The Popping of the Shale Gas Bubble

2)   Technological advancements will increase shale gas supplies.  Despite the continuing and significant advances in horizontal drilling and hydraulic fracturing technology, we have seen huge a huge reduction in the EIA’s estimate of technically recoverable resources (TRR) for shale gas in recent years.  In 2011, the EIA published a study compiled by consulting firm Intek Inc. (more on Intek later) that estimated the US had 750 tcf of underdeveloped technically recoverable shale gas with 410 tcf in the Marcellus shale alone.  However, shortly after this report was published, the US Geological Survey published a report that estimated the Marcellus to contain approximately 84 tcf of technically recoverable gas.  In early 2012, in its Annual Energy Outlook Early Release, the EIA, based largely on the findings of the USGS, reduced its estimate of the Marcellus by 65 percent to 141 tcf.  The wipeout of 269 tcf from the Marcellus reduced the total US TRR downward by 36 percent.  In other words, after the reduction in the estimate for the Marcellus, total US shale gas resources stood at 481 tcf, or less than a 19-year supply of natural gas based on 2013 rates of production.

Now that US shale gas resources have been chopped by 36 percent, are we understating the potential of shale gas? Absolutely not.  To put into perspective how inflated the EIA’s expectations for shale gas were in its 2011 report it commissioned Intek to prepare, consider the following: The biggest field in the Western Hemisphere by production history is the Hugoton field of western Kansas which has produced approximately 37 tcf over its 60-year productive life. In their report, Intek estimated there to be three shale gas fields, the Barnett, Haynesville and the Marcellus, to each have more potential than the Hugoton.   Given that shale gas is extremely difficult and expensive to extract compared to gas from conventional reservoirs (i.e. Hugoton), I find it highly unlikely that the three biggest fields in US will turn out to be shale fields.  Additionally, the shale gas industry has written off tens of billions of dollars of shale gas reserves that are not coming back despite the more than doubling of US natural gas prices over the past two years.  More importantly, the majority of shale gas fields that were expected to provide increasing production for decades are now experiencing production declines.   However, don’t just take my word for it, let’s get into specifics.

via The Popping of the Shale Gas Bubble.