Natural Gas Supply


The scope of North America’s future natural gas supplies is summarized in a 2009 briefing paper
that was commissioned by the Foundation. The report, by Navigant Consulting, draws on that group’s landmark 2008 survey of shale gas production.

A Look Back: Early History

The discovery of natural gas dates back to the ancient Chinese, who dug down thousands of feet and installed bamboo pipes. Many years later, in the seventh century CE, natural gas transported through secret pipes fueled “eternal fires” in temples near the Caspian Sea.

North American supplies of natural gas were discovered around 1626, when French explorers observed Native Americans igniting gases seeping onto the southern shores of Lake Erie, in what would become the state of Ohio. An eyewitness, John Finley (writing in “The French Heart of America”), describes the scene:

It was during this interval that, in order to pass away the time, I
went with M. de LaSalle, under the escort of two Indians, about four
leagues south of the village where we were staying, to see an
extraordinary spring. The water is very clear, like that of the
mineral marshes of Paris, when the mud on the bottom is stirred with
the foot. I applied a torch and the water immediately took fire and
burned like brandy, and was not extinguished until it rained. This
flame is among the Indians a sign of abundance.

In 1770, George Washington was said to have seen flames rising from water near the location of present-day Charleston, West Virginia, as did Thomas Jefferson. In 1821, discovery of natural gas in Fredonia, New York led to first pipeline in the United States. William Aaron Hart piped gas from a 27-foot-deep well to provide lighting for nearby buildings. By 1825, a hotel in Fredonia used natural gas for cooking–the nation’s first recorded commercial use of natural gas.
In 1840, John Griswell drilled a salt well near Centerville, PA and struck natural gas at 700 feet. By burning this gas under his evaporating pans at the salt mine, Griswell was the first person to use natural gas for industrial purposes in the United States. By 1872, the nation’s first pipeline, built of wood and beginning in West Bloomfield, NY, provided natural gas to Rochester, New York, twenty-five miles away. That same year, the first iron pipeline—two-inches in diameter—stretched 5.5 miles from Newton Well, PA to Titusville, PA, where oil and natural gas had been discovered in August 1859 by Colonel Edwin Drake.

The Modern Era Begins

By the early 20th century, discovery of large natural gas fields in the southwestern United States, along with technological improvements in long-distance pipelines had changed the industry dramatically. In 1918, some of the largest-known natural gas reserves to-date were discovered in the Texas Panhandle. In 1922, what eventually would be named the Hugoton field became the nation’s largest gas producing area; it covered more than 1.6 million acres. It is noteworthy that both of these fields are still producing natural gas.

The development of long-distance pipelines really began to take hold in the late 1920s, followed by rapid growth through World War II. Subsequent to World War II, quantum improvements in compressor design and welding technology allowed for a new generation of highly efficient long-line systems. These pipelines, extending from southwestern producing fields to Northeastern and Midwestern markets, allowed the replacement of expensive, locally manufactured gas with natural gas, and allowed the first uses of natural gas to heat homes. Prior to the market access allowed by these pipelines, much of the natural gas discovered along with oil production was simply flared—it had no economically feasible way to get to market. However, after the market access created by long-distance pipelines, especially in the 1940 – 1960 period, massive development of new natural gas supplies became an important business.

Regulation began to play an important role for natural gas development with the 1938 passage of the Natural Gas Act, regulating interstate natural gas pipelines. Then, in 1954, the U.S. Supreme Court decided that the Natural Gas Act also applied to producer prices for the commodity itself. Thus began a long period, reaching from 1954 to 1979, of government-imposed impediments to free development of natural gas supplies. The artificial cost-based prices imposed by this regime discouraged the development of natural gas for interstate markets, and led to largely artificial shortages in the late 1960s and 1970s.  It was also during this period that there was large-scale development of natural gas in offshore Federal waters, primarily in the Gulf of Mexico.

From 1979 to 1993, a process of deregulation took place, ultimately resulting in the removal of all price caps from wellhead natural gas. At the same time, pipeline services were restructured to create a more competitive, transparent market. The end result is what we see today, a large, healthy, stand-alone U.S. gas-production industry where technological innovation and risk taking are rewarded in a very competitive market. It is this environment that has spawned much of the technological excellence that allows today’s development of gas reserves previously thought to be inaccessible.

