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Shale Revolution Deniers Face An Inconvenient Truth

Shale Revolution Deniers Face An Inconvenient Truth thumbnail

 

Despite turning the U.S. into the world’s largest producer of natural gas and driving a 3 million barrel per day surge in U.S. oil production in just the last three years, the shale revolution still has its doubters. They couldn’t be more wrong.

The Montreal-based Centre for Research on Globalization recently dismissed shale fracking as a “Ponzi scheme” and “this decade’s version of the dot-com bub ble” that’s about to burst. But time and again over decades, the naysayers and “peak oil” advocates have grossly underestimated the energy industry’s ability to innovate and beat production forecasts. Today’s shale pessimists continue to do so.

Shale pessimism is constructed on the theory that U.S. development has so far largely centered on sweet spots — the most resource-rich areas of geologic formations. As drilling continues and moves further from these sweet spots, productivity of newly drilled wells will allegedly fall. Shale development is already a complex and highly capital-intensive process. The profit margins between an economic well and an uncompetitive well can be razor-thin. In theory, less productive wells, drilled in the margins of shale plays, will quickly become uneconomic and put producers in the red.

Shale pessimists also point to the sharp decline curves of shale wells to support their bubble theory. While newly drilled and producing wells may be highly productive initially, their output falls sharply over time — nearly 50% a year. Continuing to increase overall production, much less just maintain it, supposedly takes constant drilling.

Theory Vs. Data

The sharp decline curves and the movement of drilling into the margins of shale plays seem like a recipe for production to peak and then fall, according to the “peak oil” advocates. But even as producers have moved away from sweet spots, and even as the rig count in many plays has either stayed flat or fallen, production of shale oil and gas continues to grow significantly. If you’re a “peak oil” shale contrarian, the data unfortunately just aren’t on your side.

There are two important reasons why the shale pessimists are wrong: innovation and expertise. The shale revolution was launched because of breakthroughs in a range of technologies, most notably advances in horizontal drilling paired with advanced hydraulic fracturing.

Competition and innovation drive the oil and gas industry, particularly in the U.S. The innovation that unlocked the nation’s oceans of shale resources hasn’t stopped but instead has actually intensified. New ideas, technologies and ways of cracking the shale code emerge daily. And America’s amazing “petropreneurs” have obviously gotten very good at what they do.

Output Per Well Soars

Crews are working more efficiently, bringing wells online in shorter periods and producing more oil and gas from each new well. Consider Arkansas’ Fayetteville Shale, where the average drilling time for a new well has fallen from 17.5 days in 2007 to just 6.2 days in 2013. In the Marcellus Shale, America’s largest single shale gas field, each well is producing eight million cubic feet of gas per day on average — more than eight times what each well produced as recently as 2009.

Impressive production gains have also taken place for America’s crude oil production — oil production per rig in the Bakken oil field of North Dakota has increased fivefold since the shale revolution started there in 2007, and oil output per rig in the prolific Eagle Ford region of south-central Texas has doubled in just the last two years.

The same gains in efficiency and innovations that are allowing our producers to drill deeper and pull more oil and gas from each new well are not only going to unlock new domestic shale formations but will soon allow the shale revolution to take off outside the U.S. Mexico just passed groundbreaking energy reform after 75 years of a state-run energy monopoly — largely because of the need to bring in U.S. expertise to tap its own shale — and our neighbor to the south is now poised to join the shale revolution. The U.K., China and Argentina, all with significant shale resources of their own, are also working to jump-start production.

Shale pessimism and the belief in “peak oil” still have a handful of followers, but surging oil and gas output in the U.S., rapid gains in production and drilling efficiency, and the steady march of technological innovation all tell a much different story of a new, unprecedented era of energy abundance. Instead of moving toward its twilight, the shale revolution is likely only in its opening act. Stay tuned.

• Mark Perry is a resident scholar at the American Enterprise Institute and a professor of economics at the Flint campus of the University of Michigan.

IBD Buzz



63 Comments on "Shale Revolution Deniers Face An Inconvenient Truth"

  1. Nony on Wed, 24th Sep 2014 7:15 am 

    The denial of the amazing development just shows the bias of peakers. They are not thoughtful analysts. They are ideologues.

