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The world according to gas

Conference Paper · January 2005

DOI: 10.1144/0060571

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The world according to gas

A. ODEDRA,1,2 S. D. BURLEY,1,3,* A. LEWIS,1,4 M. HARDMAN1 and P. HAYNES1,5

1
BG Group, 100 Thames Valley Park Drive, Reading, Berkshire RG6 1PT, UK
2
Present address: BG North America, 5444 Westheimer, Suite 1200, Houston, Texas 77056, USA
3
Present address: BG India, Sahar Plaza, M.V. Road, East Andheri, Mumbai, India 400 059
(email: stuart.burley@bg-group.com); and Basin Dynamics Research Group, University of Keele,
Staffordshire ST5 5BG, UK
4
Present address: BG Norge Limited, PO Box 780, 4007 Stavanger, Norway
5
Present address: BG Canada, 700, 150 6th Avenue SW, Calgary, AB T2P 3Y7, Canada
*
Corresponding author

Abstract: Proven global reserves of conventional natural gas are immense, with some 5500 £ 1012 SCF
recognized world-wide, sufficient for around 60 years supply at current global gas production rates. However,
total global growth in demand for gas is expected to average 3.2% over the coming decade and is projected to
double by 2025. Along with accelerating liberalization of gas markets, this growth in demand will generate huge
opportunities for gas explorers and producers. The exploration and reservoir engineering challenges are to find
and produce three times more gas over the next 20 years than the industry has found in cumulative total since
1970. Current estimates suggest that 50% of conventional gas resources have been discovered to date. These
resources are well characterized and exploration will have to extend deeper into sedimentary basins, in deeper
waters, and in new plays, as well as creatively re-evaluate current acreage, to discover additional conventional
natural gas. Tertiary deltas will be a major exploration play over the next decade.
In the future, unconventional gas resources will be used increasingly to supplement high volume demand in
developed markets and as a major longer-term source of energy. Natural gas in low permeability sandstone
reservoirs, coal beds and fractured shale already accounts for more than 25% of natural gas production in the
USA. Additionally, enormous volumes of natural gas are generated by methanogenic bacteria during early burial
in marine sediments, much of which then contributes to frozen methane hydrates on the continental slopes. At
present, much of this unconventional natural gas is categorized as hypothetical and requires fundamental
scientific research before it can be considered as an economic resource.
Historically, the commercial imperative has been to find gas close to markets. Shipping of liquefied gas, liquid
gas derivatives and potentially solid methane hydrates (LNG, GTL and GTS technologies) around the globe, are
changing the traditional patterns of gas exploration, transportation and market supply as new producers and
demand centres emerge. LNG has already been transformed from a small volume, exotic trade into a sophisticated
global market and GTL is likely to follow, opening global gas exploration and production to deep waters and
plays far removed from markets.

Keywords: natural gas, gas reserves, gas exploration and production, LNG

The most immediate problems facing humanity over the next 50
years are recognized internationally as being dominated by the
four Es: Energy, Economics, Environment and Education (Simon
1995). Of these, a cheap and effective supply of energy is essential
for powering the world’s economies. Global energy use has
evolved over the last 50 years from a coal base through oil to being
dominated today by natural gas. It is debatable when the switch in
emphasis from oil to gas took place, but most commentators
now suggest that the age of natural gas has arrived (Holditch 2001;
EIA 2003; NPC 2003). Indeed, natural gas is increasingly the
fuel of choice. It is the cleanest of all the fossil fuels, is abundant
and relatively cheap, providing stability of supply, and proven
global reserves are sufficient for some 60 years supply (BP 2003).
However, it has not always been so. During the first half of
the twentieth century there was little use for natural gas. It was
considered a by-product of oil production and priced so cheaply
that exploration was curtailed and new pipelines were financially
unviable. Natural gas was either burnt-off as waste or pumped
back to maintain reservoir pressure enabling more oil production.
But with the huge gas discoveries onshore Netherlands (the
Groningen gas field has, for example, some 97 £ 1012 SCF of
recoverable reserves) and in the Southern North Sea (estimated in
excess of 160 £ 1012 SCF ultimate recoverable reserves) during
the 1960s, natural gas as a source of energy became more pro-
minent (Petroleum Geological Circle 1993) and contributed to the
status of Britain as a net exporter of energy. Initi
ally, European energy policy was considered too important to
leave to the market so politicians retained control on supply. All
that changed in the 1980s, when the UK Conservative government
forced the privatization of oil, coal and electricity industries. In
this respect, Britain set the pace for liberalizing energy markets, a
practice continuing around the world today. European privatized
power companies made a ‘dash for gas’, building new gas power
stations. This heralded the start of a rapid decline of coal
production in the UK, leading eventually to the closure of all
Scotland’s mines and all but one in Wales. By 1990, gas was the
preferred fuel for power generation and domestic heating across
much of Europe and North America, whilst many industrial and
petrochemical plants were powered by natural gas.
Despite this demand, in most industrialized nations, and
especially the USA, domestic gas production is declining because
easily detectable accumulations have been discovered and reserves

ODEDRA , A., BURLEY , S. D., LEWIS , A., HARDMAN , M. & HAYNES , P. 2005. The world according to gas. In: DORÉ , A. G. & VINING , B. A. (eds) Petroleum
Geology: North-West Europe and Global Perspectives—Proceedings of the 6th Petroleum Geology Conference, 571 –586. q Petroleum Geology Conferences
Ltd. Published by the Geological Society, London.
572 A. ODEDRA ET AL.
closest to market produced. Future exploration for gas must extend
further afield, to deeper waters and deeper within basins, using
smarter wells and cleaner operations. Two consequences arise
from this scenario. First, technologies to bring stranded gas to
market, such as liquefied natural gas (LNG), offshore gas to liquids
(GTL) and gas to solids (GTS), will be used more widely and a
global market in these products will develop (Hakes 1997; Stosur
2001). Secondly, there will be a drive towards exploration for
so-called ‘unconventional gas resources’. These resources com-
prise methane which occurs in petroleum systems that do not
conform to the normal concept of source, reservoir and trap.
Forward-looking governments have already introduced incentives
to promote the production of these gas resources. Enormous
potential reserves are to be gained here, if they can be exploited
economically. The current US focus on unconventional gas
resources is a template for the global exploration plays that will
emerge to meet the increasing demand for gas supply over the next
50 years.
Given this context, this contribution reviews the global con-
ventional and unconventional natural gas resource base, highlights
some of the key technologies that characterize the exploration
and production of natural gas and sets the market scene for the
drivers of future gas demand growth.
Global gas demand
The world’s hunger for energy is led by an increasing demand
across industrialized and developing nations alike. This demand is
caused by the need for cheap and reliable electricity generation,
domestic energy requirements and a demand for less polluting
transport in major conurbations. The US Energy Information
Agency (EIA 2003) predicts a future with a compound annual
growth rate for gas consumption of 3.2% in the years 2000 to
2020, the strongest growth of all fuels. The Paris-based Inter-
national Energy Agency takes a similar view, forecasting a
doubling of gas use between 2002 and 2030, with the natural gas
share of the world energy market rising from 23% to 30% over the
same period (Fig. 1). This growth will generate some 40 £ 1012
SCF of new annual gas requirement over the next decade,
equivalent to 150% of the present US gas market.
North America is predicted to have the largest increase in
natural gas use between 2001 and 2025, at 20 £ 1012 SCF. Western
Europe will also dramatically expand its gas use over the same
period, at an average annual rate of 2.5%. Liberalization of natural
gas markets in the European Union has been underway since the
passage of the Natural Gas Directive in 1998 and, in a majority of
the member countries, natural gas infrastructures are planned to be
fully open to third-party access by 2008. Increases in natural gas
Fig. 1. The historical world production of hydrocarbons, nuclear and
renewable energy supplies, expressed as a percentage of total market share,
and predicted energy demand from 2004 (based on EIA 2003; BP 2003;
Tinker 2003). The increased demand for gas will continue unabated for the
next 50 years and beyond.
use for electricity generation are also expected, replacing old coal-
fired generators and nuclear power plants set to retire in the coming
decade. Total natural gas consumption in Western Europe is pro-
jected to increase from 15 £ 1012 SCF in 2001 to 26 £ 1012 SCF
in 2025. In developing countries, annual gas demand growth is
forecast to be even stronger, rising by an average 5% annually to
2015. Asia is expected to increase annual gas consumption by
8% (BP 2003). Much of the growth will provide for electricity
generation, but infrastructure projects are also underway for
natural gas to displace polluting home heating and cooking fuels
in major urban areas in countries such as China and India. Rapid
growth in natural gas use is also projected for Mexico, at 6% per
year (EIA 2003).
In a world where greenhouse gas emissions may be increasingly
controlled by international regulation, the lower environmental
impact of natural gas compared with oil and coal is also a major
factor contributing to the increased demand for natural gas. The
same level of energy derived from burning natural gas saves 50%
of carbon emissions relative to coal and 30% relative to oil. Thus,
as governments implement policies that limit carbon emissions,
fuel substitution from coal and oil to gas and its by-products
(synthesis gas, syncrude, methanol and hydrogen) is inevitable.
