,

SPE

SPE/DtE
8945
ECONOMICS
(F DEVONIAN
SHALE,COALSEAMAND
SIMILAR
SPECIAL
APPALACHIAN
GASSOURCES

by Richard M. Mill;rand Norman E. Mutchler,

Berxw Associates

his paper was presented at the 1980 SPEDLIE Symposwrn M unconventional Gas Recovery held In Pittsburgh. Pennsylvania, tdti~ 18-21, 1980. The material is subject to
]rrection by the author. Permission to copy is restricted to an abstract of not more than 300 words. Write: 6200 N. Central ExPwy., Dallas, Texas 75206
.

ABSTRACT

cstlm~tes of the potentials of the difficult gas

sou~ces were msde under existing and improved pricel
cost relationships.

The nat al gas curtailments during the winter

of 1976-77 and the threat that gas interruptions
would become a permanent way of industrial life
THEOXY AND DEFiNITICINS

sparked widespread interest in the investigationofI

local, higher-cost gas sources. Analyses of the

The term marginal gas source is used to describe
technical, institutional,legal and economic cmThe reasons that a gas
a higher cost gas.
straints and opportunities associated with these gas
source(s) may be high coat are many, varieL and often
sp .-aslocated j.nthe Appalachian Region were under- interrelated. Technical, geologic, institutional
taken for the Appalachian Regional Commission. The
and attitudinal factors f~equently combine in some
economic potentials appeared encouraging providing
way to adversely affect the profitability of recovery
certain constraints are removed andlor relaxed.
and the economics of using a marginal gas source.
Such are the circumstance~ with regard to exploiting
INTRODUCTION
the relatively abundant Appalachian gas .resaurces
froa coalbed methane, the Devonian Shales and cys
Natural gaa is an important fuel throughout the
from other difficult Appalachian sources,.
Appalachian RegScn. Yec only two of the thirteen
Appalachian statea produces sufficient gad to supply
GAS XOM COALBEDS
Understandably, then,
their own needs (Table 1).
industrial gae curtailments resulting from the natural
T}.reasons that this resource has not been
ges crisis during the winter of 1976-77 stirred wideutilized are many and varied:
spread interest among northeast industry and public
officials to secure independent supplies of gas from
.egalownership problem
0 Coal operator attitude towa;d utilization
sources located within the Region.
Profitability
This paper describes the research and the report
0 Other institutionalfactors includin.~
done for the Appalachian Regional commission on the
regulatory
prospects and opportunities of marginal gas sources
0 Technical
in Appalachia aa they r~late to maintaining and
Safety
increasing economic development tn the Region.
Three
0
categories of msrginal sourcee were studied -- gas
Profitability has not been established in the
from coalbeds, Devonian Shale and other dj.fficult
minds of many coal operators, even some who have
sources. The Latter category included other low
previously cost-shared projects with the Bureau of
permeable gas furmationa, deep drilling and gas from
This is probably due to the marginal econMines.
Lake Erie.
omits and the experimental nature of the few projects
underway or completed. Utilization suffers from
This was pr~marily an institutional-typestudy
limited replication of successful demonstration
of governmental energy and non-energy programs and
prcjects.
activities and the actions of the private sector.
Technical, economic and institutionalfactors were
Technology in general exists for utilization
analyze< fro% the standpohts of the literature, many
but needa s~aling down in most casee for this lower
and varied interviews, xildfrom case histories to try
Except for a
volume, lower gas pressure source.
to discover the encouraging and constraining aspecls
few pipeline injection proje.ntsand-a few current
to greater expansion. Eased on these factors
experimental projects there are not many examples of
utilization.
0

References and illustrationsat end of paper.

187

GAS FROM DEVONIAN SHALES

-

~-

Devonian Shale wells are typically low permeable,

The main factor
low productivity, 10ng-li?Jedwells.
appears to be fracture permeability. By some estimates only about four percent of the gae is recovered
under preeent technology in the Eetter Fields.
There are an e;stimeted9,615 producing wells
(P. J. Browr,,1976) in eastern Kantucky (70 percent
of state as production), West Virginia, Ohio and
Virginia.f
Fifty-five percent of Devonian Skdle production
ie estimated to be b:utilities, 40 percent by independents, and lese than five percent by producerconsumers.
The main constraints against expansion of this
eource dre:
0