  2. Davy on Wed, 24th Sep 2014 7:44 am 

    Noo, quit generalizing and your criticism is boomeranging back towards yourself. You are the ideologue who preaches happy days and all is well. We have solid scientific evidence and financial results showing both above and below ground problems with shale supply in quantity, quality, and cost of extraction. I am grateful for shale. Not only has it made my family allot of money indirectly through equipment sales but it has bought me a few years of prep time I may not have had. It has bought a few more years of happiness for my 7yr old boys. So Noo stick to your good comments on the issues and drop the propaganda crowing. You are just stepping into the mud with the ideologues. If everyone realizes the end is near for BAU then the issues become mute.

  3. ghung on Wed, 24th Sep 2014 7:44 am 

    “The denial of the amazing development just shows the bias of peakers…”

    We don’t deny the ‘development’, Nony; we’re just not amazed like you. We would be like Nony, experiencing amazement every time he digs a giant booger from his nose, showing it to everyone with that proudly idiotic smile.

  4. penury on Wed, 24th Sep 2014 8:41 am 

    I admit that I could be wrong, that there may be hundreds of years of FF supply for 10 Billion humans and that the days of shortages and unaffordable heat,cooling,are well into the past but, I still think that the days of excess are passing and the days of shortage are coming. We just don’t know when or even if that day will arrive soon or at all.

  5. Beery on Wed, 24th Sep 2014 8:49 am 

    So that leveling off I see towards the top right hand side of the graph is all in my imagination, because innovation and expertise prove that a drop-off in the increase of production can’t be happening? Is that really what the author is suggesting?

    Does Mark Perry really think we’re that stupid? Or is he so far down the rabbit hole that he can’t even read a simple graph anymore?

    In the real world, anyone with working eyes can see that this article is nonsense. I mean why even add a graph that proves the author is wrong? The fact that Mark Perry thinks that the graph supports his view shows just how removed from reality he is.

  6. eugene on Wed, 24th Sep 2014 8:57 am 

    I call articles such as this “faith based”. The author assumes past will persist into the future. Faith based as they stand on the “superiority” of America/technology. As with all faith based beliefs, many factors are ignored to make the beliefs simplistic. Complexity is ignored as it creates insecurity and presents unanswered questions. What will really happens remains to be seen. Personally, I don’t place much “faith” in “faith”.

  7. Dave Thompson on Wed, 24th Sep 2014 9:27 am 

    This article is for all the investors that want to really believe they are making the right move in the oil market.

  8. JuanP on Wed, 24th Sep 2014 9:31 am 

    I will be really surprised if shale oil production growth continues increasing until the next decade. I believe we have a couple of years of growth ahead and then it will be downhill forever.
    I have been wrong too many times in my life about things, and I don’t pretend to know enough about this to be certain about it. I was very surprised by the shale boom, but all booms must bust.

  9. Don on Wed, 24th Sep 2014 9:39 am 

    So the top of that graph like Beery pointed out is interesting indeed. Back to calc 1 for a minute. It appears that there is an inflection point right at 2013 where the rate of rate of change became negative and decreasing. What does that give us again? If you said “a peak.” then you are correct.

  10. Nony on Wed, 24th Sep 2014 9:53 am 

    The peakers have already been surprised by shale. how many of them had a linear ramp of 1 million bpd for the U.S. for three straight years?

  11. Nony on Wed, 24th Sep 2014 9:55 am 

    Don,

    that graph is production per rig. Not even production overall. Production in the Marcellus has been increasing linearly at 3 bcf/day/year for the last 3 years.

  12. shortonoil on Wed, 24th Sep 2014 9:56 am 

    This was posted a few minute ago in “US Tight Oil Technology Could Boost Output by 25%”

    If 25% is all they can do, the shale industry is going to be in big trouble very soon. Condensate production is beginning to fall very fast, and about 40% of US shale production is condensate. We pulled this graph from Ron’s site at PeakOilBarrel. It shows the declining production of condensate from of the Eagle Ford.

    Texas RRC Data Report
    http://peakoilbarrel.com/wp-content/uploads/2014/09/Texas-Condensate.png

    Here is what is happening: Condensate (unlike oil which is a liquid in the ground) is a gas. The heavier fractions are dissolved in the high temperature / pressure gas. When the gas flows out of the well its temperature and pressure fall. The heavier fractions “condensate” out of the gas into their liquid form at atmospheric temperatures, and pressures, and are retrieved.

