North America’s unconventional natural gas resource base continues to expand in volume, decrease in cost

New IHS Energy study finds a 66% increase since 2010 in potential natural gas recoverable at a break-even Henry Hub price of $4/MMBTU or less

North America’s natural gas resource base is more abundant and lower cost than ever, according to a new assessment by IHS. The findings show a considerable growth of the low-cost segment of the resource base since 2010.

The study concludes that approximately 1,400 tcf of natural gas in the US Lower 48 and Canada is recoverable at a current break-even Henry Hub price of $4/MMBtu or less (in real terms). This is a 66% increase over 2010 estimates. More than half of that (800 tcf) can be produced at a current break-even price of $3/MMbtu or less, the study finds. These quantities point to long-term low-cost energy supplies capable of meeting demand projections for at least the next 30 to 40 years.

The study updates the findings of a similar 2010 IHS Energy study. The new study examines 38 major oil and gas plays in North America and Canada. It finds that not only has the 176 tcf of gas produced since 2010 been replaced by resource additions, but that the resource base has been extended and the cost of producing many of the remaining resources to be significantly reduced.

Daniel Yergin, IHS “It has become clear in recent years that the unconventional oil and gas revolution in North America has been the most significant energy innovation so far this century. What is truly remarkable is that early estimates for the size of resource base—game changing in their own right at the time—still proved to be conservative,” said Daniel Yergin, IHS vice chairman. “Technological innovation, as is often the case, has proven to be the true X factor behind this growth.”

New discoveries, recent reduction in drilling and completion costs, and major gains in productivity are the major reasons for the expansion of the resource base and lower break-even costs, the study concludes.  It points to key factors – improved understanding of subsurface geology, greater use of technology, including 3D seismic, the development of new specialized frack techniques, the emergence of new gas plays such as the Utica Shale.

The spread of shale technology to tight oil plays that produce associated gas also contributed to the resource expansion, the study finds. Largely undeveloped six years ago, associated gas production from oil and liquids rich gas plays has doubled in the past four years. A total resource base of about 250 tcf of associated gas is now estimated to be contained in plays such as the Bakken, Eagle Ford, Permian Basin and others.

“All told, this has significant implications for North American and global energy markets,” says Michael Stoppard, IHS chief strategist – global gas. “Domestically, continued low gas prices will improve the competitive position of gas in power generation. It will also validate the decisions of chemical companies that have chosen to build up their operations in North America owing to the low cost of natural gas fuels and feedstocks. On a global scale, continued low Henry Hub prices will contribute to the competitive position of North American exports of liquefied natural gas.”

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