0
0

Long payback period to recover investment

Low price of gas
Rising well completion costs
Need for improved technology

legislative and environmental actions, rather then

,ater
becauee of any problems with technology. The operatinnd Ganadian offshore rig count in thfl;
Lske Ie
presently limited to about one-half dozen.
depth, projected well depth, and rock pressuree will
not require the larger more >owerful and costly operations used in the Gulf or Outer Continental Shelf.
!,OWpermeable eources such ae the Medina Formation
will be the maiz target.
The Initial economic objective was to determine
the wellhead prices that would induce significant
expansion of produc~ion of each of the marginal
gasses. Production history data was collected from
numerous repox.s(Reference 3 is illustrativeof the
documented research) and from other case history data
that was gathered by interviews. The economic
-:vestigationof the potentials of the three marginal
~s sources, however, could not be conducted without
g
considering the critf.calnon-economic factors. ihe
projections that are presented, then, incorporate
~\udgmentalassessment of the nan-economic factor~.
ECONOMIC Projection RESULTS

GAS FROM COALBEDS

The total in-plac? Devonlsn gas resource has been
(Ssttited to range betweem 500 to $00 tcf in ~he
coSt
Ecstem United States.* Such an abundance of gas
caw~ot rationally be ignored by the numerous ener~
1> .mugh Bureau of Mines investigatorsare
l reportedly encouraged by the economic potential of
deficient ef.~te?nindustries.
the ve~t shaft/horizontalborehole production method,
GAS FROM OTHER DIFFICULT SOURCES
iL suffers from an extremely limited cost data base,
since the BureaulEasternAssociated Coal Corporation
Historically, exploration and development of
project was experimental. Consequently the costs
natural gas in Appalachia has been eest?~tially!a the
used for the return on investment analysiswere those
areas of known, easily recovered gas fxelds.
Records associated with the vertical borehole, a widely us<;d
indicate that over 590,000 oil and SSS wells have been
oil and gas development technique,
Further, the gas wells
drilled into the Basin.
average 3,700 feet in depth and 84 percent of accumThe cost range depicted in Table 2 corresponds
ulated natural gas production has come from Pennsyl.to variations caused by subsurface and surface condivanian, Mississippian, and Devonian Formatims.
tions and other cite specific locational factors
Correspondingly,85 percent of known Appalachian gas
i~cluding accessibility, and also variable charges for
reserves lie in the same regions asthe above
Since the data base was
drilling by producer type.
formations.
so linited it was decided that average costs would
be the best ir.dicatorthroughout the Region and,
A difficult, low permeable formation is generally therefore, a more reasonable measure of potential
defined as one having a permeability less than 1.0
profitability. A second reason for choosing awerage
millidarcy and an effective porosity of less than
costs, as presented in Table 2, was the consideration
twelve percent. An examination of formations
that future development vould appear to have the
throughout the Basin reveals that such characteristics greatest potential among the.larger coal opdrators
are common. However, a gas-bearhtg horizon could be
whose costs would tend to correspond with hfgh overan excellent producer in one field andi.et be a relahead ut$l!.ties. his result, notwithstanding contively impermeable rock as close as a tew mtlea
tinuing coal operatorreluctance, was the consensus
away.
of those interviewed during this study, especially
utility representatives. Yet there is an additional
Drilling and completion technology for the low
modifying condition tha~ would suggest lower cost
permeable formations is similar to that discuesed for
production. It is generally agreed that the econDtwonian Shales. Of course, the stimulation method
omits will only be improved on a production basis,
design will vary for indivi~tial.
well para.-ters,
say field development of 25-50 wells, where economies
while drilling techniques will be more standard.
of scale vould result in lower per well costs.
Hence, although indications are that the higher overThe deeper Silurian, Ordovician, and Cambrian
head coal companies are likely to be the prime &evelrocks have not been adequately explored. Deep well
opers of methane gas resources it is also ;xpparent
drilling does have one additional problem.
In 1977,
that significant expansion WO.IU \e on a scale sufthe Hughes Rig Count showed 223 rotary drille in the
ftcient to affect eoxnecost r?+~ctlnfi. The average
entire Northeast Region of the United Statee, but
price condition ehown in Table 2 satisfied both
only eleven were capable of drilling beyond
conditions.
10,000 feet.
Lake Erie offshore drilling is a difficult
source (i.e. marginal) because of the various state

Production
Production data are presented on the basis of
typical l~ighand lowyleld methann wells (Table 3).
The production data pertain solely to removing methane
from coalbede in advance oi miningby surface vertical
boreholes. The production profiles reflect composite
coalbed degasificationexperience from a group of
wells ~~ the Pocahontas NO .3 and Pittsburgh CoalThe production profiles represent wells
beds.
that inclu~e stimulation and continuing desline over
the 15 year analytical per%d.
It is recognized that
in an actual field project individual wells could vary
widely from the norm.
Results and Projections
The analytical results of the discounted cash
flow - return on investment computations are presented In Table 4.
The results show that production
from a higher volume production well is econo~ally
viable at al Pricesa
Unfortunately, experience is
unable to provide assurance of achieving production
The high volume
volumes as presente? in this case.
producer represents limited oper~cing experience in
the Pittsburgh coalbed where netural fracturing has
created unique production circumstances.

would still be 60 times greater, and given the same

percentage of profits from coal/gas, the increase in
profit would be only 1,5 percent.