    The gas in the well is forced out by its pressure. A condensate gas well is like a highly pressurized container with a hole drilled in it. As more gas is extracted the pressure falls in the well. When the pressure hits about 3000 psi the gas reaches its dew point (the pressure is no longer high enough to keep the oil dissolved in the gas) and all the heavier fractions fall out in the well, and are lost. There is little liquids production after the well reaches its dew point.

    In a formation that has to be frac’d to produce hydrocarbons because its permeability is too low for the fluids to flow through the rock naturally, the reservoir size is limited to the frac’d volume. These individual reservoirs are very, very small, about 300 to 400 million cubic feet. The pressure in these areas falls to the dew point quite rapidly.

    Thousands of these tiny reservoirs were drilled at about the same time, so it can be expected that they will hit their dew point at about the same time. Condensate production will plunge. These wells will stop producing liquids in mass. Drill Baby Drill, but the problem is that there is not enough drilling rigs on the planet to turn this around. In the graph above you are seeing the beginning of the end of the shale revolution. Shale production will undoubtedly soon be in terminal decline.

    “The shale revolution was launched because of breakthroughs in a range of technologies, most notably advances in horizontal drilling paired with advanced hydraulic fracturing.”

    Now, if they can come up with a “technology” to prevent these these mini reservoirs from reaching their dew point, they will be getting some where. We are sure that the shale industry, and its cheerleaders will have no problem negating the most fundamental laws know to physics. All they will need is a larger propaganda budget.

    http://www.thehillsgroup.org/

  13. Davy on Wed, 24th Sep 2014 10:21 am 

    Wow Noo, 1MIL is that all you can crow about?

  14. Plantagenet on Wed, 24th Sep 2014 10:48 am 

    Global oil production is very close to peaking. Tight oil from shale can provide a bridge to a non-carbon future, but it can’t sustain the oil age indefinitely.

  15. Northwest Resident on Wed, 24th Sep 2014 10:52 am 

    Davy — One day not too far off when TSHTF, Nony will be sitting in front of his blank computer screen thinking “but… but… Marcellus is mighty. What could possibly have gone wrong!?”

  16. Don on Wed, 24th Sep 2014 10:57 am 

    So Nony, are you saying that the rate of rate of change is 0 and will stay that way until the whole volume under the rate of change curve, which you are describing as a straight line is used up?

    Just so you know a constant acceleration such as you are describing has a very abrupt end. This would look very similar to falling out of a plane. Yes you would keep accelerating at 9.8m/s^2 but eventually you will hit the ground. In much the same way when you are dealing with a finite resource you will hit an end.

    I suppose that the extraction curve you are describing could be possible I just don’t see it happening that way. Most Things in nature tend to follow a bell curve, other than falling obviously. Resource extraction being one of them. Not always perfect bell curves and often with outliers though.

  17. Davy on Wed, 24th Sep 2014 11:00 am 

    NR, Noo will be nursing a beer in the local tavern with the other out of work brokers.

  18. Davy on Wed, 24th Sep 2014 11:05 am 

    Now, Don, Noo might be on to something. If us doomers are correct one day the lights will turn off at the frackster’s drill rigs and production will stop. It is one of those unconscious admissions from Noo’s very large but actually too large mind.

  19. GregT on Wed, 24th Sep 2014 11:10 am 

    ” Tight oil from shale can provide a bridge to a non-carbon future”

    Not a bridge Plant, more like a cushion at the bottom of the abyss. A cushion that we are rapidly deflating.

  20. Davy on Wed, 24th Sep 2014 11:19 am 

    Or Greg, a drawbridge to the stone age or better yet a pirate’s plank to the abyss.

  21. coffeeguyzz on Wed, 24th Sep 2014 11:19 am 

    short on oil, you actually have the seeds of the next step in the evolution right in your post. Yes these are small micro reservoirs as you said. But companies are already in the early stages of repressurising these reservoirs,and having success. The Canadian company D3 exploration, has been capturing and reinjecting natural gas for the past year and have increased production 30% as well as arresting the decline rate.
    EOG is in the early stages of injecting co2 in the Eagle Ford and – if the research experiments prove applicable to even a small degree – should show a very high rate of recovery.

  22. ghung on Wed, 24th Sep 2014 11:20 am 

    “What could possibly have gone wrong!?””

