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GAS SUPPLY

DOE's continuing involvement in gas supply research is essential to ensure the recovery of a larger percentage of the total domestic gas resource base. Our recommendation of $49.9 million for FY 1992 RD&D shows no increase above the industry's recommended FY 1991 funding levels and is predicated on the continuation of the gas supply research programs recommended for FY 1991.

Estimated consumption of natural gas in 1989 was 19.4 quads. Current domestic production is running at about 17.6 quads annually with the balance of demand met by other sources such as, storage, supplemental gaseous fuels and natural gas imports. The critical question is whether the capability exists for additional domestic production at competitive prices to meet projected increased demand.

A recent Department of Energy study 18 shows that a technically recoverable resource base of 1,059 trillion cubic feet (Tcf) of natural gas exists in the lower-48 states. At the 1989 level of nationwide gas consumption, this amount is approximately equivalent to a 54-year supply.

The amount of gas that can be recovered from the total gas resource base is directly contingent upon the ability to develop new tools and techniques to recover this gas at commercially viable prices. This resource base is made up of reserves and resources. The recovery of gas in the "resources" category requires discovery and development of new technology on the basis of an improved understanding of reservoir geometry. Of the total resource evaluated in the lower-48 states 583 Tcf is judged economically recoverable at 1987 wellhead prices of less than $3/Mcf. An additional 174 Tcf of gas is judged economically recoverable in a price range of $3 to $5/Mcf.

It is clear from the above DOE study that there is no gas resource limitation that would preclude an expanded role for gas in the U.S. energy economy. The uncertainties of gas deliverability are not resource limitations. Rather, they are the pace of technological innovation and of new investment that will be necessary to sustain the levels of gas production needed in the future to meet increased demand resulting from environmental concerns. What remains to be developed are concepts for recovering conventional and unconventional gas at competitive prices.

Moreover, because of the potentially enormous size of advanced unconventional natural gas resources such as deep source gas reservoirs and secondary recovery techniques, extensive research is needed to both verify how much may be economically recoverable and to develop the requisite technology. Simply stated, early research and development efforts in the area of deep source gas, subquality gas upgrading and secondary gas recovery (such as coproduction and inert gas sweep) will help define the scope of the resource. Continuing federally

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sponsored research is necessary to encourage such exploration and to lower production costs, providing increased assurance that plenty of gas will continue to be available at competitive prices for several hundred years into the future

Specific Supply RD&D_Recommendations

Technology can make a difference in the cost of production of gas from the resource base. The gas resource base accessible to U.S. gas users under current industry practices generally reflects the historical perceptions since the 1970's of that resource base. Under then current practice, U.S. gas production was sustained primarily by the discovery of new high-permeability fields and reserve appreciation in known fields using traditional development practices. Less conventional sources, such as Devonian shale, tight sands, and coalbed methane played a very minor role in industry activity. These sources were then considered to require very high energy prices and/or new technology to ensure their viability.

In the 1980's new initiatives began to expand the perception of the gas resource base available to the U.S. gas user. New technologies and practices developed in the 1980's or expected in the future indicate that less conventional gas sources can play a substantial role in future gas supply, even without high prices.

A 1989 GRI Baseline Projection covering 20 years showed current practice supply declining through the projection period as old fields are depleted 19. The increased gas supply in the projection arises from the growing role of new initiatives in the U.S. gas supply picture. For example, the incremental lower-48 gas production resulting from advanced technology is projected to provide 14 percent of U.S. gas supply by 2000 and 23 percent by 2010. The advanced technology production is from Devonian shale, tight sands, coal seams, and watered-out reservoirs.

This advanced technology production does not include any contribution from improved gas recovery from highpermeability gas reservoirs using more intensive in-field drilling or from geopressured reservoirs. A recent DOE gas resource study indicated that, with existing technology, the resource is estimated at 56 Tcf recoverable at $3/Mcf and 74 Tcf recoverable at $5/Mcf.

Coalbed methane and low-permeability production are expected to grow substantially over the 20-year projection period, with more of the growth occurring by the year 2000. Devonian shale gas production will also increase substantially after the year 2000. The growth in all these resource categories is contingent upon the availability of advanced technology.

The contribution of advanced technology production in turn will depend on the pace at which the predictability and reliability of new production techniques can be demonstrated and brought into widespread use. These advanced

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technologies will need to become available in the early-1990s. This can be achieved only through an expanded and directed near-term supply R&D program sponsored by DOE in cooperation with the gas industry.

It is clear that advanced gas well completion and production technology will be a major factor if the United States is to solve some of its near-term environmental problems through an expanded role for natural gas. What is needed is an aggressive federal/gas industry joint R&D effort during the next ten years. This effort should include continued research on production of natural gas from geopressured resources, and synthetic gas from biofuels and coal. As described in the following, these technologies could provide additional supplies of gas in the 2010 timeframe.