I!

Furthermore, at higher prices that apply equally

to all gas sources, the relative economics are in
favor of expansfon of conventional sources. A
higher price for all natural gases would generally
not alter the relative attractivenessof difficult
Undersource gas as compared to conventional gss.
standably, then, deregulation affecting all gas
sources, or simply a higher c~iling price for all gae,
would in general result in considerable exploration
and development of new conve~tlonal Appalachian gas
and the pz%entially much larger volume of off-chore
gas in the Gulf of Mexico, gnd similar conventional
gas sources.
This probable pattern of natural gas exploration
and development is not meant to indicate that no
expansion would occur in recovering methane gae.
Obviously, a higher natural.gas price would improve
methane extraction and utilization profitability, and
as a result some coal operators might be encouraged
t~~reexmtie methane opportunities.
It has been estimated that the cumulative Appalachian Region coal production between 1973 and 1990
tons.6
may be 14.2

For%he lower volume production example it would

not be economically feasible to develop this resource
at the lowe~t price.
At a price of $2.00/mcf the
investment achieves margina: acceptance. At
!43.001mcfthe lower volume proc!uceria an attractive
investment.

~JillkIII

The West Virginia - Pennsylvania &Fea features

many characteristics favorable to methane extraction:

Although various demonstrations have shown that

production is generally improved through stimulation-too little is known at this time of its potential for
increasing methane production (or the effect of stimMany more
ulation on the mine roof and floor).
deumstrations encompassing a broader geological and
geographical area are required before definitive
results can be reported.
Nevertheless, higher wellhead prices would conceivably improve the economic attractiveness of zhis
marginal source. Assuming that the lower volume
example has a higher occurrence probability, then an
increased wellhead price could have the effect of
expanding the recoverable reserve base for methane
gaa recovery.
To date, slightly less than three bcf of methane
gas has been produced for commercial sale.
Ap;.ro%imately one-half has been produced from 23 vertical
borehole wells over a 29 year period.
And, slightly
leas than half was produced from two demonstration
vent shafts with horizontal boreholes -- one of which
produced gaa for sale over a 2+ year period while the
other was productive for about 1+ years; the approximate remainder has reportedly been produced by several coal companiks on a very limited basis.

Lerge coal reserves

Considerable present and future mining

activity

Extensiblepipeline system (especially in

the northern sections)

Large eized coal and utility companies

It is, therefoce,the bestf candidate for the development of methane extraction expansion within the
Appalachian vtates. At present 100 million cubic
feet per day (or approximately 36 bcf per year) of
methane is wasted co the atmosphere from the Pittsburgh vein alone.
If over the next 20 years ten
percent of the total 700b:? of methane were to be
recovered for commercial application then 70 bcf of
methane would be added to theproducible reserves.
Considering that a vertical well has about a 20 year
life and total producible reserves of 120 mmcf, then
the 70 bcf of methane could be recovered ~<th
Similarly, a vent shaft - horizontal
600 Wdb.
hole recovery system has about a five yea- premining
life span and 1,000 mmcf producible resemes and,
accordingly, 70 vent shafts would recover thy 70 bcf
producible reserves.

Since these few examples areinsufficient evidence of potential opportunities, the approach to
estimating future reserves must otherwise depend on
judgmental analysis.

Alternatively, eight groups containing 50 vertical wells spaced at 1,000 feet intervals,and
including 22 premifiingvent shafts with 6,000 lineal
feet each of horizontal boreholes would be sufficient
There
to recover this volume of methane (70 bcf).
are at least eight large operator..or utilities with
mining operations of sufficient zlze to achieve this
minimal recovery rate.

Coal operators wiI.1, extract methane gas, but

At 1977-78
they will be reluctant to utilize it.
gas prices the market value of the coal was about
100 times the value of the gas.
At +2.50/mcf it

Extrapolating this approach to other major coal

seams, such as the FLaryLee Vein (Warrior Basin) in
Alabama and relating the methane recovery to the
estimated coal production would add considerably
189

ECONL?fICSOF DEVONIAN SHALE, COAL SEAM AND SIMILAR SPECIAL APPALACHIAN GAS SOURCES

There is not sharp difwould be outside this renge.

ference between che operating costs of the three producer types.

to the methane gas producible regerve base.

