Necessary But Not Sufficient: Uncertainty Surrounding Assessment of Additions to Reserves from Low-Permeability Gas Reservoirs in the Rocky Mountains

Donald L. Gautier¹ and L.P. “Red” White^2
1 US Geological Survey, Menlo Park, CA
² Consultant, Houston, TX

Prior to the 1995 National Assessment, the U.S. Geological Survey regarded unconventional gas resources mainly as a research topic and no geologically-based methodology existed for their assessment. In frank recognition of geological ignorance and genuine resource uncertainty, a cell-based assessment methodology was developed. In the model first suggested to the USGS by John D. Grace, geologically-defined plays were delineated and cells sizes were estimated to correspond to the median drainage areas of existing production wells. Using past drilling and production records, geologists estimated the technically recoverable resources of untested cells in each play. Initial results were surprising. Whereas previous research suggested the presence of thousands of trillions of cubic feet of gas in Rocky Mountain basins, the cell-based approach indicated that the technically recoverable resources would be less than 200 TCF. Moreover, initial economic analyses suggested that only a few tens of TCF could be profitably recovered even at the then-exorbitant price of $3.34/MCF. Thus, from the USGS point of view, estimates of gas in place and of economically recoverable resources differed by three orders of magnitude. Today nearly this much uncertainty remains even though unconventional gas resources have come to be considered an essential part of North American gas supply. Future additions to U.S. reserves are now widely expected to come from the extensive development of these low-permeability gas resources, as well as from new LNG facilities and resources accessed by new pipelines. Clearly, a thorough evaluation of the commercial potential of these resources is needed. Our objective in this presentation is to identify key issues that must be addressed in a probabilistic evaluation of the future contribution of low permeability gas resources to North American supply and demand. This study is an extension of the relevant work done by the Supplementary Modeling Team in the 2003 NPC Natural Gas Study.