The Popping of the Shale Gas Bubble

Based on the reasons I discuss in detail in Cold, Hungry and in the Dark, such as high production decline rates of wells and small sweet spots accounting for nearly all the commercially successful wells, there is substantial evidence shale gas resources remain significantly overstated.  The Antrim shale of Michigan is an excellent case in point.   According the Michigan Public Service Commission, the Antrim has produced approximately 3 trillion cubic feet (tcf) from more than 10,000 wells since commercial production began in the late 1980s.  Production peaked in 1998 at slightly more than 540 million cubic feet per day (mmcf/d) and has dropped every single year since 1998.  In 2013 the Antrim produced only 100 mmcf/d, an 80 percent reduction from its peak year.  Given the significant production history of the play, scarcity of remaining drilling locations and its very clear terminal production decline¾despite a substantial increase in natural gas prices since its peaking¾it is reasonable to assume the Antrim will produce no more than 1 tcf over its remaining productive life.  However, the 2011 Intek/EIA reports shows there to 20 tcf of resources left to recover in the Antrim.  As noted in my book, I contacted Intek for an explanation on how they, with all of the production history of the Antrim, concluded it could produce nearly 7 times more gas than it had already produced.  I was never given an explanation.

Tower for drilling horizontally into the Marcellus Shale Formation for natural gas, from Pennsylvania Route 118 in eastern Moreland Township, Lycoming County, Pennsylvania, USA (Photo credit: Wikipedia)

While every shale play is different, it appears that “magical thinking” has impacted the EIA’s/Intek’s estimates of other fields as well.  Even after the massive reduction of resources from the Marcellus, it has become increasingly clear that the EIA is overstating America’s total shale gas resources by a factor of four.  I provide substantial empirical evidence in my book that the US has approximately 120 tcf of recoverable shale gas remaining.  I am not the only one who has found the 2011 Intek/EIA report, which became the source for countless talking points on the potential of shale gas and oil, to contain gross overestimations.  My friend and colleague, David Hughes, Geologist Emeritus ESC NaN% of the Geological Survey of Canada and a Fellow at the Post Carbon Institute, published a report in December 2013 titled Drilling California: A Reality Check on the Monterrey Shale, that concluded that the Monterrey Shale, which Intek estimated to contain 15 billion barrels of shale oil, was far smaller.  Turns out, after several other researchers came to similar conclusions as Hughes and much media attention was focused on the huge discrepancy between Hughes’ conclusion and those of Intek, the EIA downgraded its estimate of total oil resources in the Monterrey from 15 billion barrels to only 600 million barrels, a 96 percent reduction.  While I do not expect such a large estimate reduction for America’s shale gas resource base, substantial reductions are warranted given the production history of shale fields and our increased understanding of their potential.

via The Popping of the Shale Gas Bubble.