As
noted, Appalachian coal production may total more
Assumthan 14 billion tons over the next 20 years.
ingon the average that each ton of coal .on;&ins
300 cf of methane gas, then approximately four tcf
of methane gas would be contained in the coal.
Considering also that ten percent of the methane contained in this coal might be recovered prior to,
during and follow!ng mining, then approximately
400 bcf of methane could be added to the producible
reserve base.

Production

Production data have been obtained from :he case

The figures shown in Table6 represent
study data.
a typically good prodccing well, experiencing peak
production normally three to five yt?arsfollowing
ctimulatiun. The use of a typical good producing
well perforrsnce profile is not i~.tendedto infer
that similar production is not Geographicallyconstrained. The reported ranges of .ell life production are 250 to 460/mmcf. In fact, considerable
variability of production can and does occur between
wells even at the same location. However, since tl.:
prime purpose of this analysis is to compare the
investment potentials of the various producers, i:
is convenient to calculate the return-on-investment
employing a single production environment. Tt
production data used is taken from the present gas
producing areas.

Figure 1 - Projected Appalachian Methane &s

From Coalbeds, illustrates the two prospective outcomes supported by a higher gas price and estimetted
coal production. Relating methane extraction to the
anticipated coal production eve. a 20 year period can
be 8upported on various fronts. Future coal produc
tion will.largely be extracted from deeper, gassier
seams causing increased ventilation costs and
increased risks to the safety of the miner.
Mining
productivity would also be affected through mining
in gassier seams.
Coal cperators could, therefore,
be attra.ted increasingly to extracting the methane,
but it will be a gradu%l process as they begin to
utilize more of the gas, perhaps through further increaftesin gas prices.

Results and Projections

At a price level of, say, $2.50/mcf the opportunity wi.tlbe present to induce tha necezsary experimentat3.on. At this price other constraining factors,
especially the gas rights issue, might beresolved
through cooperation, especially with suc ceding gas
price increasee. While any estimate # futcre producible reser~es must necessarily be based on factors
other than experience -- such as future mining
activity - it would appear that the required technology refinements wtiilenumerous, do not need tc be
major.

The analytical results of the discounted cash

flow - return on investment computations are presente
The -olmns depict the four price alter
in Table 7.
natives selected for this analysis. The row entries
include the alternative investment costs for normal
hydraulic fracturing. The entries in the body of
the Table are after-tax returns on investment (ROI
in percent) based on a typical production profile,
the alternative price levels, and the associated
revenue - cost profile.
This analysis considers a profitable investment
opportunity for ROI1=, after taxes, of ten percent
or greater.

GAS FROM DEVONIANSHALE

costs
Loststo develop a Devonian Shale well can vary
wide~i due to geologic and topographic conditions,
accessibility, labor rates and work rules, overhead,
etc.
Table 5 presents cost data for Devonian Shale
producers base,lon information contained in the literature and supp>rted by discussions with company~~fficials.?&covered under the case studies.
Pzoducers of Devonian Shale gas must StiIIMlate
their wells.
The two most common methods of stimulating a well are by shoottig, or normal hydraulic
I fracturing with primarily water-based fluids. The
stimulation method e~ployed would appear to depend
principally on the past practices and experiences of
the producing company with one particular technique.
Sttiulation costs range between $5,000 and $150,000
per well.
The lower costs represent nitroglycerin
skts and the $150,000 is indicative of the cost of
a k%ive
Hydraulic Fracture (NHF). Normal hydraulic
fractures are estiuatedat about $l0,00f1to $20,000
per well..
Annual operating costs, including maintenance,
generally fall within the range of $500 - $2,000 per
well.
Agatn individual circumstances and operational maint~-nancepractices determine these costs,
but it would b.?unlikely that any operation costs

The Table clearly illustrateswhy Devonian Shale

gas is a marginal source. Ata price of $1.42/mcf
(regulated gas price at the time of the analysis)
Devonian Shale development is not economically justified.
At a price of $1.75/mcf it is only a marginally attractive investment for the low cost producer.
As the price reaches a level of $2.00/mcf and above,
the return generally is sufficient to warrant the
investment.

These analytical results generally conform to

the operating experiences occurring at the time of
The principal producers were those
the analysis.
firms independentand utility -- whose development
costs were generally compatible with that depicted
for the low cost investment. possibly because of
the location, the costs of one of the largest single
producers from the Devonian Shales - Kentucky-West
Virginia Gas c.~mpany-- are generally lower than that
reported for other utility companies. Their lower
costs for development may also be attributable to the
fact that they are quite experienced in developing
Smaller independentproducers experithis source.
enced in the Devonian Shales also have costs below
the average.