Shale Gas Changes the Picture

While all forms of gas wells can be found in the U.S., the most important recent developments have involved shale-gas formations. This gas is found via sophisticated seismographic imaging that led to more than 20 active shale-gas regions throughout North America.

Gas from shale is “non-associated” gas:

Natural gas is produced from two main geological settings – one in which gas is associated with other hydrocarbons and one where it is not. Associated gas is found primarily in the same type of underground reservoir as oil. Until quite recently, no technology could capture the natural gas found during oil exploration and it was usually vented or flared off. Associated gas can also be found in gas cap formations above oil deposits, typically between a depth of 7,500 and 15,000 feet.

Unassociated natural gas, including gas produced from deep shale formations, is also called “unconventional.” It has been the focus of much research during the past ten years. It is the new frontier for natural gas development.

Shale rocks, formed tens of millions of years ago, lie beneath large areas of the United States. Geologists have long known that shale holds huge quantities of natural gas, but until recently technology did not permit the extraction of this gas.

Gas-bearing shale is usually 5,000 to 15,000 feet underground. To drill for and extract this gas requires a sophisticated and technically advanced operation.

Wells, encased in layers of concrete and pipe to ensure no contamination, are bored to the correct depths. Once the shale depth is reached, the drillers, using sophisticated 3-D computer models, turn the drill bit head until it is traveling horizontally into the shale deposit. Such horizontal drilling can continue for more than a mile.

Engineers and geologists predetermine the well path. And then, once the drilling starts, periodic surveys are taken via special cameras to guide inclination and azimuth of the well bore.

Once the well is drilled, a special casing is inserted into its horizontal chamber. The well is then flooded at high pressure with water and sand, combined with small amounts of chemicals. The water fractures the shale rock; the sand keeps the fractures open; and the chemicals reduce friction, suspend the sand particles, dissolve some of the minerals in the shale, keep the pipes from rusting, and kill bacteria.

Water and sand comprise about 99.5 percent of the fluid used for fracturing. The remaining 0.5 percent includes petroleum distillates, isopropanol, guar gum, ethylene glycol, a sodium chloride, and other chemicals that are used in everyday commodities, including cosmetics and processed foods.

This extractive technique, first developed in the late 1940s, is called “hydraulic fracturing.”

Complicated as this is, it is far from the full story. Technological improvements continue to minimize the local impact of drilling for natural gas. Drill pads have become smaller and smaller, for example, and wellbores are narrower. Horizontal wells also reduce the overall environmental footprint from drilling because many wells can be drilled from a single site.

Water can be especially important, and major advances in fracturing include continually lowering water usage per unit of production. Water use is relatively low to begin with, playing an active role only during the drilling and completion phases of each well. The water used in shale gas extraction, furthermore, is often recycled discharge from industrial or municipal treatment plants—and can itself be recycled after fracturing.

Records for Today and Promises for the Future

Total annual production of natural gas in the U.S. reached 20.5 trillion cubic feet (Tcf) at the end of 2008, a 5.4 percent increase over 2007– the third consecutive year of increase. Over the past decade, production from unconventional sources has increased almost 65 percent. Production from shale formations rose 65 percent increase from 2007 to 2008 alone.

In July 2008, a study, “North American Natural Gas Supply Assessment,” released by the American Clean Skies Foundation reported vast natural gas resources in the U.S. and Canada. According to producer reports collected for this study, North America has 2,247 Tcf of natural gas resources–about 100 years of production at current consumption levels. The increasing growth in gas production in shale plays is largely attributed to improvements in horizontal drilling and hydraulic fracturing.

In June 2009, the authoritative biennial report of the Potential Gas Committee (PGC), established by the University of Colorado School of Mines, put the estimated U.S. natural gas resource base (as of 2008) at 2,074 Tcf, the highest level in the Committee’s 44-year reporting history. This base is 36 percent higher than that reported by the Committee in 2006. Shale gas comprises approximately 33% of this estimate.