Report Contents
Report#:SR/OIAF/2000-04

Preface

Contacts

Executive Summary

1. Scope and Methodology of the Study

2.  Summary of Results

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Reference Case

The Reference Case for this analysis is similar to the reference case for the Annual Energy Outlook 2000 (AEO2000), with the following updates.

• The resource base for conventional natural gas sources in the Rocky Mountain region is lower than in AEO2000 by 8 percent—the volume estimated to be subject to current environmental and other constraints that preclude industry access.

• In the Unconventional Gas Recovery Supply Submodule, the overall improvement in technology for enhanced coalbed methane recovery is assumed to be 30 percent for this analysis, up from 25 percent in AEO2000, and the enhanced technologies are made available in 2010 rather than 2015.

• World oil prices and natural gas wellhead prices in 1999 and 2000 have been updated according to data from the April 2000 Short-Term Energy Outlook. The 1999 world oil price is $17.13 per barrel, up from $16.98 per barrel in AEO2000, and the 2000 world oil price is $24.36 per barrel, up from $21.16 per barrel in AEO2000. The average natural gas wellhead prices in 1999 and 2000 are $2.07 and $2.48 per thousand cubic feet, respectively, revised from $2.12 and $2.17 per thousand cubic feet, respectively, in AEO2000.

Rapid and Slow Technology Cases

Two alternative cases were created for this analysis to assess the sensitivity of the projections in the Accelerated Depletion Case to changes in the assumed rates of progress in oil and natural gas supply technologies. To create these cases a number of parameters representing technological penetration in the Reference Case were adjusted to reflect more rapid and slower penetration rates. In the Reference Case, the underlying assumption is that technology will continue to penetrate at historically observed rates. Because technologies are represented somewhat differently, in different submodules of the Oil and Gas Supply Module, the approach for representing rapid and slow technology penetration varies as well. For instance, the effects of technological progress on conventional oil and natural gas parameters in the Reference Case—such as finding rates, drilling, lease equipment, and operating costs, and success rates— were adjusted upward and downward by 50 percent for the Rapid and Slow Technology Cases, respectively (Table E1).

The representations of enhanced oil recovery and unconventional natural gas recovery are described below. All other parameters in the model were kept at their Reference Case values, including technology parameters for other modules, parameters affecting foreign oil supply, and assumptions about imports and exports of liquefied natural gas and natural gas trade with Canada and Mexico.

Enhanced Oil Recovery

Two impacts of technology improvement are modeled to determine the economics for development of inferred enhanced oil recovery (EOR) reserves:

• An overall reduction in the costs of drilling, completing, and equipping production wells as a result of incremental improvements in drilling equipment and procedures, reservoir characterization, completion methods, and operation refinement

• Field-specific penetration of horizontal well technology, which represents a quantum improvement in recovery efficiency.

The specific parameters for the Reference Case and the Rapid and Slow Technology Cases are shown in Table E2.

Table E2. Assumed Rates of Technological Progress for Enhanced Oil Recovery Techniques

The percentage of the remaining undiscovered recoverable resource determined to be technically amenable to gas-miscible EOR methods is set for each region at the beginning of the forecast, assuming current technology. The value is assumed to increase over the forecast period with advances in technology (Table E3).

Table E3. Assumed Rates of Technological Progress for Gas-Miscible Enhanced Oil Recovery Techniques

Unconventional Gas Recovery

The Unconventional Gas Recovery Supply Submodule relies on the model’s Technology Impacts and Timing functions to capture the effects of technological progress on costs and productivity in the development of gas from deposits of coalbed methane, gas shales, and tight sands. The numerous research and technology initiatives are combined into 11 specific “technology groups” that encompass the full spectrum of key disciplines— geology, engineering, operations, and the environment. The technology groups are characterized for the Reference, Accelerated Depletion, and Rapid and Slow Technology Cases as summarized in Table E4. The 11 technology groups are described below:

Table E4. Assumed Rates of Technological Progress for Unconventional Gas Recovery in the Reference Accelerated Depletion, and Rapid and Slow Technology Cases

    1.    Basin Assessments: Basin assessments increase the available resource base by (1) accelerating the time that hypothetical plays in currently unassessed areas become available for development, and (2) increasing the play probability for hypothetical plays—that portion of a given area that is likely to be productive.

    2.    Play-Specific, Extended Reservoir Characterizations: Extended reservoir characterizations increase the pace of new development by accelerating the pace of development for emerging plays, where projects are assumed to require extra years for full development relative to plays currently under development.

    3.    Advanced Well Performance Diagnostics and Remediation: Well performance diagnostics and remediation expand the resource base by increasing reserve growth for already existing reserves.

    4.    Advanced Exploration and Natural Fracture Detection Research and Development: Exploration and natural fracture detection research and development increases the success of development by (1) improving exploration and development drilling success rates for all plays, and (2) improving the ability to find the best prospects and areas.

    5.    Geology/Technology Modeling and Matching: Geology/technology modeling and matching matches the “best available technology” to a given play with the result that the expected ultimate recovery (EUR) per well is increased.

    6.    More Effective, Lower Damage Well Completion and Stimulation Technology: Improved drilling and completion technology improves fracture length and conductivity, increasing the EUR per well.

    7.    Targeted Drilling and Hydraulic Fracturing Research and Development: Targeted drilling and hydraulic fracturing research and development results in more efficient drilling and stimulation, which lowers well drilling and stimulation costs.

    8.    New Practices and Technology for Gas and Water Treatment: New practices and technology for gas and water treatment result in more efficient gas separation and water disposal, which lowers water and gas treatment operation and maintenance (O&M) costs.

    9.    Advanced Well Completion Technologies: Research and development in advanced well completion technologies such as cavitation, horizontal drilling, and multi-lateral wells (1) defines applicable plays, thereby accelerating the date such technologies are available, and (2) introduces an improved version of the particular technology, which increases the EUR per well.

    10.    Other Unconventional Gas Recovery Technologies: Other unconventional gas recovery technologies, such as enhanced coalbed methane and enhanced gas shale recovery, introduce dramatically new recovery methods that (1) increase the EUR per well, (2) become available at dates accelerated by increased research and development, and (3) increase operation and maintenance (O&M) costs (in the case of coalbed methane) for the incremental gas produced.

    11.    Mitigation of Environmental Constraints: Environmental mitigation removes development constraints in environmentally sensitive basins, resulting in an increase in basin areas available for development.