Sustainability 2011, 3, 1986-2008; doi:10.3390/su3101986 OPEN ACCESS sustainability ISSN 2071-1050 www.mdpi.com/journal/sustainability Article Energy Return on Energy Invested for Tight Gas Wells in the Appalachian Basin, United States of America Bryan Sell 1,*, David Murphy 2 and Charles A.S. Hall 2 1 Section of Earth and Environmental Sciences, University of Geneva, Rue des Maraîchers 13, Geneva 1205, Switzerland 2 Program in Environmental Science, State University of New York – College of Environmental Science and Forestry, Syracuse, NY 13210, USA; E-Mails: [email protected] (D.M.); [email protected] (C.H.) * Author to whom correspondence should be addressed; E-Mail: [email protected]; Tel.: +41-78-883-72-42; Fax: +41-22-379-32-10. Received: 26 June 2011; in revised form: 7 July 2011 / Accepted: 5 August 2011 / Published: 20 October 2011 Abstract: The energy cost of drilling a natural gas well has never been publicly addressed in terms of the actual fuels and energy required to generate the physical materials consumed in construction. Part of the reason for this is that drilling practices are typically regarded as proprietary; hence the required information is difficult to obtain. We propose that conventional tight gas wells that have marginal production characteristics provide a baseline for energy return on energy invested (EROI) analyses. To develop an understanding of baseline energy requirements for natural gas extraction, we examined production from a mature shallow gas field composed of vertical wells in Pennsylvania and materials used in the drilling and completion of individual wells. The data were derived from state maintained databases and reports, personal experience as a production geologist, personal interviews with industry representatives, and literature sources. We examined only the “upstream” energy cost of providing gas and provide a minimal estimate of energy cost because of uncertainty about some inputs. Of the materials examined, steel and diesel fuel accounted for more than two-thirds of the energy cost for well construction. Average energy cost per foot for a tight gas well in Indiana County is 0.59 GJ per foot. Available production data for this natural gas play was used to calculate energy return on energy invested ratios (EROI) between 67:1 and 120:1, which depends mostly on the amount of materials consumed, drilling time, and highly variable production. Accounting for such Sustainability 2011, 3 1 9 8 7 inputs as chemicals used in well treatment, materials used to construct drill bits and drill pipe, post-gathering pipeline construction, and well completion maintenance would decrease EROI by an unknown amount. This study provides energy constraints at the single-well scale for the energy requirements for drilling in geologically simple systems. The energy and monetary costs of wells from Indiana County, Pennsylvania are useful for constructing an EROI model of United States natural gas production, which suggests a peak in the EROI of gas production, has already occurred twice in the past century. Keywords: EROI; natural gas; tight gas; Appalachian Basin; Indiana County; depletion 1. Introduction Natural gas now dominates the well-derived fossil fuel production of the United States; the number of wells drilled for natural gas overtook the number of wells drilled for crude oil in 1993 and now accounts for nearly 70% of the wells drilled annually [1]. Natural gas is currently the most widely used fuel by the manufacturing industry in the United States [2]. Before natural gas rose to prominence, disturbances in the natural gas market such as the U.S. gas shortage of the 1970s and the gas oversupply of the 1980s had significant effects on national economies [3]. Similar global effects are expected to occur in the near future [4], although others tend to disagree [5] Another natural gas crisis seems likely given the unprecedented rise in U.S. natural gas well cost compared to the decrease in production per well, i.e., well costs are climbing at an exponential rate while production per well is decreasing at a linear rate. Conventional economics appears to have failed at making accurate predictions on energy resource availability [6]. Thus it becomes prudent to analyze energy resources in terms of physical constraints and requirements. This situation is more serious if we consider arguments about whether the most important fields have reached maturity and are in decline, i.e., peak gas [4]. Traditionally, discussion over whether gas reserves (and oil) are in decline rely on monetary based data [7,8] and aggregate production data from multiple fields [9-11], but typically do not address how to detect whether a particular field is in physical decline. Notable exceptions can be found with recent depletion analysis studies of individual oil fields [12-14] and for large gas fields in Europe [15] that show peak production occurring at or soon after one-half of the ultimate reserves are produced followed by increasingly high decline rates. While it is tempting to assume that the same trends apply to all natural gas fields, a