Economics of Unconventional Natural Gas Plays in North America…Or the Implications of Less Exploration Risk and More Completion Risk

David Pursell, David Heikkinen, and Dan Pickering
Tudor, Pickering & Co., LLC, Houston, TX

Onshore natural gas drilling activity and production growth has been driven by significant increases in unconventional gas (shale, coalbed methane, and tight gas) development activity. In fact, unconventional gas has become conventional. This talk looks into the economics of unconventional plays and the economic drivers which make unconventional gas plays popular. We will focus on the Barnett Shale economics and develop a framework to perform economic sensitivities on key variable such as well performance, drilling and completion costs, and gas price. We will also examine the economic impact of high lease bonus and high royalty rates in the key portions of the play. From the Barnett shale analysis, we will then apply the “economic lessons learned” to other emerging unconventional gas plays.

AAPG Search and Discover Article #90078©2008 AAPG Annual Convention, San Antonio, Texas