TABLE F-34 Benefits Matrix for the Western Gas Sands Program (WGSP)a

 

Realized Benefits/Costs

Options Benefits/Costs

Knowledge Benefits/Costs

Economic benefits/costs

DOE R&D costs: $185 million

Industry costs: $9 millionb

Benefits: DOE made substantial contribution to $800 million in increased net revenues, royalties, and cost savingsd

Incremental natural gas produced from the five Rocky Mountain foreland basinsf

Potential for large volumes of marginal resources to be added to the resource base

Development of new and improved techniques for future gas recovery from low-permeability (tight) gas reservoirse

R&D on tight gas science, technology, and development

Theoretical work on natural gas fracturesc

Improved characterization and extraction technology

Tailoring of well spacing to specific reservoir geometriesg

Characterizations of basin-centered accumulations throughout the western United States

Advanced the understanding of complex, lenticular reservoirs and how fracturing is deployed in such reservoirs

Environmental benefits/costs

Reduction in the number of wells required to produce a given gas supplyh

None

None

Security benefits/costs

None

None

None

aUnless otherwise noted, all dollar estimates are given in constant 1999 dollars through 2000.

bPrior to 1992, the program was funded entirely by DOE, but as it became more product-oriented, a larger percentage of funding came from industry. By the late 1980s, most of the research money was being spent on field demonstration projects. In the basic and applied stages of the program, DOE expenditures led industry by 2 to 1; in the demonstration stage, industry led DOE by nearly 3 to 1. In addition, FE acknowledges analogous R&D efforts by GRI and private industry over the time period in question but provides no information on these efforts.

cProvided the foundation for the emerging natural fracture detection and prediction methodology.

dFE estimates $1626 million in increased net revenues and cost savings to gas producers in the Rockies; inclusion of the industry cost share in the program would reduce the benefits credited to DOE. FE further estimates $591 million from royalties on federal lands and from increased state severance taxes due to displacement of imports, and it credits 70 percent of the increased gas production in the Rocky Mountain gas basins since 1987 to WGSP. The basis for estimating the realized economic benefits for the WGSP is the enabling of production of natural gas at prices that would not have been possible without the program. Overall, WGSP is credited with developing technology and stimulating 35 percent of the tight gas produced from the Rockies from 1978 to 2005. With a 35 percent DOE share, a net benefit of about $800 million is assigned to DOE. The remaining 65 percent is assigned to industry, GRI, and Section 29 tax credits.

eFuture application of WGS technology in emerging plays and basins will substantially enlarge this part of the resource base. By 2005, production should approach 800 Bcf. In addition to increased production, the program has significantly advanced understanding of complex lenticular reservoirs and how fracturing is deployed in them, and a much larger part of the vast in-place resource in the basin-centered gas formations of the Rocky Mountain basins is economically accessible.

fWGSP has contributed increased gas supplies at lower cost. Tight gas production from the Rocky Mountain gas basins was only 162 Bcf in 1978, at the start of the program; 10 years later it stood at 224 Bcf, and in 2000 exceeded 700 Bcf.

gWGSP demonstrated the importance of tailoring development of well spacing to the specific geometries of reservoir heterogeneity related to natural fracturing in tight gas sands.

hThe application of resource assessments, natural fracture detection and prediction technology, and advanced drilling and stimulation will enable less than half as many wells to be drilled in the future to yield the same volume of reserves.

demonstration stage, industry led DOE by nearly 3 to 1 (OFE, 2000t).

Results

The Western Gas Sands program has contributed increased gas supplies at lower cost. Tight gas production from the Rocky Mountain gas basins was only 162 Bcf in 1978 at the start of the program; 10 years later it stood at 224 Bcf and in 2000 production exceeded 700 Bcf, a fourfold increase. By 2005, production should approach 800 Bcf. In addition to increased production, the program has significantly advanced understanding of complex, lenticular reservoirs and how fracturing is deployed in them. A much larger part of the vast in-place resource in the basin-centered gas formations of the Rocky Mountain basins is now considered economically accessible.

Benefits and Costs

DOE credits 70 percent of the increased gas production in the Rocky Mountain gas basins since 1987 to the Western Gas Sands program. Overall, the program is credited with developing technology and stimulating 35 percent of the



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