Natural Gas from Shale: Texas Revolution Goes Global - Southwest Economy, Third Quarter 2010 - Dallas Fed

Natural gas extraction is experiencing what has been called a quiet revolution. The industry historically viewed natural gas as trapped in reservoirs, where it collects over thousands of years after exiting source rock. Though hard to find, the reservoirs easily give up large amounts of their holdings when penetrated by drilling. But what if natural gas could be extracted directly from source rock, such as common and easily found shale? The industry’s perspective changed when a few small, independent oil producers from Texas developed a method to economically extract natural gas from shale. Focusing on the source rock, they discovered how to force the more rapid release of natural gas. The feat, representing 10 years of work for George Mitchell and Mitchell Energy, was achieved in the Barnett Shale near Fort Worth. By the late 1990s, their solution was in place, and subsequent technological advances and rising natural gas prices enabled natural gas produced from shale to become profitable. The innovation involved hydraulic fracturing—injecting a mix of water, sand and chemicals into a well to stimulate production from shale formations. Horizontal drilling, a technique exposing more of the well bore to the source rock, further boosted output and was applied to the Barnett in 2002. Other independent producers took notice. From experimental output levels in 2000, the Barnett produced 380 billion cubic feet of natural gas in 2004 and 1.8 trillion cubic feet by 2009—almost a month’s worth of average U.S. natural gas output. The quiet revolution in Texas has now stepped onto the national and global stage. The technology has moved to other U.S. shale basins (see map), notably the Haynesville in East Texas and Louisiana, the Fayetteville in Arkansas, and the Marcellus in New York,