Natural gas availability, its low cost and its relative environmental
cleanliness all favour a growing reliance on gas in industrial
processes, as a fuel for transport and in residential use. However,
the main driver for gas use is the huge surge in global power
demand. Electricity consumption is forecast to rise by an annual
average of 3% to 2020 and accelerate beyond this date. Within this
context, natural gas use for power generation should double over
the same period, largely due to advances in gas-fired technologies
and the increased use of combined-cycle gas turbines that have
highly efficient, clean operations, with low capital costs and
shorter construction times.
World gas reserves
Resources and reserves
An assessment of natural gas volumes in the subsurface
necessitates a knowledge of the geology of the prospective region,
requiring examination of as much geological data as are available
(McCabe 1998). ‘Resources’ are estimates of the global hydro-
carbon endowment that are considered to have the potential to be
recovered eventually, as defined by the US Geological Survey
(1976). Although the total endowment of hydrocarbons is finite,
how these volumes are determined varies with time and how
much data are available. Historically, the recoverable resource
base has increased through time with improvement in knowledge
and the development of new technologies.
The term ‘reserves’, by contrast, defines only that part of the
known resource that has the potential to be recovered within the
foreseeable future under current economic conditions and with
current technology (generally up to c. 20 years hence). Reserves
are, therefore, saleable quantities of hydrocarbons that can be
technically and economically recovered from a known accumu-
lation at a given point in time. Part of the resource base is
continually converted to reserves through ‘appraisal’ as they are
discovered or become economically viable. Hydrocarbon reserves
are always subject to uncertainty, at least until the end of field life.
At any point in time there is a best estimate view of reserves and an
upside and a downside to this figure. The range of uncertainty
gradually decreases with time as the field is developed (Fig. 2) and
reserves are classified according to the level of confidence that can
be assigned to their presence based on current knowledge,
technology and economic assumptions:
. proven (or 1P, p90) – the amount of hydrocarbons that can
absolutely be guaranteed to be recoverable;
 THE WORLD ACCORDING TO GAS
Fig. 2. The conceptual framework for definition of resources and reserves.
Resources are unproven hydrocarbons within leads and prospects that
have the potential to be produced. Once a field is discovered, reserves are
defined as proven, probable and possible. The range of reserves
uncertainty decreases until field abandonment. FPA, full project approval.
. probable (or 2P, p50) – the amount of hydrocarbon that can be
reasonably expected to be recovered;
. possible (or 3P, p10) – the amount of hydrocarbon that can be
envisaged under favourable circumstances to be recoverable.
The definition of these reserves has to comply with international
criteria set by the US Securities and Exchange commission (SEC).
The 1P, 2P and 3P reserves converge as the field is produced and
are only equal at the time of abandonment.
The total complement of world natural gas resources is
potentially enormous (Fig. 3) and is estimated to range between
750 000 to 1 200 000 £ 1012 SCF (BP 2003; EIA 2003; Tinker
2003; USGS 2003). More than 90% of this endowment is classified
as unconventional and likely to be characterized by low recovery
factors. How much of this resource will ever be assigned as
reserves is currently unknown.
Conventional gas reserves
Conventional natural gas constitutes methane and associated light
hydrocarbons which occur in discrete accumulations in petroleum
systems driven by buoyancy (comprising a source, migration
fairway, reservoir and trap) and generated by thermogenic
processes (US Bureau of Mines and USGS 1976).
The estimate for global conventional natural gas reserves was
5500 £ 1012 SCF in 2003 (EIA 2003). This estimate has
moved upwards each year since the 1970s. The geographical
Fig. 3. The approximate global gas endowment, expressed as 1012 SCF and distinguished as resources and reserves, here estimated in total at around
755 800 £ 1012 SCF. Based on data in EIA (2003), BP (2003), Tinker (2003) and USGS (2003).
573
distribution of these proven gas reserves in 2003 is shown in
Fig. 4. Most are located in the former Soviet Union (FSU) and
the Middle East, which together account for over 70% of current
world conventional gas reserves. The USA has only 5% of global
conventional natural gas reserves. In the period 1995– 2000, some
600 £ 1012 SCF conventional gas reserves were discovered
(Deutsche Bank 2003). Over this period, individual discoveries
of over 2 £ 1012 SCF were made in Kazakhstan, Siberia, deep-
water West Africa, North Africa (Nile), South East Asia,
Azerbaijan, offshore Trinidad– Venezuela, Bolivia and Norway
(EIA 2003). These discoveries encompass a wide spectrum of play
types, but are dominated by Palaeozoic carbonate build-ups, deep-
water clastics, deltas and high-pressure high-temperature (HPHT)
environments.
New gas discoveries have continued apace in the FSU and in
OPEC countries since the 1980s, whilst they have been in decline
in the USA over the same time interval, and with only minor
growth in the rest of the world. If the reserves remaining at the
end of the year are divided by the production in that year (the
R/P ratio), the result is the length of time that those remaining
reserves would last if production were to continue at that rate and
no new reserves were found. The world-wide R/P value is around
60 years, significantly higher than for oil. Natural gas R/P ratios
are lowest in the well-developed markets such as USA and Europe
and highest in the resource-rich areas of the Middle East, FSU and
Africa. Together, the USA and Europe have produced more than
50% of their total estimated conventional natural gas reserves. In
large parts of the rest of the world resources remain poorly
quantified and have been largely unexploited. Outside the USA
and Europe, it is estimated that less than 10% of total conventional
natural gas resources have been produced.
New conventional gas plays. The United States Geological
Survey ‘World Petroleum Assessment’ (USGS 2003) estimates
that the volume of undiscovered conventional natural gas resources
is 5000 £ 1012 SCF. In fact, as technology has advanced over the
last five years, the estimate of undiscovered gas has increased by
15%, suggesting these estimates may be conservative.
Of these inferred resources, the FSU holds some 38%; the
Middle East (mostly in Iran and Qatar) and North Africa region
claim another 35%. A significant part of the predicted undiscov-
ered resources outside of the Middle East lie offshore in water as
deep as 4000 m. Recent reviews of potential petroleum provinces
of the twenty-first century (e.g. Downey et al. 2003) list some 20
key continuing and emerging provinces world-wide (Alaska,
Canada, North Atlantic Margins, Rocky Mountains (USA),
Kazakhstan, Timan – Pechora Basin, Russia, Indonesia, Papua
New Guinea, offshore North West Australian continental shelf,
onshore China, Gulf of Mexico, Venezuela, southern South
America, Iran, Libya, Egypt, Algeria (offshore West Africa)).
574 A. ODEDRA ET AL.

Fig. 4. The global distribution of conventional gas resources and booked reserves. Data from BP (2003), EIA (2003) and USGS (2003), with BG estimates
included. Figures shown on the map for gas volumes are 1012 SCF for each region: figures on the pie chart are expressed as percentages. Key for major
regions with gas discoveries and reserves (in 1012 SCF): 1, Siberian Basin, 1150; 2, Qatar Dome 450; 3, Zagros Fold Belt 402; 4, Iraq– Iran, 292; 5, Ghawar
Arch, 220; 6, Amu-Darya Basin, 206; 7, Rub Al-Khali Basin, 185; 8, Gulf Coast Mesozoic, 184; 9, Southern North Sea, 0.167; 10, Indonesia, 166; 11,
North Caspian, 157; 12, German–Polish Trough, 138; 13, Northern Gulf of Mexico, 136; 14, Orinoco Delta, 128; 15, Ahnet Basin, 112; 16, Australian
NW Shelf, 98; 17, Ukraine Basins, 98; 18, sub-Andean Fold Belt, 88; 19, West African Margin, 86; 20, NW Atlantic Margin 68.

Without doubt, Tertiary deltas are destined to be one of the
major gas plays of the next decade. Recent discoveries on
modern deltas including the Nile (some 14 £ 1012 SCF), Orinoco
(Venezuela and Trinidad, some 28 £ 10 12 SCF) and the
Krishni – Godavari Delta, India (18 £ 1012 SCF) highlight the
enormous gas potential of this play. Examination of creaming
curves for typical Tertiary deltas over the last 30 years clearly
demonstrates the trend of initial discoveries in conventional oil-
prone Mesozoic plays, followed by gas discoveries of several
1012 SCF in the shallower Tertiary sections (Fig. 5). A combination
of rapid Tertiary sedimentation to carry Mesozoic and early Tertiary
source rocks into the gas generation window along with regional
structuration (growth faulting and basement-related movements),
are key to providing an active petroleum system and trapping
mechanisms. Newly emerging giants, such as the MacKenzie Delta
in Canada, are likely to be significant exploration provinces of the
next decade. Also high on the exploration agenda are the geological
provinces of the Arctic region, which remain relatively unexplored,
but are estimated to contain 25% of the undiscovered gas resources
(Ahlbrandt 2002). Already some 30% of the world’s oil and gas
resides in the Arctic region, 40% of which is in West Siberia, the
worlds’ largest petroleum basin (Ulmishek 2003). New plays for
gas are being targeted in North Alaska, the Sverdrup Basin, West
and East Greenland, the Norwegian Arctic and the Russian Arctic.