    People couldn’t afford the expensive, crappy product being produced in a sort of feeding frenzy. It’s the goldrush mentality that refuses to see what’s really going on. I have friends who build spec houses and they’re quite busy again. Forbes reports that new housing starts were up for July 21.7%, YOY. Meanwhile, mortgage originations were down about 60% in the first half of 2014. I doubt it was because there were 60% fewer homes for sale.

    h ttp://www.theautomaticearth.com/debt-rattle-sep-23-2014-busting-the-boom-one-step-at-a-time/

    “Forbes reported that the first quarter of 2014, “saw the lowest mortgage origination volumes since Q3 1997.” And the headline, “MBA Lowers Mortgage Originations Forecast”, came with a story explaining that “the updated refinance total is around 60% lower than 2013 refinance originations.” Even credit unions went straight into the tank this year, originating an annualized $42.6 billion in real estate loans in the first quarter, down from $102.9 billion in the first quarter of 2013, according to an Nation Credit Union Association (NCUA) press release.”

    People think these things aren’t related, that their boom won’t be affected by another’s bust, perhaps in a totally unrelated industry. They would be wrong,, again.

  23. Northwest Resident on Wed, 24th Sep 2014 12:01 pm 

    “…a pirate’s plank to the abyss.”

    I LOVE IT! What an analogy. Arghhh matey, we all be taking the plunge down to Davy Jones’ locker sooner than ye’ think! Somebody get me a mug of that thar frack water — uh, I mean rum!

  24. Northwest Resident on Wed, 24th Sep 2014 12:07 pm 

    ghung — Ain’t it the truth! When consumers are being asked to pay more and more for less and less energy, what COULD possibly go wrong?

    I read another article on China, how they just keep buying and stockpiling the iron ore and the concrete and they keep building the highrises and bridges. And yes, we’re doing the same thing here in America, including practically giving cars away to no-credit-worthy people, just to keep selling cars. The whole point of it all is to keep the asset prices UP! If they only ordered concrete and iron for the structures that actually need to be built, and if they only sold cars to people who could actually pay for them, then they wouldn’t need to be buying very much concrete or iron ore and they wouldn’t need to be building as many cars, would they? And THAT would totally hammer the fragile illusionary bubble economy we are all encapsulated in, for the time being.

  25. Nony on Wed, 24th Sep 2014 12:11 pm 

    Don,

    I well understand the idea of a Gaussian going through an inflection point. I.e. that as rate of increase starts to decrease, eventually we get to zero.

    What YOU MISSED (and I pointed out, but you missed a SECOND TIME) is that that curve is productivity/rig! Not overall production.

  26. Nony on Wed, 24th Sep 2014 12:12 pm 

    Davy, don’t be mean to me. I’m a cute cornie.

  27. Nony on Wed, 24th Sep 2014 12:24 pm 

    Don:

    Just to be clear. Production rate for the play =(rigs in the play)*(productivity/rig).

    It is very common for rigs to move in/out of a play. When we had the crash in oil prices 2008-2009, rigs exited the Bakken like crazy. Actually productivity/rig went up dramatically (only the sweetest spots were still worked). But total production dropped.

    Capisce?

  28. shortonoil on Wed, 24th Sep 2014 12:41 pm 

    “But companies are already in the early stages of repressurising these reservoirs,and having success. ”

    What you are talking about is Huff&Puff. It has been used in condensate fields for over 60 years. Mobil used it in the Arun field in Indonesia in the 50’s. This is not new revolutionary technology. It is usually administered to reduce condensate blockage when a well begins to choke on its own condensate around the well bore. Once the well goes back into production the blockage usually returns. It is at best a short term remedy.

    Re-pressurizing a well with dry gas is also common. What the producer is attempting to do is redissolve the liquids that have fallen out into the well bore. It is also usually only marginally successful. At the Vuktyl field in Komi Russia, Gasprom tried pumping 35 million cubic meters of propane and butane into the field in an attempt to redissolve the lost condensates. They got about 3% recovering.

    Texaco, attempted methanol injection at their Hatter’s Pond field in Alabama, that didn’t work at all. Reports of using Huff&Puff and dry gas re-injection are just evidence that these micro-reservoirs are coming to their conclusion. Don’t buy the hype that technology is going to save us, it isn’t.

    http://www.thehillsgroup.org/

  29. Jerry McManus on Wed, 24th Sep 2014 1:35 pm 

    Going back in time to about ten years ago one can find plenty of prognostications from the peak oil camp that world production would hit a sharp peak “in the very near future” and drop into a steep decline.