1. Unconventional Natural Gas ($23.8 Million)

Large amounts of natural gas have been identified in tight geological formations such as Devonian shales and tight sands, which have been estimated to contain more than 1,800 Tcf and 900 Tcf of natural gas, respectively 18. Tight formation gas is produced using advanced recovery techniques such as hydraulic fracturing. A.G.A. estimates that favorable economic conditions and substantial investment in advanced recovery techniques could increase the accessible gas resources and improve the economics of gas production 20

Basic geoscience research must be expanded to maximize the amount of natural gas recovered from our abundant resource base. This research should be aimed at increasing our knowledge of the geological, geochemical and geophysical characteristics and parameters of both conventional and unconventional formations. This cross-cutting, reservoir characterization-type research is essential to both exploration and production in new formations, which are characterized by subtle traps. It is also essential to the application of secondary recovery techniques in existing fields.

To enhance the development of technology necessary to recover the natural gas from unconventional formations, more research must also be conducted to develop stimulation techniques to fracture tight rock formations that restrict gas flow. Current fracturing techniques induce only shallow fractures of a few hundred feet. Field testing must be conducted to refine techniques for inducing deep fractures of several thousand feet and to control the direction of the fracture for optimal production results. Research information must be collected from field testing to establish a technological database for stimulation, economic modeling and other analytical purposes.

In addition, advanced drilling techniques (directional and horizontal) must be refined and improved to increase production rates and reduce drilling costs. Funding of $23.8 million in the unconventional natural gas recovery program is recommended to continue DOE's secondary gas recovery program and ongoing research activities in western tight sands, Devonian shales, and other complex formations. This funding level will also support expanded geoscience research.

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2. Surface Coal Gasification ($8.5 Million)

Surface coal gasification is an important technology that can augment future natural gas supplies. Based on anticipated economics, A.G.A. projects that, by the year 2010, surface coal gasification has the potential to contribute approximately 100 billion cubic feet (Bcf) of additional gas supplies. With vigorous RD&D support, this economic threshold could be lowered. Surface coal gasification could then increase this level of production, thus enhancing the domestic gas production capability 20.

Current technologies allow significant production of gas from coal; however, substantial research into the gasification process is necessary if gas synthesized from coal is to play a role in meeting this nation's future energy needs. Gasification techniques must be developed to accommodate high-sulfur Eastern coals and combustion-inhibiting coal "fines". Research must be conducted to develop techniques for gasifying the fines, for treatment and disposal of liquid byproducts, and for consolidating fines and tars into a useful byproduct. Further scaleup of mild gasification is also needed before this technology can be put to full use.

Scientific and engineering feasibility studies of advanced gasification processes must also be conducted to develop a technological database for such processes.

3. Geopressured Methane ($9.6 Million)

Geopressured methane is found in either a free state or dissolved in water and trapped in sedimentary rock at higher-than-normal pressures. One of the largest geopressured areas underlies a portion of the Texas and Louisiana Gulf Coast. Estimates of the total resource in-place range up to 6,000 Tcf; however, estimates of the amounts of gas that might ultimately be recovered using current recovery techniques, range between 10 and 150 Tcf 18. If technological breakthroughs can be achieved, geopressured methane could become another major source of domestic energy.

Research currently conducted by DOE in geopressured/geothermal zones is focused on reservoir science, recovering gas and producing electricity from heat available in the reservoir brine. DOE research should concentrate on improved understanding of the scientific aspects of reservoir modeling and production dynamics and on recovering the vast amount of dissolved methane found in geopressured zones. In addition to DOE's current geopressured program, DOE should develop new approaches to maximize gas production and minimize brine production.

4. Biofuels ($8.0 Million)

Since the supply of biomass and waste materials is virtually limitless, supplemental methane supplies from biomass and waste conversions can add significantly to the total future gas supply. In addition, controlled production and use of methane from these sources can reduce natural release of methane from the decay of

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these waste materials. Such decay is a substantial contributor to the overall rate of methane emissions to the atmosphere. Finding sites for disposal of municipal solid waste is an increasing problem in communities across the nation. Therefore, developing energy from municipal solid waste and other biomass would promote the conservation of resources and derive environmental benefits arising from productive use of currently "useless" materials. Presently, the quality of the gas produced and the lack of suitable processing techniques inhibit the widespread use of these potential gas resources.

The gas industry fully supports the gas-related biofuels RD&D being carried out at the Solar Energy Research Institute (SERI) and recommends strong federal support for continuation of these important activities. Advances have been made in both the thermochemical and biochemical conversion processes, but more extensive studies and technology advancements are necessary to fulfill biomass' contribution as a usable source of energy.

Of particular interest to the gas industry is SERI's work in the biotechnology process of anaerobic digestion of municipal solid waste that includes genetic and other improvement of biological organisms and development of innovative reactor design concepts. Another significant area of research at SERI includes methods to remove carbon dioxide from the air or from combustion plant stacks.

Another area of interest to the gas industry is the research conducted by IGT on advanced biological and thermal gasification of municipal solid waste both in landfills and above ground reactors.

A total of $8.0 million is needed to perform these gas supply-related RD&D activities in FY 1992. Of this, $4.0 million should be dedicated to funding SERI activities. Strong, stable funding levels from DOE for all biofuels research work at SERI will help ensure successful results.