South East Asia and Australia have proved to have no shortage of
gas in recent years, with a number of large discoveries, notably
on the North West shelf of Australia and at Tangguh in Indonesia.
Large onshore Bolivian gas and condensate discoveries (such as
Margarita, Itau and Sabalo) in highly fractured and thrusted
Palaeozoic sediments have proved technically challenging but
are a feature of activity in the Southern Cone. Significant gas dis-
coveries offshore Trinidad and Venezuela suggest the Orinoco
Delta has more to reveal, whilst much of the southern offshore
Brazilian basins remains unexplored and gas prospective.
Reserves growth. A major component of ensuring continued
supply of natural gas is the ability to recover more of the gas-
initially-in-place (GIIP) that has already been discovered. This
process is known as reserves growth (Morehouse 1997). Assuming
stable prices, reserves growth occurs in two ways. First, 3D
seismic imaging and high resolution logging techniques delineate
accumulations of gas either between wells or simply not
recognized in existing wells. These discoveries allow for
substantial increases in the original estimates of GIIP. Additional
wells or improved well completions can then be used to increase
reserves and production. Secondly, improved production design,
well location and well maintenance enable operators to obtain
better recovery from existing wells so that less gas is left in the
ground. These techniques increase the efficiency of recovery and,
therefore, reserves and production, from a given GIIP.

Fig. 5. Exploration history in a typical Tertiary delta basin play, from the Indian continental shelf. Initial wildcat exploration discovered oil, which was
followed by exploration targeting the Mesozoic oil play. Subsequent exploration has successfully focused on Tertiary gas prospects.
 THE WORLD ACCORDING TO GAS
Incremental reserves growth of gas from existing fields and
their satellites will be a major contributor to conventional gas
supply (USGS 2003). Amazingly, potential additions to reserves
through more optimal production in existing fields are estimated
globally at 3300 £ 1012 SCF, which equates to 75% of the
estimated total undiscovered gas resources. In the USA, com-
pletely new field discoveries have added only around 1012 SCF per
year. Despite this, total reserves have declined by only a small
margin – the remainder of the production has come from reserves
growth which, in the USA, is estimated to provide an additional
500 £ 1012 SCF from existing fields beyond current reserve esti-
mates. The Southern North Sea has produced some 34 £ 1012 SCF
of gas since gas first came ashore from the West Sole Field in 1967
(DTI 1999), most of which has been produced from the Lower
Permian Rotliegend aeolian and fluvial sandstone play and is
estimated to retain 15 £ 1012 SCF of undiscovered gas (Gautier
2003). Stretching eastwards into the North German Plain and
Polish Trough this play fairway is estimated to have ultimate
recoverable resources of around 160 £ 1012 SCF of gas (Glennie
1998). Reserves in this fairway are expected to increase through
the application of new technologies, such as seismic processing
and interpretation techniques, which recognize ever more subtle
traps (Brooks et al. 2001). This is exactly the strategy adopted by
exploration companies when creatively re-evaluating existing
acreage for new plays (Maynard & Gibson 2001). The concepts
being developed in the North Sea will be extended globally.
Stranded gas. Methane is difficult to transport, as a gas, over
long distances. Some 80% of current gas demand is met by sup-
plies from wells within the host country where it is consumed. As
the projected growth in gas demand continues, this balance will
have to change. Gas will be transported over much longer dis-
tances and across international borders. According to Shell esti-
mates (Watts 2003), by 2030 less than 50% of demand will be met
by indigenous supplies. Unlike oil, gas has, historically, had the
peculiar property of being classified as ‘stranded’ if located too far
offshore, or if simply distant from markets, as well as if individual
gas accumulations are considered too small to be economic. This
is because of the prohibitive costs of laying pipelines over long
distances. Thus, huge volumes of gas, around 30% of current
global conventional gas reserves, are defined as ‘stranded’ simply
because they are too far away to be transported economically (EIA
2003). However, there are now two ways of bringing stranded
gas to markets – LNG and GTL technology. In general, LNG is
generally the more economically viable alternative to pipeline if
the transport distance is greater than 2000 miles.
LNG is revolutionizing and liberating gas from a regional to a
global market place commodity. With LNG technology, natural
gas is converted to a liquid that occupies only 0.0017% of the
original volume of the gas by cooling it to 21608C. The resulting
liquid requires constant cooling and insulation to remain liquefied,
but can be economically transported in ships across oceans. Japan,
for example, imports cargoes of LNG from Abu Dhabi, Qatar and
Oman, a distance of more than 5000 miles. Thus, gas need no
longer be considered a stranded asset, if located far from a market
or in deep offshore waters. There is already a booming world
market in LNG, with many countries becoming significant LNG
producers. LNG technology, together with insulated ships, has
transformed LNG from a small volume, exotic trade to a sophi-
sticated global market (Gas Matters 2004).
Gas is already less polluting than coal or oil, but GTL
technology is making it even cleaner environmentally (Hakes
1997). The modern GTL process by which ‘synthesis gas’, a
mixture of hydrogen and carbon monoxide, is converted to
‘synthetic crude’ to produce a variety of low sulphur, high quality
fuels, is opening new markets for otherwise uneconomic gas
accumulations. When such GTL-converted fuels are used in
conventional engines they produce only a fraction of the noxious
emissions created from the burning of conventional oils and
575
Fig. 6. The liquid derivatives of methane produced via ‘synthesis gas’,
a mixture of hydrogen and carbon monoxide, through to ‘synthetic crude’,
producing a variety of low sulphur, high quality fuels. As well as liberat-
ing stranded gas, sequestration of carbon and sulphur result from the
process, as methane is converted to hydrogen and carbon monoxide,
providing an additional driver for this technology.
diesels. Several commercial GTL plants are already in operation,
with a combined liquids capacity of over 100 000 BBL per day
(b/d), which is projected to reach 106 b/d by 2007 (Thackeray
2003). Natural gas can also be converted to other marketable
liquids and, over the next two decades, direct production of
hydrogen will be an economic prospect (Fig. 6). This will enable
sequestration of carbon and sulphur as methane is converted to
hydrogen and carbon monoxide in the process. Taking GTL
technology offshore is already a technical reality that can be used
to address stranded gas around the world (Agee 2000). Floating,
mobile GTL ‘barge’ technology is being developed by the US
Department of Defence for small volume production (20 000 b/d)
of diesel, naptha and liquid propane gases (Hutton 2003) and will
undoubtedly become an important component of the global GTL
trading process (Cottrill 2002). Gas to solids (GTS) technology, in
which offshore stranded gas is converted to ‘snow-like’ methane
hydrate containing 150 times the volume of gas per unit volume
of water, ready for transport in barges, is being examined by
BG Group and Advantica (Bradbury 2002). In the future, LNG,
GTL and GTS technologies will transform stranded gas reserves
from a liability – gas that would have been flared or, at best,
re-injected – into commercial assets.
Unconventional gas reserves
Unconventional gas resources (UCG) are generally taken, at least
by geologists, to refer to regionally pervasive natural gas
concentrations (expressed as high gas saturations), typically
independent of structural and stratigraphic traps and commonly
characterized by low permeability host-rock formations (Law &
Curtis 2002). They have also been defined in economic terms but,
as technology advances, tax incentives are introduced and gas
market price rises, what was once sub-economic becomes a viable
resource. Resources that were previously considered uneconomic,
such as coal bed methane, are now an essential component of the
spectrum of produced fossil fuels. As the more easily exploited
conventional gas resources are exhausted, unconventional gas
resources will contribute progressively to global gas production
(McCallister 2000; Holditch 2001; Stosur 2001). Unconventional
gas resources have gained increased industry attention for their
ability to supplement high volume demand markets, especially in
the USA, and as an important longer-term source of energy (Law &
Curtis, 2002). For example, natural gas in low permeability
reservoirs, coal bed methane and shale gas already account for
more than 25% of natural gas production in the USA. At present,
a large proportion of the global unconventional gas resource base
is categorized as hypothetical and still requires much funda-
mental scientific research before it can be considered an economic
commodity.
