lies trapped in shale. There have been two major finds in the past few years: one in the Barnett Shale region near Fort Worth, Texas, and the other more recently from Shreveport, Louisiana, called the Haynesville Shale find. Both these discoveries are turning landowners into Jed Clampett-style multimillionaires.
According to the San Francisco Chronicle, one unemployed machinist named Chris Moreno, who owes 45 acres, was offered $750,000 to drill on his land as well as 25% of the production yield.
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The process for retrieving this natural gas from shale is more expensive than the traditional wells and requires breaking up the shale using fracture pumps and horizontal drilling techniques. That said, when natural gas is over $5.50, it works… and there is a lot of natural gas to be extracted.
New horizontal drilling technology, including hydrofracturing, has made shale-based natural gas accessible.
You see, natural gas in places like the Haynesville formation in Louisiana is situated in vertical columns. Imagine six milk cartons in a row. If you stick a straw in one carton, you get one carton of milk. If you stick six straws end on end and drill it horizontally through all six cartons, you get all the milk with one really long straw.
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Chesapeake Energy has pioneered using six sections and is now using eight sections for its sideways drills.This greatly reduces the cost per unit of gas recovered. In fact, CHK has some rigs down to below $5.50 MMBtu.
In hyrdofracture drilling you simply pump pressurized water down into the well. This breaks up shale and releases more gas. You then fill the gaps with permeable sand and pump out the water and gas.
The benefit of the Haynesville site is that it is naturally pressurized. This means that instead of pumping out the gas it squirts out by itself, again saving money. Chesapeake believes that it can get its costs down to $5 and change.
