Here are just a few of many articles on this topic:
- R. Heinberg. Chapter 5 of How Fracking’s False Promise of Plenty Imperils Our Future: The Economics of Fracking: Who Benefits? October 2013.
- Hall, C. Are we Entering the Second Half of the Age of Oil? Some epirical constraints on optimists’ predictions of an oil-rich future. 2013 Geological Society of America.
- Richard Heinberg. 12 Nov 2012. Museletter #246: Gas Bubble Leaking, About to Burst.
- Gail Tverberg. 17 Oct 2012. Why Natural Gas isn’t Likely to be the World’s Energy Savior.
- Jeff Goodell. 1 Mar 2012. Politics: The Big Fracking Bubble: The Scam Behind the Gas Boom. Rolling Stone.
- James Howard Kunstler. 19 Nov 2012. Epic Disappointment.
- David Hughes. 29 May 2011. Will Natural Gas Fuel America in the 21st Century?
- James Stafford. 12 Nov 2012. Shale Gas Will be the Next Bubble to Pop – An Interview with Arthur Berman.
- Peter Coy. 12 Nov 2012. U.S. the New Saudi Arabia? Peak Oilers Scoff. Bloomberg.
- Kelly, S. 29 Apr 2013. Faster Drilling, Diminishing Returns in Shale Plays Nationwide?
October 29, 2013 Tom Whipple. The Peak Oil Crisis: The Shale Oil Bubble. Falls Church News-Press.
“fracked oil is very expensive, requiring circa $80 a barrel to cover the costs of extraction. Production from fracked oil wells drops off quickly, so new wells have to be drilled constantly to maintain production. Until recently information about just how fast our fracked oil wells were depleting was hard to come by, so the hype about the US becoming energy independent and a major oil exporter became conventional wisdom for most.
Nearly all of the growth in U.S. onshore crude production these days is coming from North Dakota’s Bakken field and Texas’s Eagle Ford. They account for nearly 2 million of the 2.4 million b/d increase in oil production that the US has seen in recent years. It sure looks as if the increase in production in these fields will keep up with the rate of decline within the next 12 to 18 months and that US shale oil production will no longer be growing. While it is possible that a surge of investment will increase the drilling to keep up with declines in production from the older wells, this is expensive, and for now it looks as if oil prices are heading for a level where fracked oil production is not profitable. Outside geologists with access to proprietary data on decline rates have been forecasting for some time now that as the number of wells increases and their quality declines, the shale boom will be coming to an end in the next two years. The release of EIA data seems to confirm these predictions.”
David Hughes at the 2013 Geological Society of America: These are heady times for U.S. oil bulls, with projections of production from tight oil rising to five million barrels per day, or more, by 2019, from essentially nothing just a few years ago. This compares to total U.S. oil production of less than seven million barrels per day as recently as 2008. Declarations of near term “energy independence” are commonplace in the main stream media.
Notwithstanding the substantial contribution of this new supply made possible by the combination of multi-stage hydraulic fracturing and horizontal drilling, the U.S. burns more than 18 million barrels per day. Even five million barrels per day of tight oil production is highly unlikely to free the U.S. from the need for imported oil. Furthermore, tight oil fields are characterized by high decline rates and the need for continual high rates of drilling to maintain production levels. The long term sustainability of tight oil production is thus of paramount concern.
An analysis of the Bakken Field, of North Dakota and Montana, and the Eagle Ford Field, of Texas, which together comprise more than half of projected tight oil production, reveals static field production declines of about 40 percent annually. Moreover, these fields are far from homogenous in terms of well productivity, with “sweet spots” of high productivity comprising a small proportion of the touted productive area. These sweet spots are targeted first resulting in the spectacular ramp up in production observed in these plays, but the steep decline rates inevitably take their toll. Production in the Bakken Field, which is the poster child for tight oil, has plateaued in the past few months, and requires 120 new wells each month to maintain production. The Eagle Ford is still growing rapidly, with 3000 new wells added each year, but it is only a question of time before the sweet spots are exhausted.