576 A. ODEDRA ET AL.
Basinal (‘deep’) gas (and tight gas sands). Deep, so-called
‘basinal gas’ sands (Masters 1979) comprise an all-encompassing
category that includes many different types of reservoirs of
differing depositional systems, including sands and limestones,
and at varying burial depths, as some of the most prolific basin-
centred gas accumulations are produced from depths of less than
1 km (Law 2002). The characteristic features are that they comprise
regionally pervasive, gas-saturated, low permeability sandstones
(and occasionally limestones) with permeabilities of as low as
one microdarcy, that are commonly, although not exclusively,
overpressured (Price 1997), with an updip stratigraphic or regional
top seal. The cause of the low permeability can reflect original
depositional composition, compaction or extreme diagenetic
cementation. Seals are a combination of relative permeability in
the tight formation (capillary effects), often accompanied by
stratigraphic (pinchouts), structural (closure and faulting) and
diagenetic seals (Law 2002). During burial, the rate at which gas is
generated exceeds that at which gas leaks and, as gas accumulates
in the pore system, the capillary pressure of the water-wet pores is
overcome and mobile water is expelled from the pore system,
resulting in an overpressured, gas-saturated reservoir with little or
no free water. Currently, most basinal gas resources are
recognized in the USA, amounting to some 7000 £ 1012 SCF, of
which some 250 £ 1012 SCF are currently considered recoverable
(Luetkehan 2001; USGS 2003). Indeed, they already contribute
15% of the total US gas production, at a rate of around 4 £ 1012 SCF
per annum (Hill 2000). However, other basins are under
appraisal, notable projects developing in the Gipplsand, Cooper
and Barrow basins of Australia, Sichuan Basin in China and
the Ahnet Basin in Algeria (Hirst et al. 2001). The potential of
basin-centred gas resources around the world is enormous and has
not yet been investigated systematically. Although there are no
accurate global resource data available for basinal gas sands, a
cursory estimate of potential resources in basins under appraisal
suggests that some 20 000 £ 1012 SCF may be available, of which
500 – 700 £ 1012 SCF could be recoverable, given current
technology.
For economic productivity, all basin-centred gas accumulations
require the presence of natural fractured networks (Bates et al.
1999), which usually have to be supplemented by artificial
fracturing to create commercial production (Cramer 2003). The
best known resource of tight gas sands is found in the SW USA in
several Rocky Mountain region foreland basins, the best
documented of which are the Greater Green River and Wind
River basins of Wyoming, Utah and Colorado (Law & Spencer
1993). Extensive high resolution seismic data are used to define
fracture networks (Bates et al. 2000) and locate high porosity
zones for well placements. Large numbers of wells are drilled, in
close proximity, on regular grids, for production at low, but
economical, rates. Numerous production stimulation experiments
have been conducted in these basins, with varying success (Stosur
2001). Production is increased through massive hydraulic fractur-
ing and nuclear explosive fracturing, although high angle and
horizontal wells have, most recently, dramatically increased
production over vertical wells (Luetkehan 2001). Reservoir
connectivity is also a key element of the resource appraisal, as
small, isolated reservoirs are not commercial. High resolution
seismic spectral decomposition of gas-charged tight sands is being
used to identify the most productive zones and optimize well
locations (GTI 2003). Tight gas sands, because of their low
permeability, are particularly susceptible to formation damage
through use of inappropriate drilling fluids, chemical stimulants
and over-balance drilling, especially in multi-layer, high angle
completions (Spencer 1989). Enhanced tight gas sand recovery has
been achieved through the use of specific proppant fluids and CO2
injection. Many of the problems associated with production from
very tight gas sands are comparable to those encountered with coal
bed methane and shale gas accumulations.
Coal bed gas systems. Natural gas occurring within coal deposits
is generally referred to as ‘coal bed methane’ (CBM). Coal beds
are self-sourcing reservoirs that can contain in situ thermogenic,
migrated thermogenic, biogenic, or mixed gas (Ayers 2002). The
CH4 is primarily absorbed as gas molecules on the surface of
organic matter in the coal and, as these have a large surface area
(c. 109 ft2 t21), coal deposits can hold much more methane as an
equivalent thickness of sandstone. Methane also occurs as free gas
in pore space and fractures in the coal and as dissolved gas within
formation waters. High CH4 concentration, good coal thickness
and fracture permeability are requirements for sustained and
economically viable production from CBM deposits.
Major CBM resources are recognized in 70 countries (Landis &
Weaver 1993), with CBM wells being drilled in 17 countries
(Ayers 2002). The World Bank has funded CBM projects totalling
$US30 million in China, India and Russia, whilst Australia has
R&D tax incentives to seed CBM activity. Canada has huge CBM
potential, with estimates of 3000 £ 1012 SCF of untapped CBM
resource, dwarfing the USA, with around 700 £ 1012 SCF and
amounting to 50% of the global estimate of CBM potential
(Schwochow 2002). However, virtually all CBM production
comes from the USA, with annual production from eleven coal
basins in the USA exceeding 1.6 £ 1012 SCF, some 10% of
indigenous US gas production. Cook Inlet in Alaska has already
produced 8 £ 1012 SCF of CBM and has 240 £ 1012 SCF of
estimate in-place resources (Montgomery & Barker 2003).
Australia produces around 20 £ 109 SCF of CBM gas per year
(about 1% of US production) and Canada around 10 £ 109, but
plans for CBM production are ongoing in Europe (e.g. Kotarba
et al. 1996), India (Trehan 2002) and Russia (Yakutseni et al.
1996).
The traditional approach to CBM production is to de-water the
formation so that the gas desorbs and then migrates to the fracture
system, from where it is produced to the well. As a result, these
reservoirs initially produce water and little commercial gas (Fig. 7),
but, as depressurization continues, desorbed gas moves by Darcy
flow to the wellbore. Initial water production is large and can be
a problem (especially if the produced water is saline and of
extreme pH), and advanced pumps were developed to handle the
large volumes and high flow rates (Leach 2002). Over time, water
production declines and gas production increases. The most
challenging aspect of the initial water production is minimizing
the environmental impact and ensuring local aquifers are not
contaminated. Deviated and horizontal wells are more efficient
producers in these tight formations, especially after hydraulic
fracturing. However, multi-seam completions (‘branched
laterals’), producing a 3608 pinnate network of up to 2 km radius
Fig. 7. Typical production from a coal bed methane gas well. During
Stage I, production is dominated by water, which has to be disposed of
effectively and environmentally. Gas production increases in Stage II, as
the relative permeability to gas increases. During Stage III both gas and
water production decline.
 THE WORLD ACCORDING TO GAS
drainage reach, give recovery factors of up to 85% within three
years of production (Ghiselin 2003), a vast improvement on 30%
recovery typically attained from traditional drilling techniques.
Estimated global CBM resources are large, in the range 5000–
10 000 £ 1012 SCF (Kuuskraa et al. 1992; Harts E&P 2003).
Clearly, CBM is poised to be a major contributor to global gas
production providing aquifer contamination can be overcome. The
challenge is to convert these resources to reserves by increased
understanding of coal bed gas systems, better reservoir characteri-
zation and improved production technology.
Shale gas. Shale gas systems are similar to CBM systems in
that they constitute widely dispersed gas accumulations in low
permeability (typically less than 0.1 mD), fine-grained, organic
carbon-rich shales, characterized by regionally high gas
saturations (Curtis 2002). Trapping mechanisms are often
obscure, with seals produced by variable lithologies, including
diagenetic carbonate cements, and migration distances are inferred
to be short as the shales typically contain sufficient organic matter
to be source rocks in their own right. As with CBM, shale gas
occurs both absorbed on kerogen and clay particle surfaces in the
matrix of the host shale, or as free gas in intergranular porosity and
natural fractures in the shale. Shale gas systems only constitute
viable accumulations because they contain natural fractures, or
if they are artificially fractured to stimulate production. The
difficulties of producing shale gas are indicated by the fact
that early attempts to entice production involved liberal use of
nitroglycerine, propellants and hydraulic fracturing. Shale gas
production is low volume (typically 20 – 500 £ 106 SCFD),
obtained by drilling many closely spaced, low cost wells
(typically £200 000 – 400 000 per well). Well completion
practices employ hydraulic fracturing to access natural fractures
in the shales and propagate new fractures. Virtually all shale gas
production comes from hydraulically fractured shale (Hill &
Nelson 2000).
Shale gas is only produced commercially in the USA, where five
formations are exploited (Devonian Antrim, New Albany and
Ohio shales, Carboniferous Barnett Shale and Cretaceous Lewis
Shale), with estimated in-place volumes of 800 £ 1012 SCF, of
which 20% is recoverable, given current technology. Production
since 1980 has totalled 3 £ 1012 SCF, and is currently 400 £ 109 SCF
per annum from 37 000 wells (Hill & Nelson 2000). However,
given that shales account for 80% of the Phanerozoic rock record,
the global potential for shale gas production must be large. The
Gas Technology Institute (GTI), for example, has identified some
2500 £ 1012 SCF of shale gas potential in the Western Canadian
sedimentary basins of Alberta and British Columbia (GTI 2003;
Faraj et al. 2004). Global resources could exceed 8000 £ 1012
SCF, which, at 20% recovery estimates, provides 1600 £ 1012 SCF
of potential reserves. Technologies likely to impact this type of
resource are high resolution imaging of gas within shale
formations, better fracture prediction techniques and enhanced
stimulation (Engler & Perry 2002).
Biogenic gas. Biogenic methane is produced at shallow burial
depths, usually less than 2 km burial, by anaerobic bacteria that
metabolize organic matter in the absence of sulphate (Ferry 1992).
