ead the article mentioned. Read all the posts here...rocdoc, I think you are missing the gist of what Rune was driving at. As we have a few years of data now on actual production, things just dont seem quite as rosy as the oilco's/investment pumpers seem to have touted a few years back. Sounds kind of familiar. I think his main point is..sure you guys can make money..provide a few jobs..but how long does this go on? At what point do we start realizing that each time we do one of these booms..Bakken, Eagle Ford, ANWR, offshore..etc......that we move further and further into the pardigm he is showing us. That paradigm is an acknowledgement that no matter how many resources we throw at oil production..manpower, capital, equipment, rigs, etc.....we seem to be running into the wall quicker each time.
The issue is that he seems to be portraying this as being something that will fail because of the steep declines, the inference being the resources aren't there. What I am saying is no it will not fail. There is no argument amongst anyone who works in the industry that the resources are there, some are more expensive to get out, others have lower pressure and hence lower rates, others have a mixture of liquids, not all of which are sold at the same price. To get those resources you simply need to drill wells and frac. The industry understands the decline rates...that is how the EUR predictions are made (type curves) and most of what I have seen published by oil companies who are at risk of heavy fines from the SEC for "gilding the lilly" show the type curves are not a bad match for the "average" well. The actual peak rate from these shales will be determined by speed of drilling and total activity. At some point there will be a sawoff and you will see relatively stable production for a number of years after which it will decline. Remember that once you have thousands of wells producing at tens of barrels a day with limited decline (the nature of late life hyperbolic decline) this can still be a very substantial total production. No one has argued this isn't a non-renewable resource but the resource level is very high and if you can manage costs and oil prices stay high it can be extracted profitably. As with conventional peak economics comes into play and although it doesn't control the total supply over time it does control the rate of extraction. It isn't a panacea but as I have said on numerous occasions it can give some breathing room for partial conversion to other sources of energy.
As to investment pumping from what I've seen this is not the oil companies, certainly not the publicly traded ones doing this. Most of the over inflated numbers I have seen come from government bodies, think tanks or the free press who misinterpret what they have read. The SEC rules are quite strict around this sort of thing and the reserve reporting rules govern precisely what can and cannot be said. When a company says they tested X number of wells at initial rates of say 1500 barrels a day, that is exactly what it means. It says nothing as to what the production is in say 5 months time but if you are in the industry and understand the decline curves for that particular shale you can make a pretty good guesstimate of what the EUR for that well will be. There seems to be a very incorrect perception amongst many here that oil companies can behave like mining companies and lie about their reserves/production rates etc. In my experience this is almost impossible given the controls that have come into place since Sorbane Oxley regs and the new reserves reporting requirements of the SEC.