Alternatively, as reported, the higher cost producers, mainly the larger utilities, were not developing this source since the return did not justify
the investment at current prices. ~is result ia

.
190

. .

.
RICHARD M. MILLER AND NORMAN E. MUTCHLER

borne out by the findings in Table 7 which similarly

illustrate that the current price leleldid not justify the investw.& for average or high cost producers

shsle;. Wjor technology improvements on L routine

commercial basis likely would not be available until
about 198& -- at whit% time the current DOE Eastern
Gas Shales Project will have been concluded. Both
phases are shown tinFigure 2 and diBcussed below.
A
20 year period is considered.

The producer-consumeris a special category of

producer type not necessarily guided by price considerations, but rather by assurance of supply. The
data base on coats for the producer-consumertype wa&
inconclusive. Consequently,any comparison reluive
to the cost data used in the rate of return analysis
is not possible.

Phase 1 <First Ten Year Period)

It is also noted that the results of the study

conducted by the Office of Technology Assessment (OTA)
were comparable to those preaected in this report.y
in that study, a price level of $2.00/mcf was the
lower limit warranting significant expansion of
these resources, essentially the findings of this
report. The cost estimatea used in both reports are
essentially the same.
*
;.nthe absence of total natural gas deregulation,
or detagulationapplying only to unconventional
sourc~q, Devonian Shale production should, nevertheless, expand due to the recent gas price increases.
Such a csticlueionwas supported by widence that
showed Devonian Shale well development increasing
slightly in response to higher prices.
However,
expansion based on existing price ceilings and technology would be limited to less than one tcf over
a 20 year period. The principal constraints limiting
further expansion are a low rate of return relative
to conventional sources, development difficulties,
and higher costa and risks associated with deposits
lying oute.tdetha already densely developed better
producing brown shale areas.

Expansion of Devonian Shale reserves can be

anticipated to occur in two phases.
~hase 1 represents the potential expansion under alternative pricing policies. The response from a higher price
should be visible within three years.
Phase 2
represents a much larger potential increase in
reserves based on substantial technological improvements, particularlywith improvements in stimulating
the less permeable grey shale formation intervals.
Department of Energy test drilling and core analysis
have already shown that natural gas exists in tha
full column of the grey shales and not just in the
rich brown shales. However, the higher tensile
strength makes them harder to fracture than the brown

Ease Case (Scenario 1)

The base case represents tks zxisting ga~ production environment, except that a ceiling price for all
natural gas is set at $2.!3G/mcf. As shown in Table f
a $2.00/mcf price ceiling would result in about 14,40[
Devonian Shale wells and an increase in the reserve
base of approximately four ?cf over a 20 year period.
The majority of ~be sxnual production,would occur in
the better producing naturally fractured brown shale
areas, but some production would be induced in the
lesser quality adjacent areas (brown she.lewith somewhat less natural fracturing). A higher reserve
base has not been anticipated since, given a choice o~
conventional vs. Devonian Shale gas at no price differential, it is most likely that producers would cow
ttiue to concentrate on crmventional gae.
The number of new wells estimated by applying
recent growth trends (14,400 wells) have been found
to correspond in a different approach with well poterr
tials on an areal basis (14,200). For the base case
then, additional reserves can be added without technological improvementsand with preeent drilling
industry capacity.

Si&ificant and immediate expansion in the short

term would be limited by geological and technological
constraints and the available drilling industry capaCity.
Consequently, the approach in-determti-i.ng
~he
economically recoverable reserve base involves a
comparison of alternative scenarios as shown on
Figure 2.
Total well drilling in the four state area including West Virginia, Kentucky, Ohio and Pennsylvania had been increasing at an annual rate of about
twelva percent per year.
Devonian Shale well completions in the same period averaged a little less than
three percent of total well drilling. Based on the
available data, it is estimated that approximately
5,300 wells were drilled in the four states in 1976.
Therefore, an estimate of 1976 Devonian Shale well
completionswould be on the order of 150 wells.

Three different pricing options are considered ir

Phase 1.
In all three cases, no significant technoHence~ any
logical changes are anticipated to occur.
substantial increase in Devonian Shale zesemes would
result from price increases and other non-techndogica:
factors. Development during this phase would be
expected to continue largely ~i the traditional naturally fractured brown shales.