The methane is produced in situ from argillaceous sediments
containing relatively low amounts of organic matter – 0.5% total
organic carbon (TOC) is sufficient. The most favourable
depositional setting for biogenic gas accumulations is a deltaic
environment because of the combination of fine-grained sediments
rich in organic matter interbedded with high porosity potential
reservoir rocks, together with high sedimentation rates. Biogenic
methane is unconventional in the sense of its generation – shallow
and from bacterial activity – but it is conventional in the sense that
it conforms much more to a source –migration – reservoir – trap
petroleum system than other categories of UCG. It is biogenic
methane that is responsible for most of the methane hydrates
577
trapped in fine-grained sediments on many of the world’s
continental slopes.
Methanogenic bacteria derive energy to grow through meta-
bolizing organic matter, with methane as the by-product. Two
metabolic pathways are inferred for the generation of CH4: CO2
reduction and fermentation (decarboxylation) of ‘acetate type’
substrates (Whiticar et al. 1986; Ferry 1992).
CO2 þ 8Hþ þ 8e2 ! CH4 þ 2H2 O
ðCO2 reduction; typical of marine waterÞ
CH3 COOH ! CH4 þ CO2
ðfermentation; typical of fresh waterÞ
Generation of biogenic methane is controlled by the temperature at
which methanogenic bacteria thrive: most methanogens cannot
survive temperatures in excess of 758C and are most active at
temperatures of 20 – 428C (Rice & Claypool 1981).
Much of this CH4 is lost to the very shallow subsurface (Fig. 8)
and ultimately escapes to the atmosphere due to the absence of
effective seals at shallow burial depths. As CH4 is twenty times
more damaging as a greenhouse gas than CO2, leaking biogenic
methane must be a significant natural contributor to global
warming. Increased sedimentation rates reduce CH4 leakage as
the depth and thickness of the seal increase, along with the depth at
which biogenic gas generation takes place. Consequently, the
accumulation of commercial quantities of biogenic gas requires
quite specific geological conditions, particularly the formation of
early structural or stratigraphic traps, presence of adequate early
seals and very rapid sedimentation rates. In some settings, regional
fine-grained shale seals, diagenetic carbonate seals and methane
hydrate seals are known. Traps have to form early because
accumulations develop when the biogenic CH4 migrates as a free
gas phase, only possible when either generation exceeds the gas
solubility in the pore fluid or when gas exsolution from pore water
is caused by reduction of hydrostatic pressure. Exsolution can be a
consequence of rapid sea-level fall, regional uplift or local erosion,
resulting in catastrophic release of methane. Gas saturation of
formation waters (and consequent formation of a migrating free-
gas phase) can only occur at shallow depths (typically , 5000 ft).
At greater depths, the increased solubility of gas in water prevents
the formation of a free-gas phase (Rice 1993).
Biogenic CH4 systems are estimated to constitute as much as
20% of global natural gas resources (Whiticar et al. 1986; Rice
1993) and, although this is a very approximate estimate, biogenic
gas volumes must equate to thousands of 1012 SCF. How much of
this methane is concentrated into discrete accumulations and can
Fig. 8. The production of biogenic gas in shallow sediments and the loss of
methane through the overlying sediment column for varying sedimentation
rates. With increasing sedimentation rate, the temperature disequilibrium
increases, suppressing the depth at which generation of methane occurs
(dashed line). Note that even with extremely high sedimentation rates, at
least 50% of the biogenic gas generated is lost through the overlying
sediment column.
578
ever become an economic resource is unknown. If only 10% of the
inferred global production is trapped in accumulations with high
saturations, a biogenic CH4 resource of 20 000 £ 1012 SCF is
possible. Several commercial accumulations of biogenic methane
have been discovered, albeit inadvertently, in the search for
thermogenically derived hydrocarbons. Many of these are in
Tertiary deltas where thick sequences of organic matter-rich
sediment are rapidly deposited; they are high 1012 SCF accumu-
lations. Significant accumulations, for examples, are reported in
the Columbus Basin of Trinidad (Requejo et al. 2004), Hangzhou
Bay, China (Lin et al. 2004), the Cretaceous of the Canadian
Alberta Basin and the Williston Basin in Montana, USA (Shurr &
Ridgley 2002), the West Siberian Basin (Littke et al. 1999) and the
Po Basin of Northern Italy (Lindquist 1999).
Methane hydrates. Gas hydrates are naturally occurring
crystalline solids composed of water and a smaller, so-called
‘guest’ molecule, the latter being either an inorganic or organic
molecule. There are a host of natural gas hydrates, formed from a
variety of guest molecules, including CO2, methane, butane,
propane, hydrogen sulphide and nitrogen. Methane hydrates are
the most common and form naturally over a temperature range of
0 – 308C and 2.5 MPa pressure (Carroll 2001), although as the
pressure increases, so does the temperature range over which they
form. Methane hydrates trap huge volumes of methane gas: 1 m3 of
solid hydrate contains up to 160 m3 of methane gas at standard
temperature and pressure. These are the least understood of UCG
resources, but potentially hold the greatest volumes of the global
methane endowment.
Methane hydrates occur in many offshore continental margins at
depths of 100– 1200 m (Collett 2002) and have been mapped from
anomalous seismic reflectors (Fig. 9), known as bottom-simulating
reflectors (BSRs). Methane hydrates form naturally in at least two
types of geological setting (Milkov & Sassen 2001).
(1) Structural accumulations associated with faults and mud
volcanoes, where gas leaking from deeper subsurface
petroleum systems is rapidly transported (via faults, gas
chimneys or other fluid conduits) to the gas hydrate stability
zone (e.g. Cassassucem et al. 2004).
(2) Stratigraphically bound accumulations in relatively permeable
seafloor sediments, where bacterial methane has been
generated in situ or has slowly migrated from shallow depths
in the section (Akihisa et al. 2002). Additionally, methane
hydrates have been encountered in the Alaskan, Canadian and
Siberian Arctic permafrost, the latter location where they form
the only current gas production from hydrate (Collett 1993).
Global estimates for natural gas resources in methane hydrates
are astounding. A ‘consensus value’ of about 700 000 £ 1012 SCF
(Kvenvolden 1993; Grauls 2001; Collett 2002) suggests methane
hydrates contain two orders of magnitude more carbon than all
other fossil fuels on Earth. Agreement between various workers on
this value is within an order of magnitude despite the different
Fig. 9. Seismic reflection image of a bottom-simulating reflector
representing a methane hydrate layer beneath the ocean floor, at
approximately 80 ms. TWTT (two way travel time).
A. ODEDRA ET AL.
approaches used, suggesting it represents a reasonable approxi-
mation. However, unlike other natural gas resources, the occur-
rence, distribution and relationship of methane hydrates with their
host sediments remain poorly understood and are likely to be a
major constraint on their exploitation (Lovell et al. 2002) and this
resource remains largely hypothetical at present. Structural
accumulations potentially have high hydrate concentrations in
the host sediment but represent a small proportion of seafloor
methane hydrates; they will only constitute economic reserves
if they contain large volumes of hydrate-bound gas. Stratigra-
phically bound deposits, despite being more abundant geographi-
cally, are characterized by low gas hydrate concentrations within
the host sediment and are likely to have low recovery factors and,
therefore, high development and production costs.
Enormous technical issues, thus, remain before gas hydrates can
be considered an economic resource (Max & Dillon 1998). There
is no methane hydrate production from the continental slopes as
yet, but various experimental production methods have been
proposed, the most promising of which is the so-called
‘depressurization’ technique (Sloan 1998) in which the local
pressure is reduced to below hydrate stability (Fig. 10). Other
proposed methods of gas recovery from hydrates include steam
injection to melt the hydrate or introducing into the reservoir an
inhibitor to reduce hydrate stability. At present, the cost associated
with these enhanced recovery techniques appears to be prohibi-
tive, although techniques such as downhole electromagnetic or
electrical heating, such as is used to prevent hydrate formation in
sub-sea gas pipelines (Bjornstad 2004), have not yet been fully
appraised. Perhaps radically new approaches, such as seafloor
mining, will have to be developed.
Technology highlights in natural gas exploration
and production
The key to natural gas exploration and exploitation success is the
development and application of ‘fit for purpose’ technologies.
Exploration for, and production of, natural gas differs significantly
from that of oil in many geological settings. Gas is imaged more
easily with seismic technologies, as the gas in the pore space of
clean reservoirs significantly lowers seismic velocity, resulting in
high-amplitude reflections indicative of gas accumulations. Gas
can be produced from reservoirs with much lower permeabilities
than those required for oil production. Many formations
considered too tight or too thin for oil production, can be
effective gas reservoirs. This means that tight gas sands (very low
permeability sands, less than 0.1 mD), thin-bedded sands (on a
millimetre scale), fractured shales (also low permeability reser-
voirs), as well as coal beds – all become potential gas reservoirs.
New technology, involving better imaging of gas, higher
resolution of thin beds, optimal well design and completion
technologies, contributes to making gas resources economic.
