Key U.S. onshore unconventional oil and gas plays and the Gulf of Mexico, especially the ultra deepwater, Lower Tertiary Trend, continue to attract high bids for acreage. Industry is evaluating potential shale gas reservoirs across the country, geographically and throughout the stratigraphic column—leaving no stone unturned, so to speak. With some notable exceptions for oil plays (Deepwater Gulf of Mexico the Bakken play in particular), the U.S. industry is focusing on gas. Here is the current situation: higher natural gas prices stimulated increased drilling activity, but gas production only has reached an undulating plateau. A shift to lower volume unconventional gas implies further drilling increases to sustain production.

Complications include: rising capital costs; uncertainties about the regulatory climate; questions whether high gas prices will hold; manpower/rig shortages and periodic transportation bottlenecks; energy security needs and growing anti-hydrocarbon sentiments and policies in support of climate change targets could restrict future oil and gas developments; access to potentially large resources currently is restricted due to these environmental and lifestyle issues. Concerns include: what are the implications of these trends on North America gas supplies?

Unconventional gas resources will continue to increase in importance in the U.S. energy mix. Most areas with strong drilling activity are targeting unconventional gas—about 75% of the current gas-related rig count. Of the top 25 U.S. gas fields ranked by production, 20 are classified as unconventional. A strong upside exists through relentless pursuit of new technologies and process improvements. However, a collaborative process among all stakeholders is critical: manage developments with local community concerns; balance climate change policies with gas supply needs, and reach a compromise on access restrictions to high resource potential areas. If the challenges are met, we may be reaching a tipping point in U.S. gas production where unconventional gas and gas from new Gulf of Mexico hubs like Independence, can offset the decline in conventional gas production. This presentation will focus on the activity trends in the lower 48 that industry appears most committed to developing, including both onshore plays and the Lower Tertiary Trend in the ultra deepwater Gulf of Mexico.