    At about the same time there were just as many predictions from the cornucopian camp that the combination of new technology and new discoveries would significantly boost supply for the foreseeable future and hold prices down to as little as $30 per barrel for decades to come.

    Here we are ten years later and it turns out both camps were wrong.

    Or, more specifically, both camps were only partly right. Conventional oil production has plateaued, and while both fracking horizontal wells and strip mining tar sands are not new technologies it has become economical to produce those marginal and more expensive resources in a world market of roughly $100USD per barrel oil.

    Meanwhile, M. K. Hubberts original analysis still holds true.

    The area under the production curve will eventually equal the area under the discovery curve, with a delay of several decades between the respective peaks. Those two curves crossed in about 1980, give or take a year or two, and if we had continued on the high rate of production seen at that time then we probably would have seen a peak about ten or fifteen years ago, roughly 40 years after the peak in the discovery curve.

    That is, if we lived in an ideal world. Instead we were treated to the 1970’s Arab oil embargo, the Iranian revolution, the Iran vs. Iraq war, and what can only be described as more or less continuous U.S. military interventions in the middle east going back at least two decades.

    The overall effect was to flatten out the world oil production curve. Now, instead of a sharp peak and steep decline, we are seeing a much more gradual peak that, in the rear view mirror, will probably be seen to span the decade from about 2010 to 2020.

    The decline, again in an ideal world, could also be fairly gradual. Maybe. Or, maybe we will be treated to something like the scenario forecast in the Limits to Growth study.

    Declining marginal returns of non-renewable resource extraction will throw a giant monkey wrench into the global finance ponzi scheme at which point global industrial output, denied its primary energy source, will fall off a cliff and take our obscenely high standards of living down with it. Throw in major disruptions to industrial agriculture output due to climate chaos and you have a recipe for the decline and fall of the human species due to war, famine, pestilence and death.

    Time will tell.

  30. meld on Wed, 24th Sep 2014 1:47 pm 

    Comical, he’s basically saying “look because we are pumping so much money in the form of tech into these wells to make them succeed that means peak oil doesn’t exist” Whereas he just actually defined peak oil. I guess us handful of peak oil followers really took a beating with this article.

    Bubble will pop late this year or early next as a rough estimate.

  31. JuanP on Wed, 24th Sep 2014 2:03 pm 

    Short “That is, if we lived in an ideal world. Instead we were treated to the 1970’s Arab oil embargo, the Iranian revolution, the Iran vs. Iraq war, and what can only be described as more or less continuous U.S. military interventions…”
    I think the collapse of the USSR deserves being added to that list as both production and consumption fell drastically in former soviet countries, particularly Russia, as a consequence, IIRC.

  32. Hiruit Nguyse on Wed, 24th Sep 2014 2:25 pm 

    Went to the junkyard today to scrap an 83 F250 351 Windsor….looked around, saw our destiny.

  33. ghung on Wed, 24th Sep 2014 2:27 pm 

    Jerry: “Here we are ten years later and it turns out both camps were wrong.

    Or, more specifically, both camps were only partly right.”

    One camp was at least trying to base their predictions on available evidence, which likely prevented them from anticipating an insane amount of debt being substituted for real capital in the form of production. That we were able to borrow several years of increased non-conventional output may not look so impressive in the rear view mirror.

    Borrowing from Peter to pay Paul’s fuel bill likely won’t be received too well by those who end up paying the piper. The inevitable convergence of bills coming due and declining energy capital looks nastier every day. Funny how the cornucopians always ignore that part, as if they’ll be insulated from the effects somehow. Greed-based magical thinking will surely get a lot of us killed. Nothing new there, except that this time will set a new bar in terms of the scale of this thing. Simply HEEEUUUUUGE.

