Playbooks Supplements

Unconventional Yearbook 2018

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100 | January 2018 | 2018 UNCONVENTIONAL YEARBOOK | PRODUCTION FORECAST ceeding further, it seems appropriate to introduce our model for Lower 48 natural gas production. Natural gas production in the Lower 48 is akin to a four-legged chair, with associated gas, Appalachia unconventional gas, non-Appalachia unconven- tional gas and Gulf of Mexico (GoM) offshore each representing a leg on the chair. Associated gas is the first leg on the chair. Being oil-driven, associated gas is indifferent to Henry Hub and NYMEX gas prices. Associated gas is expected to grow by 21%, driven by acceler- ated activity in the Wolfcamp Shale of the Perm- ian. Associated gas currently represents about 35% of total unconventional gas in the Lower 48, and that share is not expected to change as growth in Permian is met with growth in the Marcellus and Utica of Appalachia. Attractive breakeven oil prices for the best areas of the Wolfcamp and Bone Spring provide a clear run- way for many years. Consequently, the Permian will continue to attract a disproportionate share of rigs for years to come. Appalachia dry gas is the second leg on our chair. Appalachia activity is highly correlated to gas prices and to infrastructure projects. Appala- chia gas is primarily Marcellus gas and assisted with contributions from the Utica/Point Pleasant for- mations. Gas demand east of the Rockies sets the call on domestic production greater than the "base" supplies (associated gas) provided from "liquids" wells. In periods when Appalachia gas falls short of demand, mostly due to infrastructure constraints, the Haynesville stands ready to inject substantial quantities of gas at competitive prices, making the Haynesville an important "swing" producer for North America. Delving deeper into the Marcellus, we fi nd that understanding the mineral composition is key to understanding the play and the areas prone for creating a dense, connected network of induced fractures. The Marcellus is generally laminated, with silica-content up to 60% and clay content up to 49% in some areas. Where clay content is greater than about 40%, the rock is more ductile, inhibit- ing effective fracture stimulation. Most Marcellus production occurs in the central and eastern por- tions of the formation's extent, as the northern and western portion is both immature and thinner, with limited results. Depths can be up to 9,900 ft; free and adsorbed gas in the pore space help to increase Marcellus reservoir pore pressure to an average 6,000 psi. We expect the Marcellus to remain a top contributor through at least the end of the next decade. 0.00 20.00 40.00 60.00 80.00 100.00 120.00 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20 May-21 Jan-22 Sep-22 May-23 Jan-24 Sep-24 May-25 Jan-26 Sep-26 May-27 Jan-28 Sep-28 May-29 Jan-30 Sep-30 Daily Production (Bcf) Appalachia Permian Midcontinent Eagle Ford Rockies Bakken Other Lower 48 Shale and Tight Gas Production Estimate

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