Deregulation of All Natural Gas (Scenario 2)

The deregulation of all natural gas would not
immediately cor substantially improve the opportunities for developing the Devonian Shale deposits,
since it would still have a profit disadvantage relative to conventional gas eources. The meet likely
occurrence, in this caee, Is that significant Devonia
Shale expansion would occur following the lpeaking*
of conventional.gas resources. In other words,
increasing the gae prices will increaae gee production for a period of time and then start a downward
It is believed under this Scenario, with
trend.
all gae priced equal, that major Devonian Shale
exploitation would occur along with many other difficult eources at the time of the downward slide.
Total deregulation, estimated at about
$2.25Jmcf wo@d, however, result in further expansion
of Devonian Shale gas ae shown on Figure 2 (Scenario
The increase shown represent a slight upward
2)
shift of the curve corresponding to the baee case
conditions.

J
191

Since deregulationwould entail expaneion of

the entire natural gas industry, the response would

. .
ECONOMIC5 OF DEVONIAN SHALE, COAL SEAM AND SIMILAR SpECI~ APPALACHIAN GAS 8ovR~ES

Figure 2 shows that an economic technology

breakthrough in stimulation technique would substan:::~l&elerate
the producible reserves beginning
.
DOEe $80 million, eight year research
program {e directed toward achievement of expanding
improvement~
produci?ie reserves through technological
and def-lnlngthe resource.

be somewhat delayed for difficult source gas, hence

a three year lag represents Che time required bafore
the effects of deregulationmight be visible.
The 20 year increase in recoverable reeerves has
been es~hated et seven :cf.
Deregulation of Devonian Shale Gas (Scenario 3
and 3A)

GAS FROM OTHER DIFFICULT SOURCES

Like the basa case and total deregulation, the

effect of deregulation of Devonian Shale gas only
essentially represents a stimulant to development
witl;current technology. In this case the natural
gas price is considered to be at a level of
$2.00/mcf while the priceof Devonian Shale gas is
$2.50/lncf. Therefore, total gas industry expansion
in the Appalachian Region is assumed to grow at the
same rate used to calculate reserves in the base
Howevar, the economic disadvantagespertaining
case.
to Devonian Shale gas would be removed and, as a
result, added incentive is provided in expanding
drilling for Devonian Shale gas rslative to conventional sources.

This category covers all other known marginal

gas sources locatad in the Appalachian Region and
includes~ (1) other low permeable formations;
(2) deep drilling; and (3) offshore drilling in
Lake Erie.
Other difficult source wells would involve one
or more of the following characteristics:
1. Targeted horizons are below or remote from
those normally sought.
2. Stimulation requires special design
considerate
ions.
3. Drilling requires non-standard technology.

It has already been mentioned that additional

production would have to come from areas other than
However,
the so-called better producing areas.
the bulk of the production would continue to come
from these areas with more Intense well spacing both
within the area and nearby.
lhis need not be a subject of probability, ?v?causea massive Devonian Shale
characterizationprogram is underway involving most
of the affected State Geological Surveys and coordinated by the U.S.G.S. Together with improved
remote sensing, aerial and ground surveys and other
techniques for locating joints and lineaments,
expanded promising areas should be known somewhat
before the beginning of the second decade. For this
reason, this portion of the curve is shown as Scenario 3A on Figure 2.
Known recoverable reserves would increase to
17 tcf between now and 1998.
Technological Improvements (Scenario3 and 4)
The significant contribution of Devonian Shale
gas cannot be achieved without techniques that would
either lower costs, increase gas production, or both,
along with a higher gas price to increase profit
margins.
The ARC study compared the geographically
limited naturally fractured brown shale areas wit!?
the muck larger geographicallydistributed deposits
of non-fractured brown and grey shales. These lattez
shales are variously I.abelledlight grey shales, grey
shales, or greenish-grey shales. In order for these
less permeable locations of shale to make a significant contribution, it would be neceseary that technology be advanced, principally in the area of new or
improved techniques to stimulate the grey shales and,
of course, non-fractured areas of brown shales. However, it should be pointed out that such a technical
breakthrough for economical high productivity stimulation technology is by no means assured. However,
the potential warrants the effort. According to
DOE, as much as 150 tcf of Devonian Shale gas could
possibly be added to the nationls producible
reserves.

192

4. Production volume sold is low compared to

investment Involved.
5. Statutory or regulatory restrictions prohibit
or hamper development.
6. Low success ratio.
Because of che general similarities to Devonian
Shale well development -- geophysical, technological
and economic -- the potential of broadening the
economically recoverable reserve base would be comparable to the potential opportunities for the
Devonian Shales.