Seismic imaging of gas. Seismic imaging is the principal tool
used in the search for hydrocarbons, allowing frontier areas to be
explored and the subsurface geological structure ‘between the
wells’ visualized in existing discoveries and fields. Seismic data
are used to determine accurately the reservoir structure and
stratigraphy and reduce risk and uncertainty at any stage in the life
of a gas field. The variation in gas reservoir properties can be
revealed from seismic amplitudes. Changes in seismic amplitudes
can be related to many subsurface properties, including fluid
content, thus, a rock physical model generated from log, core and
empirical measures can be used to ‘calibrate’ the observed effects
(Bachrach et al. 2004). Modern 3D seismic technology has,
undoubtedly, reduced the cost of finding and developing gas
reservoirs. It is credited with enabling exploration in deep water,
imaging complex geological structures using pre-stack time and
sub-salt depth imaging and improving early field appraisal and
development strategies (Brown 1999).
 THE WORLD ACCORDING TO GAS
Fig. 10. Possible production technologies for producing hydrates from the ocean floor: (a) the ‘depressurization’ technique in which the pressure is reduced
to below hydrate stability; (b) steam injection to melt the hydrate; and (c) inhibitor injection to reduce hydrate stability (based on Collett 2002).
Whilst, in detail, the acoustic response of the Earth’s
sedimentary crust is complex (Anstey 1980), in essence, seismic
waves are reflected from lithological boundaries where there is
a contrast in acoustic impedance (AI): the product of density
and compressional wave velocity. Velocity and density, in turn,
are related to lithology and porosity, as well as to the fluids
contained within the pore system. Generally, sandstone porosity
decreases with depth of burial, whilst cementation effects
increase with age, resulting in higher acoustic impedances, but
also a decrease in the proportion of the impedance that is
attributable to the fluid content. This, generally, makes fluid
content less detectable with increasing depth and, moreover,
seismic amplitudes respond differently, particularly with offset
(AVO). It is, thus, essential to construct the correct predictive
relationships against depth when interpreting seismic amplitude
anomalies (Fig. 11).
The replacement of brine by gas in a sandstone reservoir may
lead to a seismic amplitude response that ‘stands out’ from
neighbouring events. Typically, these amplitudes are large in
shallow settings, giving rise to so-called ‘bright spots’. Where an
aquifer is present beneath the reservoir there is a large contrast
between the gas and water legs, which generates high amplitude
horizontal seismic events termed ‘flat spots’. These amplitude
events, collectively known as direct hydrocarbon indicators
(DHIs), when mapped in 3D and compared to the structural
Fig. 11. The relationship between acoustic impedance and overburden for
a simple system of clean sand and end-member shale, with the resulting
change in amplitude response. The amplitude response between shale and
an underlying gas sand stands out at the top reservoir from the ‘background’,
where there is either no reservoir or where the sand is brine-filled.
Typically, these reflections are large in shallow settings and where an
aquifer is present beneath the gas-charged reservoir.
579
contours, provide direct evidence for the presence of gas-charged
sediments (Fig. 12). Mapping of amplitude anomalies enables
wells and platforms to be located optimally and reserve estimates
made with greater precision. Amplitude inversion (transformation
of post-stack seismic reflectivity traces into AI data) is an addi-
tional powerful technique enabling rock layer properties to be
interpreted: AI greatly simplifies lithological and stratigraphical
identification (being a layer property) and can, thus, be converted
directly to lithology or reservoir properties such as porosity, fluid
fill and net pay, allowing direct interpretation of 3D geobodies
(Rowbottom et al. 2003). Variation in the DHI over short dis-
tances is, thus, likely to represent variation in lithology, poro-
sity, net:gross ratio or gas saturation and, thus, reflect reserve
calculations for a given gas accumulation (Chavestes & Hill 2001).
These properties of gas sands have been used in the Tertiary Nile
Delta to drill 16 successful exploration and production wells
Fig. 12. Sesimic amplitude image of a gas-bearing reservoir submarine
channel sand from the Simian Field, offshore Nile Delta, clearly showing
the extent and geometry of the reservoir and enabling production wells
to be placed optimally (from Samuel et al. 2003).
580 A. ODEDRA ET AL.
in succession, proving 12 £ 1012 SCF of gas reserves (Samuel et al.
2003). The inversion of pre-stack multi-offset amplitudes to
provide elastic impedance (EI) in addition to the post-stack or
zero-offset AI is proving of value, in some cases, highlighting fluid
effects and differentiating fluids from lithology.
Thin beds. Thin beds are a type of low resistivity pay,
comprising sediments that are laminated on a centimetre scale
(Fig. 13). They may include high quality (high porosity and high
permeability) reservoir and, thus, significant hydrocarbon volumes
but at a vertical resolution below conventional petrophysical
detection limits that rely on an elevated resistivity to detect and
quantify hydrocarbons in the pore space. In this context, two
definitions are important. A hydrocarbon-bearing layer is detected
when a wireline log displays a recognizable response to that layer,
whilst a layer is resolved when the deflection of the log attains the
true parametric value for that layer, after appropriate downhole
corrections (Worthington 2000). Thin beds can be productive for
both oil and gas but are much more effective in gas reservoirs due
to the higher mobility of gas. Petrophysically, gas-bearing thin
beds consist of alternating layers of resistive sand and conductive
shale. Additionally, gas displaces capillary-bound water in silts
and argillaceous sands, so that apparently low quality reservoirs
can often be gas saturated. The conductive shale greatly suppresses
conventionally measured horizontal resistivity such that it is not a
reliable method for detecting or quantifying hydrocarbons present
in the sand and silt laminae. Gas-bearing thin beds are, therefore,
extremely difficult to recognize as reservoirs in the subsurface.
However, as thin beds are associated with many depositional
environments and are especially common as overbank deposits to
channels (fluvial and submarine), as sheet sands within aeolian
sediments and as intertidal beds in coastal settings, they can
contain significant gas resources. Recognizing and evaluating the
presence of reservoir layers without the process being distorted by
adjacent non-reservoir beds is the challenge in thin-bedded pay
analysis and is a key element of reserves growth in gas reservoirs.
A variety of techniques has developed to quantify hydrocarbons in
such formations, including borehole seismology (Paulsson et al.
1998), high resolution logging tools (Benavides & Engels 2003)
and borehole imaging (McCall et al. 1987). The latest wireline
tools recognize thin bed property anisotropy, being able to
measure both vertical (RV) and horizontal (RH) resistivity and
minimize the shale effect (Olesen 2002). Use of this approach to
evaluate thinly bedded turbidites in the Tertiary of the offshore
Nile delta resulted in increases of gas reserve estimates of up
to 200% in laminated thin beds compared with conventionally
computed reserves (Fig. 14). Such technology defines gas – bearing
Fig. 13. Centrimetre-scale interbedded highly porous sandstone and shale
levee deposits from the Rosario Formation, Baja, California, typical of
potential thin bed pay. Clean, porous sandstones, 10–20 cm thick, are
interbedded with silty shales, but extend laterally for hundreds of metres, in
packages tens of metres thick.
pay where none was previously recognized, contributing
significantly to 1P reserves.
Maximizing ultimate recovery. Production of gas is simpler
than of oil. Gas reservoirs are produced mostly by depletion,
allowing the original field pressure to decline as the gas is
produced. In some cases the natural aquifer pressure is used to
support production, although a strong aquifer drive leaves gas
trapped behind the water front as high residual gas saturations
(Hower et al. 1992). Compression may be introduced later during
field life when the reservoir pressure is no longer sufficient to
overcome the pipeline export pressure. Production can be
maintained for even longer if reservoir pressure is kept
artificially high by injecting water through dedicated wells, but
this necessitates expensive pumping equipment and water-
handling facilities. Rather, current trends in maximizing
recovery from gas fields are focused on defining as accurately as
possible how much gas the reservoir contains, where it is located
(in which depositional facies) and to what extent faulting has
compartmentalized the reservoir (Englemark 2001; Waggoner &
Pickering 2004). Seismic amplitude mapping and inversion of
reflectivity data to rock properties can reveal the reservoir volume,
fluid contacts, connectivity and reservoir drive mechanisms.
Three-dimensional and multi-component seismic data enable
well locations and trajectories to be planned carefully so that
appraisal and development wells access more reserves whilst
reducing risk and uncertainty in development planning. Such data
are critical in making early decisions about well placement and
facilities design. One of the largest risks in developing a gas field is
not producing the 2P reserves (Fig. 2) that are expected from initial
appraisal, because of compartmentalization due to unrecognized
faulting. Mapping of faults and determination of their sealing
capacity is key to accessing all the GIIP and maximizing recovery
factors. Once seismic and well data have provided a calibrated
image of the reservoir and its properties, a 3D geological model
that incorporates geological and petrophysical heterogeneity,
ideally conditioned to geophysical properties, enables accurate
GIIP estimates to be determined and well positions to be placed
optimally (Van de Graaff & Ealey 1989; Dubrule et al. 1998;
Duey 2004).
Another area in which recovery can be maximized is in the
design of wells for optimal deliverability and in extending the
productive life of existing wells. This entails designing the well
specifically for the sediment properties present in the field,
minimizing formation and completion damage and accurately
steering the well to target the best reservoir (McCann et al. 1994).
