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Page added on May 29, 2014

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Shale EROEI Failing


Rigzone, which reports new finds and plays in the fossil fuel industry, complains that, US Shale Debt Increases as Drillers Push to Maintain Gains:

Shale debt has reportedly doubled over the past four years, according to a Bloomberg News analysis of 61 shale drillers, while revenue has increased just 5.6 percent. Many are spending at least 10 percent of their sales on interest …

“What is not clear from higher-level company data is if the industry (both large players and independents) can run a cash flow-positive business in both top-quality and in more marginal plays and whether the positive cash flow could be maintained when the industry scales up its operations,” [a research associate] noted. …

Furthermore, independent producers will spend $1.50 on drilling this year for every dollar in return, Bloomberg noted in February. Producers will have to drill 2,500 new wells a year just to sustain output of 1 million barrels per day in the Bakken, according to International Energy Agency.

Recent analysis by Energy Aspects show 6 years of progressively worsening financial performance by 35 independent companies focused on shale gas and tight oil plays in the United States.

I look back at the headline and wonder, what gains? These guys are slowly going under.


17 Comments on "Shale EROEI Failing"

  1. peterjames on Thu, 29th May 2014 5:52 am 

    Lucky they are drilling the better prospects first, restricting it to a giant ponzi scheme. Once they move into the less productive areas, they may have to reclassify their activities in the stck market releases as a giant fraud.

  2. Makati1 on Thu, 29th May 2014 6:15 am 

    Giant ponzi scheme … looking for more suckers.

  3. sunweb on Thu, 29th May 2014 7:21 am 

    The title is misleading. This is not about ENERGY RETURN on ENERGY INVESTED at least not directly. In the long run it is.

  4. Davy, Hermann, MO on Thu, 29th May 2014 7:33 am 

    The Wall Street Psychopaths have done their market distortions. This will hopefully stop the mothballing of the NUK and Coal thermo electric productions with the shale gas fantasy. The oil shale fantasy will quickly shrivel as “Short” on this board has pointed out so well. These Wall Street folks are truly a parasitic scourge on the US economy. It is always a matter of time for speculation to run its course. It has taken a “lobby of plenty” much fanfare and sweet talk and the investment community bought it. Will we still hear the talk of energy independence and gas and oil exports now? We have the severe blow of the California shale oil hype popping. Now we see the financial msm reporting financial difficulties with the core operators in shale development. It is always interesting to see sobriety in action.

  5. meld on Thu, 29th May 2014 8:22 am 

    POP! right on schedule. Reality is a bitch isn’t it.

  6. Juan Pueblo on Thu, 29th May 2014 9:08 am 

    I’ve been following this shale oil speculative bubble and its accompanying PR and disinformation campaign since the first day, like many here. Waiting for it to burst has been fun. I believe most people are so brainwashed they will never know it happenned after all is said and done. This is all very Orwellian. I think George would have loved this stuff.

  7. Northwest Resident on Thu, 29th May 2014 9:53 am 

    The “shale boom” is a pretty good analogy for the US and Global economy. Lots of hype and “hopium”, truckload of newly printed $$$ needed to keep it going, investment and financial buzzards circling overhead and touching down to quickly devour dead pieces of meat along the road, accounting gimmickry taken to whole new levels in order to show a “profit” while in fact the enormous amounts of real energy are just being pumped and dumped into the shale formations to take the place of that “sweet light crude/condensate” that is being extracted. It is all hype, all illusion, no substance. But hey, at least the it keeps the empty shell of BAU creeping along for a while longer, which is probably all that it is meant to do. But there are real consequences — people losing their jobs, sinking into poverty, pollution and emissions piling up to the heavens. Things are breaking — real things, and it is only going to get worse. Like, for example, when governments across the US start going bankrupt like popcorn in a microwave:

    Richard Ravitch: Expect a Tsunami of Municipal Bankruptcies at moneynews dot com

  8. sandu on Thu, 29th May 2014 10:53 am 

    Is there any data on what will happen at prices from 8$ to 10$ . In other words at what price will shale gas will no longer be a bubble ?

  9. shortonoil on Thu, 29th May 2014 10:59 am 

    What is the ERoEI of shale, honestly – we don’t know, and we have worked like hell on this problem! The difficulty lies in the huge diversity of well types, GOR that is all over the place, and the lack of information available. The producers are not forthcoming at all in that department. What we can tell you is that the Bakken “maybe” a breakeven at about 7:1. Some of the purely condensate fields may be as low as 1.5 :1. What we have found out is that production costs have averaged $1.67 for every $1.00 of product produced. This is not a sustainable industry!

    We’ll keep you posted, but I think it is likely that by the time we have concrete answers the shale industry won’t be there anymore!

  10. Sharpie on Thu, 29th May 2014 12:25 pm 

    Ok, well if they’re constantly losing money then why keep drilling? lol.

  11. Northwest Resident on Thu, 29th May 2014 1:07 pm 

    “Ok, well if they’re constantly losing money then why keep drilling?”

    1) To keep the refineries at full or nearly full capacity

    2) To keep the oil workers employed

    3) To prevent the fact that we are on the downward slide toward energy shortfalls and ultimate collapse from becoming wide-spread knowledge

    4) To keep the illusion of “all is normal” and “BAU forever” alive in the minds of the unsuspecting masses

    To name a few…

    Once the illusion of “all is well” and “BAU forever” dissolves to reveal the stark reality behind the curtain, the stock markets will plunge, credit will freeze up, people will panic. That must be prevented at all costs — until it can’t be prevented anymore, or until TPTB are ready to reveal the reality to the world — whichever comes first.

  12. meld on Thu, 29th May 2014 1:36 pm 

    @ sharpie – they’ve managed to brainwash themselves quite expertly. Just a bit more new tech and they can get back to boom times. The Buffoons never took physics class.

  13. SilentRunning on Thu, 29th May 2014 9:22 pm 

    They lose a bit on money on every gallon pumped, but they are making it up in volume.

    Sure! Sign me up for that investment!!

  14. alokin on Thu, 29th May 2014 9:33 pm 

    1. Why do banks give them credit to keep running? I don’t believe that they are that dumb.
    2. Did a large number of shale companies give up yet?
    3. When do you think the shale bubble bursts and major companies close down?

  15. peterjames on Fri, 30th May 2014 12:34 am 

    Alokin – Banks dont give them all the money. They may give them some, but its on the back of alot of money given to them by shareholders first. For example, shareholders stump up $500 million, banks can in theory lend billions. If things go bad, its the banks that get money first. Also, its often the companies that keep going to shareholders asking for money, they may have just burnt thru $500 million of shareholders money, but they then go and ask for more, often saying the hard work has been done (or we are sorry that we screwed shareholders money, but it did allow us to do the things that werent economical) and things will be better this time.

  16. alokin on Fri, 30th May 2014 1:52 am 

    Oh, once shareholders know the story they’ll run! Or are there shareholders with the main interest to prop up the system (maybe your superannuation)?

  17. sandu on Fri, 30th May 2014 9:45 am 

    Now they hope to survive to see 10$ or more and i think they will get it by end of 2015 but they will lose still more until then

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