Peak tight gas production in Barnett Shale is 5 Bcf/d, down to 4.5 Bcf under current conditions
Global shale natural gas production will rise by 400 per cent over the next 25 years, but that’s little consolation for Barnett Shale producers, who are just doing their best to weather the price rout that began in 2008.
The Barnett Shale is a geological formation located in the Bend Arch-Fort Worth Basin that covers 5,000 square miles of north Texas, including the metroplex of Dallas-Fort Worth and at least 17 counties. The formation is tight gas and requires hydraulic fracturing and horizontal wells to produce cost-effectively. Some oil is found in the Barnett, but no liquids-rich natural gas.
I recently interviewed Ed Ireland, executive director of the Barnett Shale Energy Education Council and economics professor at Texas Christian University, about the current situation in the Barnett. This interview has been lightly edited.
Markham: Why don’t you give me the state of the union in the Barnett?
EI: Sure. The current state is that there are no drilling rigs running basically and this has been true now for many months. I think there’s been a rig here or there but certainly no consistent drilling program here. One well was fracked last week in the Barnett Shale – it was drilled earlier.
Other than that as far as activity or new well activity, there’s basically none. But the Barnett Shale continues to be a fairly significant producing natural gas field – it’s over somewhere around 4.5 billion cubic feet a day, which still puts the Barnett as a significant producing natural gas field in the US.
But drilling activity really started declining in 2008 and there’s been an amazing resilience of the level of production in the Barnett Shale in line of that decline. It’s starting to take its toll and the existing wells are starting to show very steep declines and it’s all related of course to the price.
Basically, no company in the United States is knowingly drilling for dry natural gas, they’re going for, if they’re drilling at all, they’re going for crude oil or liquids of some sort. So we’re in a production mode and we’ll be there until the natural gas price recovers from its current levels.
Markham: Are the Barnett producers shifting to a more natural gas liquids weighted strategy? Is that likely to be the go-forward?
EI: Well, they would if they could. The problem is with a large portion of the Barnett Shale is dry natural gas – there aren’t any liquids. And in the major part of the Barnett Shale, in Montague County, there is some crude oil production and in some other parts of the Barnett Shale there is some natural gas liquids production but a lot of the Barnett Shale is dry natural gas and that’s just not economical at this stage.
Markham: We ran a column a couple of weeks ago from a columnist who said that the investment in drilling for gas had dropped significantly and, unless it picked up, gas prices were going to start to rise pretty soon. Is that your take on things?
EI: Yes, I would agree with that. The lack of drilling for natural gas in the Barnett Shale is not unique, it’s true pretty much everywhere. Unless there’s a significant liquids component, dry natural gas wells have not been drilled for some time and it is starting to take its toll I think to the extent that other natural gas fields in the United Started are showing the kind of decline rates that we’re seeing in the Barnett Shale. There’s no question that that’s going to have an impact on natural gas supply and therefore on prices.
Markham: We’ve heard reports from other fields, in particular the Permian, that producers have been working hard to get their decline rates down. Are we seeing the same kind of thing in the Barnett – new technologies, new techniques, refracking, that sort of thing?
EI: Yes, absolutely. A number of producers here have been refracking wells. At this point in time, I would say it has been more of an experimental or an investigative type of approach. Devon Energy has reported that they had, I believe a 30 well program where Devon went in and refracked the wells and they haven’t, as far as I’m aware, released the information regarding the success of those refracks other than just saying that they were very successful.
I’d say that that is a practice that’s been underway here because refracking a horizontal well has had its challenges and is certainly something that, at least in the Barnett Shale, is not something that’s been done on a large scale basis. I think that’s what will happen; I think that as the price starts the recover, I personally think that the first move we’ll see will be refracking the wells before any new ones are drilled.
The conversations that I’ve had with producers is that they’re getting tremendous results with these refracks, with bringing wells back up to their initial rates of production if not higher. I think that is the first round of activity that we’ll see as prices start to recover.
Markham: Is that kind of change in strategy going to have a big impact on that service industry based in the Barnett?
EI: Yes, for sure. Of course, all of that is being done by the service companies and I think there’s been a lot to learn about the most efficient ways to refrack these horizontal wells. Of course, the whole hydraulic fracturing technology and the number of frack stages involved has changed significantly from when these Barnett Shale wells were initially drilled starting back in 2002, really the prime time– large number of wells that were drilled in the Barnett was between about 2002 and 2008 so some of these wells have some age on them now and we’ll realize old technology back to today’s standards.
So I think for the service companies to be able to bring these wells up to date is going to have a major impact and I could really see the Barnett Shale recovering to more than its 5 billion cubic feet of production that we reached just from refracking wells. Then the next stage would be drilling new wells.
The University of Texas published a study it seems a year or two ago about the Barnett Shale capability and they said that there’s two to three times as much gas remaining in the Barnett Shale as already been extracted. So there’s a lot of gas here and it just takes the right price to go get it.
Markham: It sounds like some service companies like the fracking companies – the big guys like Halliburton and so on – will do well under the new strategy but others like drillers, for instance, may not.
EI: Well, I think it’s technology – that’s the key to it. It’s going to be the service companies that are currently investing their time, efforts and money into the technology that’s required to bring these wells back up to where they were or higher levels. So yes, I think that the companies that have been investing in not only technologies but investing in reducing the cost of applying those technologies, those are the companies that are going to be the big winners.
Markham: Ed, is there anything that we should’ve talked about that we didn’t?
EI: I mentioned that there has been, even the last few days, continues to be a lot of changing hands, ownership of the assets. As an economist, those kinds of transactions are exactly what you’d expect to see in a free market and that is many of the players – oil and gas companies that initially developed the Barnett Shale – some of those are choosing to move on and they’re selling their assets here and could be concentrating their efforts in other areas.
To me that doesn’t indicate that the future of the Barnett is somehow clouded. In fact, in my eyes those kinds of moves are exactly what is needed to ensure the future redevelopment, continued development of the Barnett Shale because different types of companies – different types of expertise – are now coming in.
The companies that are going out were perfectly suited and did a great job at getting the Barnett to where it is now and as these assets change hands, in my mind, that’s a positive thing that happens and it’s happened continuously in the oil and gas business. That’s just how it works and that’s what makes markets efficient.
So I think all of this, while it’s disruptive to employees and others in this area and in other areas where it’s happening, in the long run it’s all a positive move and I think it sets up, specifically the Barnett Shale, to move in to the next stage of being redeveloped.