The most important parameter for increasing well productivity
is the effective horizontal permeability –thickness (Kh) through
the reservoir, especially in tight formations (Niko 1992). This
can be increased by maximizing contact of the wellbore with the
reservoir by drilling inclined, high angle or horizontal wells that
minimize the resistance to flow around the wellbore (Cinco et al.
1975). This, in turn, minimizes pressure drops and fluid velocities
in the near-wellbore area and reduces coning and cusping. The
effectiveness of this relationship is demonstrated by the exponen-
tial increase in the use of extended reach and high angle wells since
the early 1980s, when only a few horizontal wells were drilled
each year. Today, over 5000 are drilled annually world-wide.
Well completions and drilling fluid design are also paramount in
achieving optimal gas production, especially in open-hole and
highly deviated or horizontal wells (Palar et al. 2000). Typical gas
flow rates for conventional vertical production wells are in the
range 15 – 20 £ 106 SCFD, but modern high-angle wells completed
with large diameter (5 12 00 tubing size) give flow rates of 100–
250 £ 106 SCFD (Palar et al. 2000). In these high flow rate wells
the integrity of the sand face completion in the borehole is crucial.
To prevent sand breaking into the wellbore it is lined with a por-
ous gravel screen that maintains the borehole stability (Watson
et al. 2001). By using such completion approaches in extended
 THE WORLD ACCORDING TO GAS 581

Fig. 14. Recognition of thin-bedded pay from high resolution wireline logs. Two thin-bedded units (TB1 and TB2) are associated with gas-bearing massive
sands (MS1 and MS2). The presence of gas is clear for MS1 and MS2 (low gamma, high resistivity and density neutron gas cross-over) but not apparent
in the TB1 and TB2, thus pay in these intervals would be overlooked. Track 4 shows a bimodal response of the fine-grained shale contrasting with the
permeable sand laminae from the nuclear magnetic resonance tool (NMR). Track 5 shows the FMI high resolution resistivity image revealing the laminated
nature of the thin-bedded units, which is further confirmed by the computed formation dips in Track 6. Track 7 shows a computer processed interpretation (CPI)
for mineral and fluid volumes. Track 8 shows the average water saturations through the units, indicating water-free production would be obtained from
the thin beds. Significant additional gas volumes are revealed in units TB1 and TB2. Indeed, the good quality of the sand laminae in TB1 and TB2 indicates
that these units will be much more productive than MS1. If this was not realized and allowed for in the completion design then not only gas volume
might have been lost but also substantial productivity.

reach horizontal wells, production rates of 100 £ 106 SCFD were
achieved consistently in successive wells drilled in the Orinoco
Delta offshore northern Trinidad (Folefac et al. 2004). Increasing
the recovery factor not only enables more gas to be extracted
ultimately from the reservoir, but also maximizes reserves proven
per well drilled. For platform developments, high angle multi-
lateral wells enable stacked or compartmentalized reservoirs to be
accessed from a single well (Salas et al. 1996). Smart wells, in
which downhole measurement equipment or control valves are
installed in the well, also promote optimization and dramatically
reduce costs and risk, especially in deep-water sub-sea develop-
ments where the cost of intervention is prohibitive (Duey 2002).
So far, smart well technology has focused on intelligent
completions, using downhole sensors to gather and transmit data
and downhole flow tools that adjust gas production when needed
(Boon & Ferris 2004). Future smart well technology will
inevitably allow intelligent drilling and testing, resulting in true
production automation.
The future of gas
Environmental impact
Average global temperatures have increased by around 0.78C since
the start of the industrial revolution at the turn of the nineteenth
century. Atmospheric CO2 is widely believed to be the main cause
of this global warming. Burning hydrocarbons as a source of
energy is, thus, not environmentally friendly, in any form, but
hydrocarbons remain a necessity until alternative renewable,
cleaner energies are economically and widely available. The driver
for energy use in the next half century will be towards
decarbonization, i.e. fuels that do not contribute carbon to the
atmosphere (Tinker 2003). Methane has a clear advantage over
other hydrocarbons in that it is the cleanest burning fossil fuel.
Furthermore, it does not contaminate groundwater and has a high-
energy efficiency, resulting in a lower environmental impact
compared with other hydrocarbons. Burning methane produces
50% less CO2 than coal and 30% less CO2 than oil. In addition,
unlike other hydrocarbons, methane contains only trace amounts
of sulphur, nitrous oxides and particulate matter, which cause
respiratory problems prevalent in many industrialized cities today.
Natural gas used as a road fuel has a lower environmental impact
compared with diesel and oil.
Repercussions of the Kyoto Protocol
In 1992, 154 countries signed the Framework Convention on
Climate Change. Subsequently, 160 countries agreed at Kyoto in
1997 to regulate emissions of six of the main greenhouse gases,
including CH4 and CO2, which are clearly directly associated with
the oil and gas industry. Despite the current abstinence of the USA
from the Kyoto agreement, there is the political will amongst all
other countries to regulate the emission of these gases, and the
implementation of the Kyoto Protocol will signal a step change in
the global approach to fuel use. In the EU, there are already strong
indications that ambitious targets are to be set by member
governments with a view to moving to a ‘low-carbon economy’
and, ultimately, to non-carbon fuels. The UK Government, for
example, restated its commitment to a ‘liberalised’, deregulated
and global energy market in its 2003 Energy White Paper. The UK
is tasked, under the Kyoto Protocol on climate change, to reduce
emissions of greenhouse gases by 5.2%, below 1990 levels, by
2012. The likely repercussions all favour preferential use of the
hydrocarbon with the lowest carbon content – natural gas. This is
582
particularly the case as economic measures such as emissions
trading will be introduced to reflect the fact that the various
hydrocarbons have different environmental impacts. There are
also ambitious plans for energy efficiency improvements and to
increase the renewable energy share of the market. UK energy
consumption, for example, increased by 32% between 1970 and
2001, but only by 19% between 1990 and 2001.
These environmental trends are a source of optimism for the use
of natural gas. Despite this reality, the political mood towards
energy policy in the USA and Europe remains concerned rather
than optimistic. Policy-makers are correct to have reservations,
as increasingly the oil and gas supply needs of the major con-
sumer countries will not be indigenous, but will come from non-
OECD and/or developing nations. Some of these have histories of
instability, while others require the establishment of completely
new gas relationships with the Western industrialized world. The
implications are that consumer countries will increasingly try
to secure a diverse range of supply sources to mitigate political
risk. This has pushed security of supply higher up the poli-
tical agenda than ever before, or at least since the oil crisis of
the 1970s.
Gas markets
A direct consequence of the Kyoto protocol is the emergence of a
new gas market that reflects both the preferential use of gas over
other fossil fuels on environmental grounds, coupled with the need
to provide security of supply. The USA, Europe and North East
Asia are expected to consume much of the gas growth to 2020,
whilst two-thirds of new gas production in that period is likely to
be traded cross-border. These two key developments will define
the future gas market and have two significant implications.
Firstly, as their indigenous supplies dwindle, the major developed
global economies will become increasingly reliant on non-OECD
sources of supply. Because of the nature of these sources,
spreading risk by diversifying will be essential for improving
security of supply. Secondly, this new market shape will favour the
rapid expansion of LNG (and probably GTL and GTS technol-
ogies), allowing spot cargoes, short-term contracts and flexible
trading to co-exist alongside the traditional long-term contracts.
The LNG chain
LNG is based on sound but simple technology and provides
diversity of gas supply as well as security of supply. The
international trade in LNG is now some 40 years old, but has
grown at a phenomenal rate over the last decade, increasing from
Fig. 15. The three distinct trading regions of the present-day LNG market – Asia– Pacific (East of Suez), Europe–Africa and the Americas – showing markets
and trading routes.
A. ODEDRA ET AL.
2 £ 1012 SCF in 1990 to 10 £ 1012 SCF in 2000. The demand
forecasts for LNG average 10% growth globally but reach up to
45% growth in the USA alone. In recent years, value in the LNG
chain has increased due to overall cost reductions in the
construction of liquefaction plants, receiving terminals and
ships, together with optimizations such as shipping swaps. This
significant value-add means that LNG is not as dependent upon
highly priced gas or oil to compete as it was ten years ago.
The global LNG business is divided into three distinct trading
regions – Asia – Pacific, Europe – Africa and the Americas
(Fig. 15). East of Suez, LNG trade flows predominantly from the
Middle East and Indonesia to North East Asia. In Europe, supplies
mostly come from the North Sea and the FSU via pipeline and
North Africa via LNG. In the USA, domestic production supplies
95% of the demand, but with increasing supplies of LNG from
Trinidad and other countries on a short-term, spot or swap basis.
Two markets dominate the LNG business, the Pacific Basin and
Atlantic Basin.
In the Pacific Basin there are eight suppliers (Oman, Qatar,
Australia, Malaysia, Indonesia, Abu Dhabi, Brunei and Kenai),
with only three markets (Japan, Korea and Taiwan). By the end
of this decade, LNG demand is forecast to increase from 60 mtpa
(in 2000) to 140 mtpa – as these markets grow and new markets
emerge (Fig. 16). More Pacific region markets are likely to
develop within the next five years in India and China, where
demand for gas is large. There are also plans to build terminals on
the west coast of Mexico to access both local and Californian
markets.