similar decline analysis for U.S. natural gas apparently has yet to be performed. Knowing the decline characteristics for natural gas in a given area is essential for economic planning regardless of a peak gas scenario. However, different interpretations can be made about the same production data [8,9]. We propose a different approach for detecting whether a natural gas field is declining by examining individual well decline characteristics and the requirements for exploiting natural gas at the single-well scale. This approach makes sense because the overall decline rate of a given field should be controlled by the sum of the decline rates of individual wells and the energy requirements for drilling will physically and economically constrain the life of a given field. As a first step in understanding the Sustainability 2011, 3 1 9 8 8 limitations of natural gas reserves, the oldest and most mature fields that contain relatively inexpensive wells, such as those found in the Appalachian Basin, should be examined. The purpose of this research is to examine the energy requirements for drilling a natural gas well compared to the energy produced, i.e., a net energy analysis or an energy return on investment (EROI). We examine how much material and their energetic equivalents are required to drill a natural gas well in the Bradford-Venango-Elk (BVE) natural gas field in Indiana County, Pennsylvania. Material requirements and resource production are examined over time in order to detect whether technology and drilling parameters affect production. The resulting information can then be used as a constraint when considering other natural gas resources in terms of their economic viability. There are several advantages for choosing this area for EROI analysis. First, these wells are unique because they are near or already classified as marginally productive as soon as they are drilled and thus are extremely vulnerable to being abandoned or not drilled when the market price of petroleum decreases [16]. Thus, any estimates made for these wells could be considered a baseline estimate for other, more profitable wells. Second, this heavily drilled area represents one of the largest tight gas plays in the United States (Figure 1). Pennsylvania has the largest number of marginal gas wells of any state and produces the 4th largest quantity of marginal gas in the United States after West Virginia, Oklahoma, and Texas [16]. EROI could predict the future of this important natural gas resource by stating the energy requirements for exploitation. Third, Indiana County, Pennsylvania has over 100 years of natural gas exploration history and is densely populated with vertical natural gas wells (Figure 2), most of which have similar total depths, i.e., the natural gas system of this area is relatively well constrained (Figure 3). This long history [17] could serve as a useful comparison to other gas fields and possibly provide an indication as what to expect from the total gas supply of North America and beyond. Figure 1. Tight gas plays in the United States. The different colors represent different groups of rocks that compose the various tight gas plays of the United States. The dark brown polygon in the northeast U.S. represents the Bradford-Venango-Elk tight gas play. Sustainability 2011, 3 1 9 8 9 Figure 2. Map showing the Bradford-Venango-Elk (BVE) tight gas play (inset) and the distribution of all BVE wells in Indiana County, Pennsylvania, U.S. Yellow squares represent well locations examined for materials used. Red squares represent all wells that have available production records. The black squares represent all wells BVE play wells drilled in Indiana County. Figure 3. Depth-distribution of BVE wells. Elevation is that above sea level. Data are from the Pennsylvania Department of Conservation and Natural Resources (PADCNR). Wells have been drilled to other formations but 97% have been drilled to the depths of the Bradford, Venango, and Elk Formations. Sustainability 2011, 3 1 9 9 0 1.1. Drilling and Production History The Bradford, Venango, and Elk plays (Figure 2) are tight natural gas formations that encompass the western half of Pennsylvania, northern half of West Virginia and small portions of Virginia, Kentucky, Ohio, and New York [1]. All three plays comprise the BVE natural gas basin (Figure 1). Indiana County is roughly within the center of the main drilling area of the BVE field. It is useful for context to note that in 2007 there were approximately nine residents for every natural gas well in Indiana County, Pennsylvania. Of the 10,468 Indiana County wells on file at the Pennsylvania Department of Conservation and Natural Resources (PADCNR) as of March 2007, 97% were completed in the BVE natural gas play (Figure 3). The average depth of these wells is 1106 meters (3630 feet). The first BVE well in Indiana County was drilled in 1878 with peak number of wells (565) drilled in 1981 (Figure 4). After 1981, drilling intensity decreased rapidly until 1990 and is increasing steadily to this date. The market price of natural gas appears to have been the