Accordingly, at a price of $2.50/mcf with deregulation of difficultsource gss only, the potential
producing reserves over the next 20 years from
Other Difficult Sources may be in the range of
20-30 tcf, or an average of 1 to 1.5 tcf per year.
The bottom of the range (20 tcf) essentially corresponds to the potential from Devonian Shale.
The
similaritiesbetween the Devonian Shales and the
slightly more attractive low permeable shallow well
gas sources permit an order-of-magnitudeestimate
for Difficult Sources that corresponds to the more
rigorously derived Devonian Shale estimates. The
upper range (30 tcf) ie a very tentative estimate
reflecting the growing interest and hopefully potentials in deep well development, tight sandstones (and
some limestones).
It is noted, however, that the potentials for
expanding the recoverable reserve base may be
slightly higher in this category (20-30 tcf over
20 years) for the followiug reasons:
1. Other D3ifftcultSources encompasses all
other marginal gas sources at variotisdepths shallow to very deep.
2. Low permeable shallow wells, such as those
in the Berea, Clinton, Medina, etc., have
quick flush and slightly greater yields.

.,*
RICHARD M. MILLER AND NORMAN E. MUTCHLER
. .
ARC 77-2-co-5246, Study on Dev@ian She;e, Coal Seara
3. Ohio, a major Appalachian industrial state, is
and Similar Special Appalachian as Energy Prospects
encouraging greater expansion of both low perand Opportunities.
In the
meable shallow wells and deep wells.
four yeare since its inception, the results
in terms of ticreaeed drilling - are quite
noticeable.
4. Deep well drilling, while a high risk venture,
may pay off in the discove~y of large volume
reserves.

The work was under the direction of Dr. David R.

Maneval, (former) Technical Project Officer and
Science Advieor, and Dr. John J. Demchalk, Director,
Natural Resources Division, Appalachian Regional
Commission.
.REFERENCES

A producing reeerve of 20-50 tcf over a 20 year

period would require the completion of approximately
50,000 successful welle (over 70,000 total drilled
wells aseuming a 70 percent success ratio). The
50,000 welle are based on the presumption that most
of the reeerve would be produced from low permeable
ehallow wells each producing about 400 mmcf over a
20 year life epan.
Recoverable reserves from approximately 50,000
wells would range between 20-30 tcf between now and
1998 with deregulation of dffficult source gas only
and current technology. Again, the higher figure
(30 tcf) reflects the potentials primarily in deep
drilling.

1.

Brown, P.J.: Energy From Shale - A Little Used

Natural Resource, National Academy of Sciences,
FE-2271-1, 1976, pp.86-99.

2.

Avila, J.: Devonian Shale as a Source of Gas,

Chapter 5, Natural Gss From Unconventional
Geologic Sources, %ational Academy of Sciences,
1976, p.113,

3.

TRW Energy Syetems Planning Division: Systems

Studies of Energy Conservation, Methanz Produced from Coaliieds,2 Volumes, McLean, Virglnia, January, 1977.

4.

Cervik, J. and Elder, C.H.: fRemovingMethane

from Coalbeds in Advance of Mining by Surface
Vertical Borehole, Reprinted from PruceedinCs
Conference on the Underground Mining Environment,
University of Missouri - F.ollaand Bureau of
Mines, October 27-29, 1971.

CONCLUSIONS

Estimates of mazginal gas source devdoprnent in

the Appalachian Region must be largely judgmental due
to the many non-economic constraints to expansion.
Nevertheless, a more fav;rable gas price should promote expansion eince the economic inducement should
5. Production profiles of Equitable Gas Company
encourage the elimination of the non-economic barWells in Wetzel COUilty, West Virginia.
As intended in performing the study for the {
riers.
Appalachian Regional Commission the economic consid6. Miernyk, W.H.: Coal and the Future of the
eratio=s were presented so as to derive appropriate
Appalachian Economy, Appalachia, Octoberprograms.
November, 1975, pp.29-35.
ACKNOWLEDGKMENTS

7.

l%is paper is based on work completed as part of

the Appalachian Regional Commission Report,

193

Congress of the United States, Office of Technology Assessment, Status Report or,the Gas
Potential from Devonian Shales of the Appalachian Basin, November, 1977.

,,,

TABLE 1
NATURALGAS PRODUCTIONAND USE
WITWIN
APPALACHIANREGION- 1976

BILLIONBTU
NaturalGaa
Production

State

Natural0ss
Use

Alabama

161,748

Georgia

46,627

63,375

Kentucky
Mississippi

26,910

75

9,164

1,619

54,455

752

25,515

21,334

Mmyisnd
New York
North Carolina
Ohio

40,996

104,048

Pennsylvania

89,975

274,583

38,795

26

124,661

SouthCaroline
Tennessee
Virginia
West Vf,rginia
Totals

6,937

11,568

146,311

104,276

350,066

1,003,600

Source: BrookhevenNationalLaboratory,The Ener~etics

of the UnitedStatesof America: An Atlas;
AmericanGae Association,
NaturalGasesof
NorthAmerica, Vol.2; and BergerAssociates.
TABLE2
TOTALESTIMATEDMETHANERECOVERYCOSTSPER WELL
(1977Dollara)

Utility

small
LargeIndependent
Independent
Producer/Large
Producer-Consumer Producer

VerticalBoreholeMethod
ExtractionCoet

$52,000

$ 5.2,000

CollectionSystemCost

$14,300

$ 14,300

$33,500
$6,300

TOTAL,DEVELOPMENTCOST

$66,300

$66,300

$39.,80/,

Operationand Maintenance
(PerYear)

$ 1,00G

$1,000

Vent ShaftWith Horizontal

BoreholeMethod
.