In the Atlantic Basin region, the market is more diverse, with
demand centres in the USA, South America, the Caribbean,
Greece, Turkey, Belgium, Portugal, Spain, Italy and France. The
UK will emerge as a new importer later this decade. Suppliers to
this region are fewer than in the Pacific region, being dominated by
Algeria (Fig. 15). New suppliers, including Libya, Nigeria and
Trinidad, are already emerging and, as the Atlantic Basin LNG
business grows, these are likely to result in trans-Atlantic trade
(Fig. 16). Additional suppliers such as Egypt, Norway, Qatar and
Iran have welcomed this growth by building new LNG plants and
planning expansions.
Although LNG trade volumes are almost three times larger in
the Pacific Basin region, it is the Atlantic Basin region that is
forecast to double its growth, or 15% compounded annually, to the
year 2007. By 2010, 100 mtpa LNG is forecast to trade in the
Atlantic Basin (Fig. 16). Clearly, with discrepancies between
supply and demand, new LNG terminals become a business
opportunity. Import terminals under development in Europe
 THE WORLD ACCORDING TO GAS
Fig. 16. The predicted LNG global markets at 2010. LNG demand will increase from 60 mtpa (in 2000) to 140 mtpa – as these markets grow and new
markets emerge.
represent up to 40 mtpa of additional import capacity, whilst in the
USA, over 20 new terminals have been proposed. Conversely,
supply-side trends of lower production and transportation costs,
as well as increased supplier flexibility, mean that more distant
and formerly stranded gas reserves become LNG supplies of
economic potential into the Atlantic Basin market. The result is a
proliferation of proposed supply projects, with in excess of 80
mtpa of new supply being developed.
Gas Flaring
Another direct consequence of the Kyoto Protocol is a dramatic
reduction in gas flaring. Much of the gas associated with oil
production is still flared at the well head. Flaring of gas is not only
wasteful, it is harmful to the environment. Globally, the
exploration industry collectively vents or flares about 4 £ 1012
SCF of gas annually, almost a criminal act in its own right (World
Bank 2002). If all of this associated gas were flared it would
represent 220 £ 106 tons of CO2 equivalent (tCO2e) emissions,
accounting for about 10% of the emissions that contributing
countries (including the USA) have committed to reduce under the
Kyoto Protocol during the commitment period from 2008 to 2012.
The wasted energy is enormous. As an illustration, the gas
currently flared in Africa is sufficient to provide almost half the
power needs of the entire continent. In Nigeria alone, of the
3.5 £ 109 SCFD of associated gas produced, approximately 33%
is used commercially, 17% is re-injected, whilst the remaining
50% is flared. The government of Nigeria has set a target of
stopping all gas flaring by 2008.
In recognition of this wastage, the petroleum industry and
governments in so-called ‘flaring countries’ have taken a number
of significant steps to minimize flaring. Many governments have
set targets to eliminate routine flaring and have introduced fiscal
and other incentives to help achieve them. Several E&P companies
have committed to zero flaring for new projects and, though others
have refrained from setting explicit public targets, they have
embarked on programmes designed to develop markets more
systematically to exploit associated gas. A key initiative is the
Global Gas Flaring Reduction Public – Private Partnership
(World Bank 2002), launched at the 2002 World Summit on
Sustainable Development. The aim of this partnership, working
through the World Bank with national governments, development
agencies and the petroleum industry, is to limit gas flaring
activities and capture the gas produced at the well head and
channel it to more useful outlets, including the power generation
industry and for use in households. The partnership enables private
investment in pipelines and other infrastructure that makes this
‘capturing’ possible.
583
Conclusions
Natural gas is a highly desirable energy source, of which there are
enormous global resources that exceed oil resources by orders of
magnitude. Proven global reserves of conventional natural gas
exceed 5000 £ 1012 SCF, sufficient for around 60 years supply at
present production rates. Current estimates suggest that only 50%
of conventional gas resources have been discovered. These
resources are well characterized so explorationists will have to
probe deeper into sedimentary basins, in deeper-water acreage and
re-evaluate current acreage, to discover more conventional natural
gas. The industry can expect to drill more technically difficult
wells in more hostile environmental conditions under increasingly
challenging political scenarios. These technical and commercial
hurdles will shape the future of the gas industry and, in turn,
provide opportunities for experts in gas. In the future, unconven-
tional gas resources will be used increasingly to supplement high
volume demand in developed markets and as a major longer-term
source of energy. Astounding volumes of natural gas are
generated by methanogenic bacteria during early burial in marine
sediments, much of which is then frozen as methane hydrates on
the continental slopes. At present, much of this unconventional
natural gas is categorized as hypothetical and will need much
fundamental scientific research before it can be considered an
economic resource. However, unconventional natural gas reserves
in low permeability reservoirs, coal bed methane and shale gas
already account for more than 25% of natural gas production in
the USA.
There is no single technology that will revolutionize the
exploitation of natural gas resources. It is new technology that has
reduced the finding and production cost of conventional gas by
more than 50% over the last decade. This explosion of new ideas
and innovative technologies that has blitzed through the
geosciences will continue apace, with several areas making
huge impacts not just in conventional natural gas resources but
also UCG resources. The desire of the geoscientist and reservoir
engineer to characterize and monitor the reservoir will continue
to be insatiable. High resolution 3D seismic imaging, real-time
depth imaging whilst drilling and the electronic instrumental gas
field will be routine practice. This is not surprising, given the
success of seismic exploration for gas and between-well seismic
reservoir characterization over the last decade. In the future, the
electronic reservoir will have intelligent wells with sensors in
drill bits and permanently placed in the casings of development
wells to measure acoustic emissions, electrical fields, temperature
and pressure to monitor field response to production (Hottman &
Curtis 2001; Lumley 2001; Duey 2002). The next challenge will
be to assimilate this huge volume of data and integrate it into
584 A. ODEDRA ET AL.
reservoir simulations, real time, requiring a new generation of
databasing and supercomputing.
Methane hydrates trapped on the continental slopes offer the
greatest potential prize of all, although these resources may be a
double-edged sword with potential environmental hazards. If they
prove to be economic, then new methods of exploiting them will
have to be developed. Current notions of well-based solutions
may be too expensive and too inefficient. Re-gasified hydrates will
have to be vented from the seafloor and captured from the water
column before escaping to the sea surface. The unique characteris-
tics of seabed methane hydrates will require the industry to
consider radically different ways of production, perhaps more akin
to mining, for this resource to be realized.
Gas consumption is forecast to continue to grow. Total global
growth in demand for gas is expected to average 3.2% over the
coming decade and is projected to double by 2025, outstripping
the demand growth for all other major fuels. In developing
economies, annual gas demand growth is forecast to be even
stronger. Along with accelerating liberalization of gas markets,
this growth in demand will generate huge opportunities for gas
explorers and producers. This growth will be satisfied by a
combination of reserve enhancement – getting more gas from
existing fields, and resource creation – finding new gas largely
from unconventional resources and through the evolving natural
gas transportation markets of LNG, GTL and GTS. LNG is now
competitive as a gas product and is a dynamic growth sector
especially in the Atlantic Basin and the USA. Although the
original driver for these technologies is to monetize stranded gas,
the strong environmental pressures towards decarbonization of
energy provide an additional incentive to produce ultra-clean
fuels. Synthetic fuels produced from methane, and an emerging
hydrogen technology, are set to revolutionize gas uses and gas
markets. These new fuels will place a long-term cap on future gas
prices and will lead to fuel substitution – GTL technology will
delay the decline of oil production. The age of gas is here and
now. In a world according to gas, there never has been a better
time to be in this business.
BG Group is thanked for permission to publish. This article draws on the
expertise and experience of many BG colleagues, of whom Tim Pritchard,
Ian Warburton, Eric Edwardson, Colin Harwood and Eddy Webb are
especially thanked. John-Remis Olesen and Dick Ireson provided
additional invaluable insight into thin beds and amplitude anomalies,
respectively. BG Group generously supported colour printing.
This paper includes ‘forward-looking information’ within the meaning
of Section 27A of the US Securities Act of 1933, as amended and Section
21E of the US Securities Exchange Act of 1934, as amended. In particular,
there are certain forward-looking statements concerning demand for gas
and the future of the gas and LNG industries. Although BG Group believes
that the expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will prove to
have been correct. Accordingly, events could differ materially from those
set out in the forward-looking statements as a result of, among other
factors: (1) changes in economic, market and competitive conditions,
including oil and gas prices; (2) success in implementing business and
operating initiatives; (3) changes in the regulatory environment and other
government actions; (4) major recession or significant upheaval in major
markets; (5) significant fluctuation in oil and/or gas prices; (6) exchange
rates being significantly different to those assumed; (7) risks encount-
ered in the gas and oil exploration and production sector in general.
BG Group undertakes no obligation to update any forward-looking
statements.
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