Where such limits exist and what prices would be necessary to keep production rising are still matters of debate. When starting out in assessing new shale formations, “the uncertainty is massive,” says Kenneth Medlock, an economist with Rice University’s Baker Institute, a think tank that receives funding from the oil and gas industry. “The uncertainty generally clears up as you drill a play.”
Assessments by Medlock and colleagues have estimated there are vast resources that would be profitable to extract. “We know there’s an awful lot of gas out there,” agrees Jeffrey Logan, an energy market analyst at the National Renewable Energy Laboratory in Golden, Colo., part of the U.S. Department of Energy. What prices are needed for extraction to be profitable, however, is the big question—one that “people are really scratching their heads on,” he adds. In 2012, when natural gas spot prices fell below $2 per thousand cubic feet, “I think people were thinking those prices were the new normal, that we were in a different world,” he says. “But that’s clearly not the case. Right now gas prices are well over twice what they were in 2012.” Given such uncertainty, he adds, “Any smart decision maker out there will look for a properly risk-weighted portfolio of options.” Otherwise, “they might get in trouble if gas prices rise above a certain point.”
One of the major risks of dependence on shale gas is that wells’ production drops off so sharply, Hughes says. Shale gas wells’ production rates typically drop by at least half in the first year and continue to decline thereafter. The EIA expects that nearly half of all the “technically recoverable resources” of shale gas identified so far would be consumed by 2030. And at that point, shale gas production would still be increasing, with much more extracted after 2030. John Staub, leader of the EIA’s Oil and Gas Exploration and Production Analysis team, says the agency’s model “includes technology change,” which, year after year, increases the amount of gas that can be extracted.
“The EIA apparently has unfettered faith in new technology developments to provide shale gas production to meet its projections,” Hughes notes. He points out, however, that the EIA’s most recent assessments of the total amount of gas that can be recovered from major shale gas areas, formations such as Marcellus and Texas’s Barnett , have fallen rather than risen. Also, according to Hughes’s analyses, new wells in Barnett are less productive, a sign of stagnation as “sweet spots become saturated with wells and drilling moves into lower quality rock,” he says. “This is unequivocal evidence that geology in shale gas plays ultimately trumps technology.”
Hughes has been a thorn in the side of those optimistic about supplies of shale oil and gas. In a 2013 report he argued that the EIA had vastly overestimated the amount of oil that could be recovered from California’s Monterey Shale Formation. Earlier this month the EIA released updated figures (pdf) that dropped the amount of recoverable oil in that formation by more than 90 percent, from around 14 billion barrels to just one billion. Questions remain about how long the so-called shale gale can blow.