After listening to the recent drilling plans of various leading North American gas companies, you might conclude that unconventional is the new conventional. Everybody from EnCana (NYSE: ECA ) to Anadarko Petroleum (NYSE: APC ) to XTO Energy (NYSE: XTO ) is talking about it: But what is the difference?
Conventional gas drilling involves boring a hole into the ground and coaxing natural gas to the surface. Since the gas is so light, it doesn't take too much prodding, so long as the source rock has relatively large, well-connected pores. That's the low-hanging fruit, and its production is believed to face decline in North America. For that reason, industry players here have turned to unconventional reservoir sources, including tight gas sands and shales, and coal beds. It's all the same gas, but it's trickier to produce.
Tight gas sands -- i.e. gas-bearing sandstone formations -- have the opposite properties of the ideal outlined above. The gas requires a lot of stimulation, so various methods are used to loosen up the formation. It's kind of like having an open bar at a wedding.
One way to maximize the flow rate is to find natural fractures in the formation, and to use directional, or horizontal, drilling to hit those fractures. All it takes is a lot of frac fluid, which creates the fractures, and some proppant, which keeps them propped open. These materials are supplied by both diversified oilfield services companies like Halliburton (NYSE: HAL ) and Schlumberger (NYSE: SLB ) , and specialists like CARBO Ceramics (NYSE: CRR ) .
Tight gas shale is a similar phenomenon, but shale rock's tendency to spread laterally makes horizontal drilling perhaps even more critical. Also, horizontal drilling capacity means that the city of Fort Worth doesn't have to be relocated in order to get at the giant Barnett Shale gas field, in which Devon Energy (NYSE: DVN ) claims over 600 million BOE in proved reserves. According to Schlumberger, tight gas shales today draw the majority of land drilling in the U.S.
Coal bed methane was first viewed as a nuisance that had a nasty tendency of seeping into coal mines and killing miners. It used to be vented straight into the atmosphere, but with gas prices high, this too has become an economically viable source of natural gas (which is, by the way, mostly methane). Coal seams tend to be shallow, making drilling quicker, but the reservoir pressure tends to be low, which requires advanced compression solutions.
Have more questions about oil & gas terminology or concepts? The Oil and Gas board will be happy to oblige.
Fool contributor Toby Shute probably should have taken more geology classes in college. He doesn't own shares in any company mentioned. The Motley Fool's disclosure policy is a resource not facing decline.
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