Tight oil is an important contributor to U.S. energy supply, but its long term sustainability is questionable. It should be not be viewed as a panacea for business-as-usual in future U.S. energy security planning.
Art Berman: There is about eight years’ worth of shale gas supply available in the United States. The math: If you divide the “technically recoverable resource” of about 1,900 Tcf (trillion cubic feet) of gas, as identified by the Potential Gas Committee’s (PGC’s) report by annual U.S. consumption, you come up with 90 years. However, the PGC’s report says the “probable recoverable resource” is only 550 Tcf— 25% of the “technically recoverable resource. Then, if you divide the 550 Tcf “probable recoverable resource” by 3, which represents the amount of the resource that is actually provided by shale gas, you get about 180 Tcf. (Nov-Dec 2012. A contrarian on Shale Gas. Amerian Public Power Association.)
Bill Powers: The U.S. has nowhere close to a 100-year supply. In his new book “Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth”, Powers concludes the USA has a 5 to 7 year supply of shale gas. People and companies who benefit economically are behind the promotion of the shale gas myth. In reality, many corporations are taking write-downs of their reserves. (Peter Byrne. 8 Nov 2012. US Shale Gas Won’t Last Ten Years: Bill Powers. The Energy Report.)
James Howard Kunstler, 24 Sep 2012 “Duty“: “In all the monumental yammer of the media sages surrounding the candidates they follow, and among the freighted legions of meticulously trained economists who try so hard to fit their equations and models over the spilled chicken guts of daily events, there is no sense of the transience of things. Tom Friedman over at The New York Times still thinks that the petroleum-saturated present he calls “the global economy” is a permanent condition of human life, and so does virtually every elected and appointed official in Washington, not to mention every broadcaster in Manhattan. … Someone told all these clowns about 14 months ago that we will be able to keep running WalMart on shale oil and shale gas virtually forever, and they swallowed the story whole, and then force-fed it down the distracted public’s throat. In reality – that alternative universe to flat-screen America – all the mechanisms that allow us to keep running this wondrous show teeter on a razor’s age of extreme fragility. We’re one bomb-vest or High Frequency Trading keystroke away from a possible dark age…”
Richard Heinberg (excerpt from July 2012 Museletter #242: The End of Growth Update Part 2): whether the latest financial news is giddy or dismal, whether oil prices are up or down, the game of growing the economy by increasing the production of affordable transport fuel is now officially over. Previously, we enjoyed both a growing economy and low fuel prices, with the latter feeding the former; now we see “cheap” oil only when the economy is in a tailspin of demand destruction.
In reality, virtually all the easy, cheap oil has already been found and put into production; what’s left to find and produce will be hard, nasty, and expensive. Oil-bearing shales have been known to geologists for decades, and fracking has been part of the technical arsenal of the industry since the 1980s, but the cost of development was considered too high. Meanwhile, despite its “miraculous” growth in domestic oil production, the United States saw its trade deficit in oil increase to $327 billion in 2011, accounting for 58 percent of the total trade deficit, the highest-ever annual share.
Not necessarily. As the economy tanks, that will cut demand for oil and the price will fall below the new-supply break-even level; when that happens, companies will cancel or delay new projects (as they did in late 2008 when the per-barrel price fell to $40). But if, for the moment, the economic news looks good, demand will grow and oil prices must inevitably return to levels that justify new supply. And those price levels are just high enough to begin undermining economic growth, as a spate of recent economic research has shown.
Huffington Post, 27 Mar 2013: Deep water and tight oil (like what comes from the Bakken and Eagle Ford) have extremely high depletion rates. Deep water wells deplete about 10-20 percent a year. Tight oil depletes at about 40 percent annually the first few years. Think about that latter number, where most of our new oil extraction is coming from. What if you had a part-time job but within two years you would only be making about a quarter of your current income. Probably need a new part time job, right? But that one does the same thing. Before you know it, you need 40,000 part time jobs. But even that doesn’t help, because they’re all still depleting at 40 percent. Give a thought to how much you would have to work to maintain your original income after five years, then ten years, then twenty years… Source: The Reward for Being Right About Peak Oil: Scorn Heaped With Derision
ASPO newsletter 19 Nov 2012: The International Energy Agency 2012 World Energy Outlook forecast that US shale oil production would continue to grow more rapidly than expected for the rest of the decade, leading to the US becoming the world’s largest oil producer by 2012 and largely energy independent (though not for oil) by 2035.
