Considerable attention has been and is being focused on the necessity for adequate pricing of natural gas in order to encourage exploration for and development of new gas reserves. Equal attention should be devoted to the effect of natural gas pricing on the recovery of gas from existing pricing on the recovery of gas from existing producing reservoirs. Higher gas prices frequently can producing reservoirs. Higher gas prices frequently can improve ultimate recovery by making feasible one or more of the following actions:
extending the producing life of wells
adding compression
handling fluid problems by artificial lift
remedying mechanical problems
acidizing or hydraulic fracturing.
Purchasers, regulators, and consumers must recognize that realistic pricing of gas will result in adding reserves which are critically needed to meet the nation's energy requirements.
The ultimate recoverable natural gas discovered to date in the United States is estimated to be 730 TCF of which 500 TCF have already been produced. With annual production volumes of approximately 20 TCF and a new discovery rate of only 3 to 4 TCF per year, there has been much speculation about exhausting our natural gas supplies in the near future. Current emphasis is on conservation of existing reserves, increased incentive for quicker development of new reserves, and development of alternate resources. It is the point of this paper that too little attention has been focused on the effect that pricing can have on maximizing recovery of natural pricing can have on maximizing recovery of natural gas from existing reserves.
In most cases, the effect of price on recovery is more pronounced for volumetric non-associated reservoirs than it is for water drive reservoirs. For a volumetric reservoir, increasing the gas price from 50 cts/MCF to $2.25/MCF (a price equivalent on a BTU basis to the current market price of oil) increases recovery by amounts ranging from 7% to more than 20% of the gas in place. To a nation accustomed to cheap energy, this may seem to be a high price to pay for additional gas. In reality, it price to pay for additional gas. In reality, it may be much lower than will be the cost of developing alternate energy sources. It should also be emphasized that these recovery improvements are expressed as percentages of original gas in place. For a field or a well in the latter stages of depletion, this may represent a several fold increase in the remaining reserve. It is significant that, of the 730 TCF of recoverable gas discovered to date in the United States, more than half occurred in volumetric reservoirs which are still producing at this time. Improving the recovery from these reservoirs by only a few percent will result in the production of an additional several trillion cubic production of an additional several trillion cubic feet of natural gas.
The American Gas Association, in its annual publication of proved reserves, defines reserves publication of proved reserves, defines reserves as those volumes "….. estimated to be recoverable from proved reservoirs under the economic and operating conditions existing at the time of the estimate. Likewise, the SPE has defined gas reserves as being the quantities of natural gas which "…. geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known oil and gas reservoirs under existing economic and operating conditions".
Most oil and gas leases, whether from individuals or governmental bodies, provide that, after the primary term of the lease, the lessees interest in this lease is maintained by production only for as long as production continues in paying quantities. At that time, ownership of the minerals usually reverts to the lessor unless additional drilling or remedial operations are initiated within some specified period of time.
