Exploring Hydrocarbon Depletion
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Page added on February 1, 2013
I rarely write about natural gas, mostly because I like to think I’m smart enough to know how much I don’t know, and thus opt out of adding my two cents’ worth to topics with which I have at best marginal familiarity. But there’s no denying its significance.
It’s home-grown, plentiful, and touted as the best way to wean the US off Mideast oil. But there are limits to how far the US can tilt toward a natural gas economy….
Natural gas already plays a major role in the American economy. It’s the primary way more than half of Americans heat their homes and cook their food. It’s also used to generate one-third of the nation’s electricity and is a major component in the chemical and manufacturing industries. Almost daily, its footprint is expanding because of the sudden surfeit of supply and low prices. 
In the course of doing some research, I came across a March 2012 article posted at the Energy Collective website. It was written by a Chevron Corporation executive, and seemed all but identical to the carefully manicured arguments offered by those who deny the facts about Peak Oil. Same playbook, no doubt. [Quotes are from this article unless noted otherwise.]
In light of what I do know about shale gas production in the last year or so, I thought it would be helpful to discuss the author’s exuberant assessments about shale gas (“a game-changer”), his near-complete disregard for any unpleasant realities which might rain even a little on his happy parade, and point out where we wind up by allowing these repeated efforts at denying facts, offering at best disingenuous arguments, or in the worst cases, making stuff up to serve as “information” to the public.
If nothing else, citizens should easily appreciate that there are two sides to most stories. Facts (I hope) still matter. The storyline follows the same pattern as do most writings disputing Peak Oil (and climate change, along with too many observations from the Right about President Obama, for that matter. I’m currently running another series on that topic, which began here). It’s not hard to follow the common themes and “strategies” employed.
The primary question remains unchanged: Why do they do this?
In this particular instance, there’s more than a bit of irony in the title: “The Truth About Natural Gas From Shale.” Seems that a fair amount of “truth” went missing in this benign account of “myths associated with this resource and its method of extraction” and the author’s determination to explain “how the process actually works to help demystify it.” It’s a slick way of bypassing those messy facts, too.
The usual parameters offered by all who rely on unconventional resources as the answer to Peak Oil are duly noted here as well. Once again, “more jobs and government revenues” are promised, and is a comment undoubtedly true. I’m still waiting for these deniers to also mention in passing that alternative energy development also provides a healthy share of “more jobs and government revenues.”
So too do we find the careful suggestions that “[n]atural gas from dense shale rock formations … could become a significant new global energy source [my bold/italic].” Doubtful that most casual readers pause for even a moment at such qualifiers to ask appropriate follow-ups. (I offered some thoughts on the “could become’s” more than a year ago.)
Let’s dive in….
According to the Energy Information Administration (EIA), the U.S. has over 2500 trillion cubic feet (Tcf) of recoverable natural gas resources – 33% of which is natural gas from shale. In just one decade, natural gas from shale has grown to around 25% of U.S. gas production and it will nearly double by 2035. This is significant as it will continue to provide the United States with reliable, affordable energy and present economic benefits to regions of the country such as Pennsylvania, Ohio and Michigan.
A couple of comments for starters. The “2500 trillion cubic feet” statistic is more than a decade old. One should assume an oil industry executive would know that. One should also assume that information widely reported two full months before the author’s article was published indicated that the U.S. Department of Energy cut its estimate of the Marcellus reserves (the area of shale gas reserves running primarily through Pennsylvania, West Virginia, Ohio, and New York, and the subject matter of this article) from 410 trillion cubic feet of natural gas to 141 trillion cubic feet. Not a small adjustment….
‘. . . the gas rush has . . . been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.’ Krauss and Lipton go on to quote Rex Tillerson, CEO of ExxonMobil: ‘We are all losing our shirts today. . . . We’re making no money. It’s all in the red.’ It seems gas producers drilled too many wells too quickly, causing gas prices to fall below the actual cost of production.
And there’s this [links/other references and sources are in the original article by Sharon Kelly at Grist, from which this quote is taken]:
The oil and gas industry doesn’t like to discuss is how hard it is to find the best places to drill for shale gas. Starting about a decade ago, drillers began offering investors some lofty rhetoric about the productivity of shale wells. They argued that they could pump this stuff in a “manufacturing model” whereby they could drop a well anywhere in a drilling zone (called a “shale play”) and it would be equally productive….
It is now clear that not all areas of shale play perform the same. Investors, small companies, and some landowners who expected sky-high royalties have been disappointed — even in the heart of drilling country….
Many drillers wind up in a tough spot because the contracts they signed with landowners require them to drill wells quickly — if they don’t, they lose their leasing rights. Many of these companies are deeply in debt; in fact, some of them are so leveraged that they’re raising eyebrows among federal and state regulators, who question whether companies broke the law by possibly providing inflated estimates to investors for the amount of gas that they could profitably bring to market.
In a terrific, thoroughly-researched 2011 report by J. David Hughes entitled “Will Natural Gas Fuel America in the 21st Century?”, Hughes pointed this out:
[T]he shale gas industry was motivated to hype production prospects in order to attract large amounts of needed investment capital; it did this by drilling the best sites first and extrapolating initial robust results to apply to more problematic prospective regions. The energy policy establishment, desperate to identify a new energy source to support future economic growth, accepted the industry’s hype uncritically. This in turn led Wall Street Journal, Time Magazine, 60 Minutes, and many other media outlets to proclaim that shale gas would transform the energy world.
Just a few facts, missing from the Chevron executive’s piece, which suggests a more-than-slightly different take on the promise of shale gas. Funny what even a little bit of evidence/reality can do to the no-energy-worries Happy Talk.
My point is not to call attention to the author’s motivations. What’s of much greater significance is that everyday citizens—having neither the time, nor interest, nor expertise, nor knowledge about the details of fossil fuel supply and production—need to understand that fact-free assurances have a downside.
Facts have an annoying habit of demonstrating that.
Just getting started on this.