Cont. from page 1, R&D Impact...

It is important to realize the benefits of ongoing R&D efforts during high pricing periods. Seven years ago, complex reservoirs like the Barnett Shale unconventional gas play in Texas did not significantly register on the USGS radar screen, but today it's one of the ten largest gas plays in the United States. Technologies like horizontal drilling, 3-D seismic and aggressive reservoir fracturing have unlocked tight gas reservoirs that were uneconomical and thus overlooked in the past. Encouraging results have opened up new ways of thinking that allow industry to better understand complex geologic environments.

Much of that domestically-focused R&D will involve universities or geological surveys that provide key support for the professionals of tomorrow. In many DOE-supported projects, industry and academia work alongside each other leveraging their respective strengths to reach project goals. Beyond the research results themselves, the involved students will enter industry with greater knowledge of how to practically apply the concepts they learn. Those entering the workforce are now expected to contribute from day one, which requires both book learning and practical knowledge.
It is key to note that, although high energy prices are quoted in the NYMEX, domestic producers are not guaranteed to share in this run up. A quoted price in New York does not reflect what regional price pictures dictate. Rather, a spread

discount difference increases with an increase in quoted NYMEX prices. For example, producers in the northwest have experienced over a $22 per barrel differential before a further discounted adjustment for crude gravity and transportation. In the Appalachian region, $6 quoted gas can net some producers in the range of $3 per mcf delivered.

On the other side of the equation, direct costs have risen. Many operations are energy intensive so producers who must use electricity, natural gas or diesel for their enhanced production have seen expenditures double, triple and even quadruple. The price of tubular services including iron to drill, case and provide production tubing for well completions has risen to historical heights. The charge for other services is also rising with demand for production.

As the economics change, so do the targets for reserve replacement. While the higher prices do not drop directly to the bottom line, regional price pictures vary widely when considering purchaser's midstream, transportation issues and even international alternatives.

The U.S. has been a key beneficiary of past R&D investment. Clearly, an investment in technology by domestic industry in cooperation with state and national governments will play a crucial role in the ability to harvest these more difficult reserves in the future.

Deep Gas Well Stimulation Speakers

Program presented insights and field case study information from three basins. Work was performed as part of a Pinnacle-led, DOE-supported R&D effort. From Left to Right: Richard Sullivan, Anadarko Petroleum Corp.; Ron Matson, BJ Services; David Adams, Halliburton; Ernie Brown, Schlumberger; Mike Mayerhofer, Pinnacle Technologies Inc.