ExtractionCoat

CollectionSystemCost
TOTAL,DEVELO=

COST

Operationand Maintenance
(PerYear)

:1,000

N/A

NJA

$566,000
$60,000
$626,000
4 2,500

TABLE 3

PRODUCTION PROF~LE FROM COALBED GAS

(mcf per year)

Year
..

ah

LOW Yield

Yield

14,400 (i.e. 40,000 cfd)

7,200 (i.e. 20,000cfd)

13,900

6,800

13,300

6,500

6,100

U ,800

12,200

5,800

11,700

5,400

11,200

5,000

10,600

4,700

10,100

4,300

10

9,500

4,000

11

9,000

3,600

Ii

8,500

3,200

13

7,900

2,900

14

7,400

2,500

15

6,800 (i.e. 18,900 cfd)

2,200 (i.e.

6,000 cfd)

TABLE 4

RETURN ON INVESTMENT, AFTER TAXES

(Pezcent)
METHANE RECOVERY
VERTICAL BOREHOLE METHOD

WELLHEAD PRICE PERMCF

$1.42

$2.00

$3.00

22.0

34.2

54.3

11.3

22.3

PRODUCTION
High Volume
Low Volume

*Resulting return after taxes less than 10 percent

.,

TABLE 5

TABLE6

-$XMFOSITE
REVIEWOF ECONOMICDATA
DEVONIANSHALE

TYPICAL
PRODUCTIONPROFILEFROM

PRODUCERTYPEi

DEVONIANSHALEWELL
(mcfper year)

(1977Dollare)
,.

DevelopmentCosts

$80,000

ProducerConsumer

Independent
Producer

!&&Q!
160,000

$50,000-.125,000
(small
Independent)

YEAR
-..

$S0,000- 160,000
(Large
Independent)
OperaRingCosts
Price

$500 - 2,000

$1,000-2,000

$0.295- 1.42hcf**
(Interstate)

*Intereetand limiteddevelop~nt by producer-consumers

i6 quite
recentand generallyhas not bsen available.

3,

12,
18,

18,

18,

17,

16,

14,

11,

10

10,

11

9,

12

9,

13

9,

14

8,

15

8,

$0.295- L.421mcf** $1.75- L.SO/mcf

(Interstate)
(Intrastate)

1
2

;**?nxmer
FERC ragulatadprice (1977).

TABLE 7
RETURNON INVESTMENT,AFTERTAXES
1
(Percent)
DEVONIANSHALE

WELLHEADPRICEPER MCF

$1.42
.

$1.75

~,

:0.5

12.4

21.3

10.0

17.6

14.9

NormalHydraulicFracturing
Low Coet - $117,500
AverageCcat- $140,400
High Cost . $162,500

.J

*Reau]:ingreturnaftertaxes lees than 10 percent.

. ...
**.

TABLE8
DEVONIANSHALE
ESTIMATEDECONOMICRESERVEBASE
(1978- 1998)

Price

Number
of Wells

20 Year
Reserve
Addition

Baae Caae

$2.oo/mcf

14,36>

4.0

DeregulateAll Gaa

$2.25fmcf

25,565

7.0 tcf

$2.5olmcf

61,200

17.0 tcf

3 & DeregulateDifficult
3A
sources
4

TechnologyImprovemxit

tcf

*Undetermined,
but well tn exceaaof Scenario3; aarliestdate
equals19SS.

500
450
!
400

350
300
250
~.
200
150
100

70 bcf
MinimumBaee -
Case

50 --

...~
_~

~?
197s

1980

1985

Time

fn Years

1990

FIGURE1 - PROJECTEDAPPALACHIAN
MSTNANEGAS FROM COALB~S

I
1995

-f~
199s

.
....

.,1

24
(4) /
22
/
20

18

I
I

17 tcf

/
(3a)

16

/
/

14

12
/

10

8
6

PhaseI Expansion
..

4
2
0

1980

1985

Time in Years

199C

FIGURE2 - PROJECTEDAPPALACHIANDEVONIANSHALE

,J

1395

1996