NATURAL GAS:

Dramatic growth seen in unconventional plays

Unconventional sources of natural gas will account for more than half of North American supply by 2020, despite a current industry downturn, according to a new report by a Calgary-based energy consultant.

Ziff Energy Group says unconventional plays from shales, coalbed methane and other sources will account for 53 percent of U.S. and Canadian natural gas supplies within 11 years -- up from 30 percent in 2000.

"Growing shale gas production is changing the mix of North American gas supply," said Simon Mauger, director of gas services for Ziff Energy, in a statement.

Energy companies have long known about extensive reserves trapped in compact shales like the Barnett in Texas, the Fayetteville in Arkansas and the Marcellus in Appalachia. But until recent technological developments, they have been unable to tap them.

Advances in horizontal drilling and hydraulic fracturing to break apart the compact rock, as well as rising natural gas prices through most of the last decade, allowed shales to become a viable natural gas source, the report says.

Last year, shale gas production was more than 5 billion cubic feet a day, or 8 percent of North American gas production.

But a sharp dip in natural gas prices from more than $13 per million British thermal units in July to about $3.50 today has contributed to a production decline in most of the reservoirs.

All but the Haynesville Shale in Louisiana have seen the drilling frenzy slow as capital budgets are slashed, the report says. But the consultants expect producers to continue evaluating emerging shale reservoirs, increasing their technical understanding of extraction techniques and evaluating the potential of emerging and developing areas.

Areas where companies will likely continue to focus their limited resources include the Barnett, Fayetteville, Haynesville and Marcellus; the Woodford in Texas and Oklahoma; and the Horn River in British Columbia, the report says.

Companies will likely continue to evaluate and explore new shale reservoirs in the medium to long term, which will also contribute to growth, the report says.

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