  34. Northwest Resident on Wed, 24th Sep 2014 2:40 pm 

    ghung, again you are so right. The peak oil predictions would most definitely had come true exactly as described had it not been for the governments of the world (USA, China, Japan, EU) — sinking us many trillions of dollars into debt. Had that huge amount of debt not been injected into the rapidly deflating global economy, NO AMOUNT of fracking would have made a difference. And yet, we are treated daily to the hooting and crowing from our resident fracking cheerleaders about how great Marcellus is and how advanced fracking technology is going to give us another million barrels of low-energy oil at some point in the future, maybe. But any logical analysis of the situation proves that the entire fracking phenomenon is nothing more than a tempest in a teapot, a minor blip on an enormous radar screen — a puny gnat on an elephant’s ass (to throw in one last platitude). Fracking exists ONLY because of the massive debt thrown at it — it is buying a little time, but those peak oil projections are still looming like massive boulders above us, ready to drop when the debt and financial trickery weakens to the point where the inevitable doom can no longer be held back. tick, tick, tick…

  35. coffeeguyzz on Wed, 24th Sep 2014 2:51 pm 

    short on oil, thank you for responding, but I am NOT talking about huff and puff. What D3 is doing in Canada with nat gas re-injection is re pressurizing a nine well field (all laterals)through one original production wellbore. Their plans in 2014 and going forward are to put one injection well (lateral) for every three production wells. The examples you described with re-injecting gas do not apply to shale fields as it has simply never been attempted before on any big scale. These fields have one to two mile long wellbores, with many entry points, situated 500 to 1,300 feet apart. This is a brand new playing field with this environment. All indications are co2 will be usually most effective, supply being the bigger constraint at the moment.

  36. marmico on Wed, 24th Sep 2014 2:55 pm 

    Meanwhile, mortgage originations were down about 60% in the first half of 2014. I doubt it was because there were 60% fewer homes for sale.

    Refinancing originations, which make up a substantial proportion of total originations, have plummeted. There are fewer and fewer households that haven’t refinanced to lower rates.

    From the Mortgage Bankers Association:

    “We expect purchase originations to decrease 11.7 percent in 2014 relative to 2013, totaling $576 billion in purchase volume. Refinance originations are still expected to fall 60.9 percent to $431 billion in 2014 relative to 2013’s level of $1.1 trillion.”

    ___________________________________

    Mark Perry deserves kudos not derision. He was on the Bakken bandwagon early.

  37. Nony on Wed, 24th Sep 2014 3:18 pm 

    Hubbert’s analysis doesn’t “still hold true”. He totally ignored how price would drive new production. He mostly ignored technical innovation. Both factors that he should have known from history of the industry that far. He ignored earlier failed peak predictions.

    Moreso, he did not make many of the caveats that Rock attributes to him. Instead he said he was trying to look at overall sedimentary basins of the WORLD oil extracted ever.

    Oh…and he screwed natural gas up big time.

    It’s going to be SUH-WEET when we cross that 10 million bpd and repeak in the U.S. in 2016. Hahaha. Down with Hubbert.

  38. rockman on Wed, 24th Sep 2014 3:42 pm 

    “But even as producers have moved away from sweet spots, and even as the rig count in many plays has either stayed flat or fallen, production of shale oil and gas continues to grow significantly”. A valid criticism…if one ignores the details as they have. They would be correct if current Eagle Ford wells were being drilled as they were several years ago. But they aren’t. First, they’ve learned how to drill them faster: from 40+ days to less than 20 days. Thus needing fewer rigs which also can reduce the cost per foot drilled. But they are also drilling longer laterals then they were initially. The good news: cost per foot has gone down. Bad news: there a lot more expenses in poking a hole then just the drilling costs.

    More important, initially wells were having just several frac stages per well Now 20+ frac stages are being pumped. And that runs the cost up significantly. A cost increase that would be hidden by the quicker drill rates/fewer rigs stats. Some EFS are experiencing higher total frac costs then the drilling costs. Original EFS wells well were costing $5+ million. Now $12 million isn’t uncommon. But they are getting drilled faster with few rigs. But they are comparing apples to oranges so that analysis is meaningless.

    But as long as oil prices stay sufficiently high the shales wells will continue to be drilled. But only until all the viable locations are drilled up. At that point the EFS or Bakken or Marcellus boom is over. As I’ve pointed out every oil/NG play that has boomed in the US in the last 100 years has been a bubble that eventually burst: all plays are eventually drilled up. They all eventually have very well defined geographic limits. And those limits can’t be predicting by drawing a chart with any stat. The limit of every play is eventually defined by the map the geologists draw. No economist, promoter or any cornucopian can escape that reality. Even at $200/bbl there will come a day when they are few if any EFS, Bakken, et al wells left to be drilled. Mother Earth has the last call on the subject…not Halliburton. LOL.

