US Shale Gas: Less Abundance, Higher Cost
August 06, 2011
– Comments (13)
From The Oil Drum - http://www.theoildrum.com/node/8212
- Arthur E. Berman and Lynn F. Pittinger;
Shale gas has become an important and permanent feature of U.S. energy supply. Daily production has increased from less than 1 billion cubic feet of gas per day (bcfd) in 2003, when the first modern horizontal drilling and fracture stimulation was used, to almost 20 bcfd by mid-2011.
There are, however, two major concerns at the center of the shale gas revolution:
• Despite impressive production growth, it is not yet clear that these plays are commercial at current prices because of the high capital costs of land and drilling and completion.
• Reserves and economics depend on estimated ultimate recoveries based on hyperbolic, or increasingly flattening, decline profiles that predict decades of commercial production. With only a few years of production history in most of these plays, this model has not been shown to be correct, and may be overly optimistic.
These are not purely technical topics for debate among petroleum professionals. The marketing of the shale gas phenomenon has been so effective that important policy and strategic decisions are being made based on as yet unproven assumptions about the abundance and low cost of these plays. The “Pickens Plan” seeks to get congressional approval for natural gas subsidies that might eventually lead to conversion of large parts of our vehicle fleet to run on natural gas. This might commit the U.S. to decades of natural gas exports at fixed prices in the face of scarcity and increasing prices in the domestic market. Similarly, companies have gotten permits from the government to transform liquefied natural gas import terminals into export facilities that would commit the U.S. to decades of large, fixed export volumes. If reserves are less and cost is more than many assume, these could be disastrous decisions.
Executive Summary
Our analysis indicates that industry reserves are over-stated by at least 100 percent based on detailed review of both individual well and group decline profiles for the Barnett, Fayetteville and Haynesville shale plays. The contraction of extensive geographic play regions into relatively small core areas greatly reduces the commercially recoverable reserves of the plays that we have studied.
There is more, http://www.theoildrum.com/node/8212
I hope the Tea Party candidates do not turn out to be a group that ran on reducing Gov't spending and then continue spending tax money subsidising the wrong choices for America.
Best wishes,
Steven
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