'Weird' Gas Increasingly Important to North American Supply, reports NGI.

DULLES, Va. -- EOG Resources' CEO Mark Papa may call it "weird" gas, but coalbed methane (CBM), tight sandstone, biogenic gas and shale formations, otherwise known as unconventional natural gas resources, are an increasingly important component of the North American natural gas supply.

"Weird gas isn't just a passing fad," Papa told a group of industry analysts. There are only three organic growth options for North American producers today: drill deeper in existing basins, explore in new basins or pursue unconventional gas.

Papa is betting on the latter. This year, EOG plans to invest 76% of its $1.6 billion capital budget in unconventional gas plays across North America.

Just three years ago, unconventional gas accounted for about 20% of the total gas output in the Lower 48 and non-Arctic Canada, but by 2025, the National Petroleum Council is forecasting that these resources will contribute 42% of total gas output.

According to the American Gas Association's "Preliminary Findings Concerning 2004 Natural Gas Reserves," published earlier this month, a lot of domestic gas production activity in 2004 was directed toward less conventional reservoirs, such as CBM.

Declining natural gas supplies have compelled the search for new resources, and with the sustained high prices, more producers view unconventional gas prospects as an economically feasible way to expand because the wells offer low risks and predictable production.

Analysts point to recent acquisitions that have focused on building an unconventional gas profile. Howard Weil analyst Larry Benedetto said that many of the recent acquisitions have come in the Barnett shale region where producers are "chasing a shale-type unconventional gas." He noted the recent acquisition of Evergreen Resources by Pioneer Natural Resources was driven by Evergreen's CBM assets.

Even Alan Greenspan, chairman of the Federal Reserve, believes unconventional gas resources are one key to increasing supply. In a speech before the National Petrochemical and Refiners Association Conference in San Antonio recently, Greenspan noted that "production from unconventional sources has more than doubled since 1990 and currently accounts for roughly one-third of U.S. dry gas production. In many respects, the unconventional is increasingly becoming the conventional."

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