The Fayetteville Shale is Expected to be Natural Gas Producing Hub in the Future

Monday 13 February 2012, Amsterdam

The report highlights the gas production from various counties in Arkansas, providing details of the major companies exploring the Fayetteville shale and the drivers and challenges to shale gas exploration in the US.

The Fayetteville Shale is Expected to be Natural Gas Producing Hub in the Future

The Fayetteville shale, in a span of six years, has evolved to be a significant onshore natural gas producing play in the US. The production from the Fayetteville shale increased from 0.1 billion cubic feet (bcf) in 2004 to 777.6bcf in 2010.

The production from Fayetteville shale play is expected to show an upward trend. During 2012, the production from the Fayetteville shale is expected to increase to 929.1bcf, from 918.0bcf in 2011. The production is expected to grow at a CAGR of 5.2% for the period 2011–2020 and gradually reaching 1,453.2bcf by 2020.

See figure: Fayetteville Shale Play, Historical and Forecast Production, Bcf, 2004-2020

The Fayetteville Shale Gas Success Mandates Infrastructure Development

The state of Arkansas had not seen any major infrastructural development activities before the discovery of the Fayetteville shale in 2004. However with the emergence of this shale, the state has witnessed significant infrastructural developments. Among the major infrastructure development plans in the shale play, the Fayetteville Express Pipeline (FEP) is being constructed to take produced gas in the Fayetteville shale play to Midwest and Northeast of the US. The Fayetteville and Greenville gathering lines also transport gas from the Fayetteville shale play to the market primarily through existing interstate pipelines of the US.

The Fayetteville Shale Attracted Substantial Funds for the Future Development of Natural Gas Resources

The recent downturn in natural gas prices has initiated the process of consolidation in the Fayetteville shale. With small players unable to sustain the low gas price pressures and opting out, this has provided large companies an opportunity to enhance their gas portfolio through the acquisition of these small companies or their acreage in the shale. Increased initial production rates and Estimated Ultimate Recovery (EUR) from the Fayetteville shale play, along with decreasing cost, makes the Fayetteville shale an attractive investment destination. Industry majors such as BP Plc, ExxonMobil Corporation, and BHP Billiton have acquired a significant acreage position in this shale play in recent years. These companies plan to make further investments in the Fayetteville shale in the future to unlock its reserve potential.

Low Natural Gas Prices have Impacted Drilling Activities in Fayetteville Shale Play

The number of producing wells in the Fayetteville shale increased from eight in 2004 to 490 in 2009, indicating increased interest of the companies in the shale play. The growth in the numbers of producing wells declined sharply from 85% in 2008 to 16% in 2009, owning to low natural gas prices. Further in 2010 the producing wells counts declined by 53% from its 2009 level to 228, reflecting sustained low natural gas prices.