major driver in Indiana County’s natural gas development (Figure 4). Figure 4. Production and drilling history for BVE wells in Indiana County, Pennsylvania compared with the wellhead price per Mcf of natural gas. Price data are from the U.S. Energy Information Agency (EIA) [1]. Production and well data are from the PADCNR [18]. The BVE play is composed of multiple thin layers of siltstone and sandstone with low natural porosity. This type of formation requires the rock to be artificially fractured and eroded with explosive charges and high-pressure water containing various acidic chemicals. During this fracturing procedure sand is simultaneously pumped into the well as a material that acts as a prop (i.e., proppant) that holds open the artificial fractures. Available production data from the PADCNR on the BVE natural gas play in Indiana, PA, dates back to 1980 with fewer than 100 reporting for the first ten years [18]. Between 1991 and 2001, between 5,000 and 7,000 wells were reported each year (Figure 4). For each year since 1991, natural gas from Indiana County has accounted for approximately 23% of the total gas produced in Sustainability 2011, 3 1 9 9 1 Pennsylvania. During this same time, the number of wells drilled account for 20% of all wells drilled in Pennsylvania. Total production increased each year, however average production per well decreased between 1990 and 2005 (Figure 5). Average production per well for 20 years was reported [19] with average initial production per well at 28.5 MMcf (78.1 Mcf per day) decreasing to less than 5.0 MMcf after 16 years. Of all wells drilled in Indiana County, approximately 97% are successful natural gas producers. Unsuccessful wells typically have their production tubing removed, plugged with cement, and abandoned. Figure 5. Average production per well between 1991 and 2005. The values were determined by dividing the number of wells drilled in a given years by the total production. Production and well data are from the PADCNR [18]. 2. Data Collection Methods Individual well costs are difficult to obtain because of proprietary restrictions on such data [20]. Summary reports on monetary costs are available from the U.S. Department of Energy, but these reports do not provide details on amounts of materials used. Despite these issues we obtained well information that includes location, total depth, and materials emplaced in the borehole for natural gas wells from archives maintained by the PADCNR. This allowed assessment of what comprises a typical well in this Indiana County. From the well information list in the PADCNR archive, 101 gas wells drilled between 1965 and 2004 were randomly selected using a random function in Microsoft® Excel X for Mac® for examination of materials used in drilling and completion. The wells were randomly selected in this way because it was not possible to convert all completion reports into a useable dataset while selecting completion reports that would cover a broad geographic area of the county. The selected wells appear to give an adequate geographic coverage. Wells that were abandoned after drilling because of a lack of natural gas, i.e., dry holes, are not included in this study. Materials consumed in natural gas well drilling were taken from well completion reports maintained by the PADCNR (Table 1). The reports for each well lists the amount of steel casing and tubing, cement, and Sustainability 2011, 3 1 9 9 2 fracturing fluids and proppants (sand) used in the construction of the well. Approximate diesel fuel consumption used in drilling and completion of the well were derived from personal interviews and checked against industry publications [21]. Drilling and completion diesel fuel numbers were derived from personal sources at drilling and well service companies in Indiana County and from private company reports for fuel use in other natural gas producing regions in the United States. Table 1. Materials list for a typical natural gas well in Indiana County, Pennsylvania, with a depth of 3710 feet. Total Energy Materials Amount per well (GJ) Average casing and tubing weight (U.S. short tons) 31.88 1037 Average cement (U.S. short tons) 22.69 127 Average stimulation Water (gallons) 74,099 ? Average proppant/sand (U.S. short tons) 144.82 3.77 Drilling diesel fuel (gallons/day) 450 886 Completion diesel fuel (gallons/day) 900 135 Average well completion time (days) 13.1 – Labor Cost ? ? Average Production (Mcf) with 4% production loss 176,331 190,437 Conversions Conversion units References Raw Steel 25.3 GJ/ton [22-24] Manufactured steel pipe 7.2 GJ/ton [22-24] Limestone mining 0.03 GJ/ton [25] Cement manufacturing 5.59 GJ/ton [25,26] Sand (aggregate) mining 0.03 GJ/ton [25] Diesel fuel energy content 0.15 GJ/gallon [27] Natural gas energy content 1.08 GJ/Mcf [27] Energy cost for drilling 0.59 GJ/foot This study Approximate dollar cost for drilling $51.00 /foot [28] United States Energy Information Agency data were downloaded from their website [1]. Data used in this study includes: (1) footage for all exploratory, development, and dry wells; (2) gross gas well withdrawals; (3) the number of natural gas exploratory and developmental wells drilled; and (4) nominal cost per foot of natural gas wells drilled. Data coverage is restricted to those wells drilled explicitly for natural gas—mixed wells that produce both natural gas and crude oil are excluded. 