Re: THE Shale Gas Thread Pt 2 (merged)
Posted: Wed 03 Sep 2014, 19:24:06
The Popping of the Shale Gas Bubble
forbes
For much of the past decade we have been inundated by reports of how the wonders of technology, specifically horizontal drilling and hydraulic fracturing, have unleashed a new era for energy supplies. Industry leaders have touted that shale gas, along with burgeoning shale oil production, will lead to America’s energy independence, kindle a manufacturing renaissance, lower bills for everyday Americans and create millions of much-needed jobs. While there is little doubt that booming shale gas production, along with a very deep recession put an end to the natural gas price spike of 2008, much of the accepted conventional wisdom about the longevity of the shale gas bonanza is wrong. America’s shale gas resources and reserves have been grossly exaggerated and today’s level of shale gas production is unsustainable. In fact, due the distortions of zero interest rates and other factors, an enormous shale gas bubble has developed. Like all bubbles, this one will pop sooner than expected and when it does, the aftermath will be very unpleasant.
Make no mistake; shale gas production over the past 12 years has been nothing short of phenomenal. From a standing start a dozen years ago, shale gas production has grown to account for nearly 50 percent of America’s gas production. However, the shale gas boom is rapidly maturing and we are quickly approaching a point where shale gas production heads into decline. In fact, the majority of shale gas basins in America are already exhibiting declining production.
Before discussing how the coming natural gas crisis will unfurl, let’s debunk some of the most commonly held myths about the shale gas.
1) The US has a 100-year supply of shale gas. While many grandiose claims about the potential supply of shale gas, such as ‘the US has a 100-year supply’, have been made in recent years; almost none have ever been supported by any empirical evidence. According to the EIA, marketed production in 2013 was 25.6 trillion cubic feet (tcf). Therefore, using last year’s rate of production, a 100-year supply would be 2,560 tcf of gas. (Note: Total US supply consists of marketed production plus net imports.) No one has ever been able to identify the shale gas fields, resources and reserves that would supply this bounty. More importantly, given that America is the most thoroughly explored petroleum producing country on earth, it is very unlikely new shale gas fields lie in wait of discovery. The only justification ever given for the 100-year supply claim has been that future developments in hydraulic fracturing (“fracking”) technology will unlock all that shale gas that has already been identified. While recent advances in horizontal drilling and hydraulic fracturing have been remarkable, technological progress does not follow a straight line.
forbes