  39. coffeeguyzz on Wed, 24th Sep 2014 4:13 pm 

    Rockman the number of stages are indeed going up and very rapidly in fact. NCS energy services just did a 92 stage frac in the Eagle Ford a few months ago, and set a world record 93 stage in the Bakken a few weeks later. The one in the Bakken, by the way, was done in one trip, for Whiting.
    Continental, in the Bakken, said they will frac no fewer than 40 stages for every 2 mile lateral going forward. Their incremental cost is one and a half to two million for the increased proppant as well as stages. The increased production more than takes care of the added expense in less than one year’s time, according to them.
    And, as I have mentioned before, the sweet spots are far far from being drilled out.Continentals Hawkinson project as well as its Rolfestad project are proof of this. The Hawkinson at 14,000 boe 24 hr IP, the Rolfestad 24,000 BOE original production. These were from 14 wells on a single pad each. And that is in the main what is to be expected in the coming years both in the EF and the Bakken.

  40. Poordogabone on Wed, 24th Sep 2014 4:37 pm 

    The American Enterprise Institute,
    A think tank of wishful thinkers.
    Those neocons think they can create their own reality.
    We heard a lot from them during the run up to the Iraq war, not so much now.

  41. Northwest Resident on Wed, 24th Sep 2014 5:10 pm 

    “And that is in the main what is to be expected in the coming years both in the EF and the Bakken.”

    That statement makes a lot of assumptions about the economy, the price of oil, the continued supply of conventional oil, the market for condensate, and so much more. Even if it ends up being true or close to true, it will be far too little and far too late to make any difference in the big picture.

    But sure, while the good ship BAU is sinking into the stormy seas, let’s keep fracking and singing the praises of all things related to fracking. I can see Nony now, clinging to the main mast as the boat goes under, yelling “Marcellus is HUGE! Marcellus is HUGE!”

  42. Nony on Wed, 24th Sep 2014 5:11 pm 

    The Marcellus has had massive growth per well. And there is a LOT of undrilled locations. Even just in the sweet spots (large in themselves). Marcellus really is massive. It’s takeout limited. Not geology limited. Or even U.S. price limited.

    Gas sells for less than $2 in some locations (because takeout is limited). As the pipelines get built (which is not just an issue of investment credibility but of time for permitting, construction), more and more capacity will come on line and reach markets.

    It’s interesting…but the rate of growth for Marcellus is linear (3 BCF/day/year) and so is the Bakken (.25 MM bpd/year). Who knows how long it lasts. But so far…they are both exceeding the median expert estimates. And WAY STOMPING negative peaker estimates.

    Gas in particular has massive “legs”. Terry Engelder knows the Marcellus. He has been right. Berman/Rogers wrong. Score. Board.

  43. coffeeguyzz on Wed, 24th Sep 2014 5:54 pm 

    nony, those of us who follow this realize how massive the mighty Marcellas is, but not so well publicized is that the Utica – 1 mile below – is quite a bit bigger in aereal extent and thickness.
    Shell Oil – maligned as not being involved in the shale plays – just announced a well with 26 million cubic feet flow IP in the Utica.
    If the capacity of the Marcellus is measured in centuries, adding the Utica to that maybe calls for a time frame measured in millenia.

  44. Nony on Wed, 24th Sep 2014 5:57 pm 

    Utica! Coming on strong.

    http://www.vorysenergy.com/uploads/image/Utica%20Gas%20Production.JPG

    But really…it is the Point Pleasant. Besides. Might as well lump it in with the Marcellus (like Permian stacked shales).

  45. shortonoil on Wed, 24th Sep 2014 6:29 pm 

    The standard 20 frac well in the Bakken produced an average IP of 467 b/d over five years, or 23.34 b/d per frac. You are now saying that a 93 frac well is producing an IP of 1711 b/d, or 18.4 b/d per frac. What’s your point, except that things are getting worse? We already knew that!

    “Marcellus really is massive. It’s takeout limited. Not geology limited. Or even U.S. price limited. ”

    You really should listen to your mother; get back on your meds. “Or even U.S. price limited”, or get off that other stuff! You are really losing it!