2.1. Deriving EROI The EROI calculated here is for the mine mouth (EROI ) and takes into account the embodied mm energy found in materials consumed in well construction. Energy quality is not considered and other energy costs are ignored because we consider them minor with respect to the costs presented here, e.g., physical energy employed by workers. An EROI ratio, which is a first approximation of EROI is mm calculated for Indiana County using the following equation: (1) Sustainability 2011, 3 1 9 9 3 Production, P, and production loss from pipeline leaks, s, represent the energy returned. The energy equivalents of steel used in casing and tubing, S; cement used in the well, C; proppant used in fracturing, p; and diesel fuel used in drilling and well treatment, D, represent the energy inputs. Other energy inputs can be added, but were not directly available for this study. The energy requirements for the BVE play wells in Indiana County are assumed to be close to the minimum cost of drilling a natural gas well. The minimum energy requirement is 0.59 gigajoules per foot. This minimum energy cost per foot is used to calculate the average energy cost per foot, E, of f natural gas extraction in the U.S. on the basis of monetary cost per foot (assuming that energy cost is approximately proportional to monetary cost and that energy costs for BVE wells in Indiana County have remained constant): (2) The minimum monetary cost per foot is C , which is equal to $51.00 per foot for the year 2000, m C is the average monetary cost per foot for the nation (U.S.), and E is the minimum energy AN m cost. This average energy cost per foot is then multiplied by the total footage drilled for a given year such that: (3) The total production, P is from gross gas withdrawals, E is the average energy cost per foot, and F t f is the total footage drilled for all exploratory, development, and dry wells. In this EROI calculation the monetary and energy costs, footage drilled, and production are used to approximate an ratio for EROI . Another indicator of the natural gas drilling effort that may useful is the total number of gas mm wells drilled per year. While admittedly speculative, we assume here that as the numbers of wells are increased there may be a corresponding increase in infrastructure. This infrastructure increase may be used to give an indication of energy inputs beyond the mine mouth boundary, i.e., point if use (EROI ) as defined in the introductory portion of this volume. If so, then the number of wells drilled pou in a given year can be used as an approximation of transmission and processing costs and losses such that EROI for the U.S. may be estimated by: pou (4) The number of wells drilled for a base year W is the same year used to derive real from nominal by dollars. The number of wells drilled for any given year, Wt, divides the number of wells for the base year. The number of wells does not account for all infrastructure however, we use the number of wells drilled as a factor that takes into account the influence of field expansion and the required pipeline development. A more accurate calculation would add the energy costs of infrastructure, which is clearly not taken into account in our analyses. Sustainability 2011, 3 1 9 9 4 2.2. Deriving Energy Intensities of Materials Used To tally the energy costs of drilling and completing a BVE play well we examined the amounts of steel for casing and tubing, cement used to set the casing in the borehole, water and sand used for treating the well, and diesel fuel for all aspects of well construction. Many other materials, e.g., fuel for transporting personnel to the well site, are commonly used in the construction of a natural gas well. We consider the energy cost of these other materials as small compared to the entire energy cost of the proceeding materials and would make a minor contribution to the EROI calculation. This assumption appears reasonable after examining “application for expenditure” forms from private industry. Unfortunately, these forms contain proprietary information and cannot be published. Some other materials such as drill bits may make a significant contribution to energy cost of a well; however, reliable information on the manufacturing energy cost is not readily available. While we did tally the amount of water used (i.e., fracture fluids), there was no clear way to arrive at an energy equivalent for water use. Calculating the energy cost for making steel (Table 1) is difficult because it is unknown what quantity of secondary steel (i.e., steel manufactured from scrap using electric arc furnaces) is used for casing and tubing. Secondary steel has been estimated to cost between 11.3 [22] and 11.8 GJ/ton [23]. For primary steel derived directly from iron ore the energy cost is estimated