During this decade, northern Michigan’s Antrim shale-gas area has evolved from a marginal resource considered attractive as a tax shelter to a bona-fide revenue-generating shallow-gas play. "We don’t need to factor in tax credits when we estimate reserves there under an economic-limits basis," said Pat McInturff, a Ryder Scott engineer who specializes in evaluating the Antrim shale. "Most of the wells in the areas being developed today pay out nicely on their own."

Each year, production improvements have been achieved through new, cost-saving field applications. In the past four years, operators have substantially increased production from the shallow, black Devonian shale as the number of active wells jumped from 3,734 to 6,175. By September 1998, estimated cumulative production had reached more than 1 Tcf of gas. Over the past six years, Ryder Scott has evaluated all 405 units that produce an average of 531 MMcf/D of gas.

Although the first Antrim shale gas production was reported in 1940, it wasn’t until the 1980s that activity increased as the low cost of shallow drilling and the characteristic flat production declines attracted producers to the highly fractured trend. Drilling permits increased from 9 in 1983 to 1,200 in 1989. A year later, Washington established the Section 29 federal tax credit for unconventional fuels and Antrim operators ramped up operations.

The tax credit is now worth $1.02/Mcf of produced gas or $37,200 annually for a well producing 100 Mcf/D. However, operators have learned new ways to profitably produce gas from the shale without the aid of tax breaks. In large part, they owe thanks to the Gas Research Institute, which has played a pivotal role in helping operators develop and implement new technologies.

Those applications include improved completion, stimulation, and production practices; development and application of a reservoir predictive model and optimization of fracture-treatment design. As far back as 1994, a study by GRI showed a threefold increase in net present values when using these improved technologies.

The most effective artificial-lift methods are plunger lift, progressive-cavity pumps or beam-pumping units. These techniques are more efficient at maintaining low fluid levels and increasing drawdown to maximize production.

As a direct result of GRI’s work in improving log-acquisition applications, Ryder Scott and Antrim operators now estimate gas content from density logs. "GRI research resulted in bulk-density-to-gas-content correlations based on core analysis. We now use those analogs in our gas-in-place calculations," said McInturff.

He cautions, however, that even though the bulk density may be favorable, the pay zone must contain natural fractures to be commercially viable because of the low matrix permeability of the shale. Those permeable paths may be detected as close as a few inches apart using fracture-identification logs.

McInturff uses volumetric calculations as a starting-point upper limit for estimating the recoverable volumes from the gas in place. Analogies in the Antrim shale for complete production histories do not exist.

"The oldest producing project is 30 years old, but monthly volumes recorded before 1990 are not readily available to the public," said McInturff.

Even with all the technology improvements, "the tax credits are still a big part of the value," said McInturff, who analyzes the economics of Antrim projects using the Ryder Scott in-house cash-flow program. In addition, the tax credits have spurred a natural-gas rush to Michigan where more than 4,500 wells qualifying for the credit have been drilled in the Antrim shale play.