  46. Nony on Wed, 24th Sep 2014 6:38 pm 

    production is up. We are increasing the efficiency of drilling and completion. Read that Bakken kicking Rune’s prediction and WEEP, WEEP, WEEP.

    https://www.youtube.com/watch?v=rX7wtNOkuHo

  47. wildbourgman on Wed, 24th Sep 2014 6:57 pm 

    This is an ironic juxtapostion I guess, but RigZone a cheerleader for shale has an article saying somewhat the opposite of this article and this peak oil sight has an article saying all is well with the oilwell.

    I think it may be debt and the economy that kills shale producers long before the productivity treadmill does.

  48. adamx on Wed, 24th Sep 2014 10:58 pm 

    It seems to me like a choice of catastrophies – either population and evironmental degredation catch up to us, or resource depletion catches up to us. There is an argument for there being much more oil out there, and at a price that a lot of people will pay (especially people riding scooters rather than filling trucks). The classic “resource pyramid” is wider at the base, is it not? So there are more hard to exploit resources than easy to exploit resources.

    We’ve got coal, gas, and still more oil in crappy places. The economy has kept going despite high oil prices, China, India, and other developing countries continue to grow, despite the squeeze between demand and price we see a sort of half-misery, lower expectations in places like the US but not DOOM.

    Yet we certainly haven’t got “happy days are here again” (except perhaps for the very rich). So both sides have been wrong and continue to be wrong. It’s unpleasant for many, yet places like Seattle and Honolulu are in the middle of a construction boom. It doesn’t look like doom, but the promised “good jobs” are not as good or plentiful as promised either.

    I can’t say I believe in doom much anymore, but nor do I believe the claims of plenty. Shale oil never got me a job or gave me back the old $1 gallon of gas I remember from my youth (all of 15 years ago). Yet the only place truly imploding is the middle east.

    Peak oil is not arguable but shale has not peaked yet, despite the cries of “bubble” everywhere. It will peak eventually though. We are arguing about timing. But the common thing about bubbles is that the doom contingent is wrong until their right and the sunshine contingent is right until their wrong, with neither side having an ability to predict with any certainty when the ride is over.

    This article will look foolish at some point, probably not too far in the future. But right now, it’s the sackcloth-and-ashes side that looks like fools. Shale has gone farther than I or most doomers expected.

  49. rockman on Wed, 24th Sep 2014 11:13 pm 

    With respect to longer laterals and high number of franc stages in the Bakken and the resultant output indicating lots of sweet spots remaining here’s the latest news from the state DMR:

    “…the production data from the state’s Department of Mineral Resources (DMR)…reflecting net oil production added per well. It shows that…the total appears to have dropped dramatically into the 113 range in the past two years from the levels of 130-170 in prior years. The trend in daily oil production per well is also trending lower in the two most recent years (130 and 134), yet the number of new wells remains high – the 1700-1800 range.”

    As I’ve pointed out several times every oil/NG boom in the entire history of the oil patch has eventually busted for one reason or another. Even when commodity prices stay high productivity per well always declines over time. And eventually every booming trend dies. It will happen in the Bakken one day. I don’t have a guess when that day will come but the data above appears to indicate we may be on the backside of individual well performance despite drilling longer laterals with more frac stages. Maybe several years… maybe 10+ years. But even if prices stay high all the current hot trends will fade into the background. That fact can’t be argued… only the timing can be debated.

    Folks have become too enamored with short term stats IMHO. Trends typically boom and bust over roughly a 2 decade life cycle. That seems like a long period to many. But for someone who has been hunting oil/NG for 4 decades it doesn’t. I’ve seen more then one hot trend go from birth to growth to death. There really are no new dynamics at play in the oil patch today that haven’t been in place for the last hundred years. It just seems like that to the newbies.

  50. Simon on Thu, 25th Sep 2014 1:59 am 

    Not wanting to steal one of rockmans phrases …. but
    if these fracking wells are so good, why am I still paying a bomb at the pump (I paraphrase), why are old people still dying of hypothermia, why is a large portion of the west (cant answer for the east) in fuel poverty (spending > 10% of their income on fuel) I don’t really care whether its condensate, a conventional reservoir or kerogen, until someone can show a sustained drop in prices as far as I am concerned we are on the bumpy plateau, just waiting for the next price hike.
    Morning rant over, off to get caffeine

    Simon

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