to be between 23.4 [22] and 26.0 GJ/ton [23]. According to Worrell [23] there appears to be a decrease in the average energy consumption by the steel industry per ton of product of almost 35% over a couple of years in the early 1980s, which should be considered when calculating the energy cost of a well at least prior to 1982. The decrease in average energy consumption is probably due to the closure of many older integrated steel mills and an increase in the number of mills that use recycled steel [23]. Also important to note is that several energy intensive materials required for steel making are excluded from the energy equivalents. Stubbles [22] points out that such excluded items include electrodes, ferroalloys, refractories, and imported direct reduced iron. Also excluded from the energy cost of steel is the mining cost of coal for coke and limestone for lime. According the U.S. Department of Energy [25], coal produced in the eastern United States is estimated to have an energy cost between 0.31 and 0.003 GJ per ton. Lime is used in the steel industry to remove impurities during the steel making process and comes from the thermal decomposition of calcium carbonate, i.e., limestone. The process of mining and making lime is similar to that for cement, which has been estimated to have an energy cost of 5.3 GJ per ton [23]. Coke and lime requirements per ton of steel are 50 and 120 pounds, respectively [22]. Coke and lime combined adds only 0.3 GJ of energy cost to each ton of steel, which has a small effect on the final net energy requirements for natural gas well construction. We could not find direct energy costs associated with the manufacturing of petroleum specific casing and tubing from steel in any published literature. However, the energy costs for forming and finishing, which includes manufactured pipe is estimated to be 7.2 gigajoules per ton [22,23]. This energy cost for petroleum specific tubing is likely to be more than basic structural tubing because of stringent requirements as outlined by the American Petroleum Institute. The energy costs for producing crushed and broken limestone and other rocks are derived from a 2004 report to the U.S. Department of Energy on energy use in the mining industry [25]. The estimated energy costs of mining and processing limestone minus calcining (lime production) is 0.026 GJ per Sustainability 2011, 3 1 9 9 5 ton. Cement manufacturing is energy intensive at 5.59 gigajoles per ton because of the heat needed to decompose calcium carbonate to lime [25,26]. Sand used as a proppant requires a specific grain size and grade that must be mined, crushed, sieved, and transported in a similar manner as limestone. Since we could find no studies on the energy requirements for sand production we use the same energy cost values as used for the mining of limestone. The energy equivalent of natural gas is 1.08 GJ/Mcf [27]. Production for each well is measured at the wellhead. Most natural gases require processing to remove other liquid fuels and impurities, which results in a reduction of volume of the extracted natural gas. The U.S. Energy Information Administration estimates this volume reduction (shrinkage) to be approximately 4%, which we use to correct the energy produced at the wellhead since natural gas (methane) is what is being examined in this study. The diesel fuel energy equivalent is derived from the same report as the natural gas equivalents [27]. 3. Results Individual well production data from Indiana County are for the years 1984 through 2003 while material data are for the years between 1964 and 2005. On the basis of all available production data from 2486 wells (Figure 6), average production per well increased during the 1980s and then generally decreased or remained flat until the present. Average total production per well is 184 MMcf between the years 1985 and 2003. A log curve fitted to the average of all production data gives R2 value equal to 0.97 (Figure 7). Average first year production data shows a decrease in production after 1988 (Figure 8). On the basis of subtle trends shown in Figure 6 and Figure 8 we grouped the wells to show multi-year trends that show decreasing average production (Figure 9). Wells were randomly selected using a spreadsheet random number function (Figure 2). On the basis of 101 wells, materials used in the well construction show no clear trends over time, but the time it takes to drill a well generally decreased between the 1960s and 1980s and remained flat until the present (Figure 10). Average natural gas production (Figure 7) and the average of materials consumed (Figure 10) were converted to their energy equivalents (Table 1). The average EROI for a gas well in the BVE tight gas play in Indiana County, Pennsylvania over this time period is 86.96 (Figure 11). Year to year production changes do not show a correlation with year-to-year changes in available data (see data appendix). EROI fluctuates with respect to well production and shows a general decline from the 1980s when the EROI was as high as 120:1 to 2003 when EROI was equal to 67:1 (Figure 12).