The world’s press trumpeted the energy crisis was now way in the future and that all would be well for the next 20 years. The few writers that consulted people in the peak oil community buried their skeptical comments at the bottom of their stories.
The issue is how much longer shale oil production can continue to grow at the spectacular rates of the past few years before it too peaks and starts to decline. Oil production from the Bakken Shale in North Dakota is about 660,000 b/d, Eagle Ford in Texas about 600,000 b/d and growing. Some say the 2 fields will produce 2 million b/d in the next year or so. The IEA seems to be saying that tight oil production in the US will peak at about 5 million b/d around 2020.
Most people in the peak oil community who have looked into the issue have major problems with these forecasts, believing that a peak in shale oil production around 3 million b/d is more realistic. Remember, demand is increasing at about 750,000 b/d each year, so 8 years from now an additional 6 million b/d of new production will be required worldwide plus another 3-4 million b/d will be needed to replace the depletion from existing fields every year.
The first problem with the IEA’s estimate is the rapid depletion of fracked oil wells. Despite limited experience with this relatively new technology, some are calculating that production from many of these wells is dropping by over 40% or more a year.
We know the average daily production from North Dakota’s 4,630 producing wells is currently 143 b/d. If we assume that the Bakken oil fields are to produce 2.5 million b/d by the end of the decade then it will need some 18,000 wells, each producing the average of 140 b/d. While this is a not an inconceivable number, when one takes into account that most, if not all of these wells will have be redrilled twice in the next 8 years, the number becomes improbable. We shall have to drill more and more wells just to maintain the same level of production.
The second problem with the optimism over tight oil is the very high cost of the horizontal drilling and fracking of these wells, which may run 3 to 4 times that of a conventional well. Some people put the cost of producing a barrel of oil from the Bakken at $80-90, which is just about where oil is currently selling in the region. Should the global economy continue to contract, the selling price of fracked oil could well fall below the cost of production, bringing a marked slowdown to further drilling.
Roger Blanchard: A Closer Look at Bakken and U.S. Oil Production:
- Oil production outside of Texas and North Dakota has actually declined in the last few years
- Bakken extends over a large area of North Dakota, Montana and Saskatchewan, but just 4 counties in North Dakota are 80.8% of all the oil production. Even within that area, some spots are better than others.
- “Oil wells in the Bakken region decline rapidly. From data I’ve seen, the average decline in the first year is ~60%. The only way to maintain or increase Bakken oil production is to rapidly increase the number of wells. As the industry has to drill in less fruitful areas, being able to maintain production will become an increasing challenge.”
- “I expect oil production in the Bakken to peak in 2013 to 2015. I expect Texas oil production to have a secondary peak around 2014 (Texas oil production peaked in 1972 at 3.57 mb/d while it’s presently ~1.5 mb/d). If oil production in both Texas and North Dakota begins to decline around 2015, I expect U.S. oil production as a whole to begin to decline in that same time frame.” (my comment: Blanchard also says that oil production is declining now in the Gulf of Mexico!)
ASPO Newsletter Nov 26, 2012 Who do you believe, Likvern or North Dakota official?
- performed an in-depth analysis of data from fracked wells in North Dakota and concluded that the fracked wells are depleting so fast production from the region is unlikely to get much beyond 600,000-700,000 b/d.
- the average Bakken well produces 85,000 barrels of oil in its first year
- production steady due to accelerating rate of drilling at about 143 b/d. September to september # of wells: 590 2009-2010 1010 2010-2011 1762 2011-2012
- Each well costs $10 million – how long can that be sustained?
- Hess oil costs was $13 million per well drilled/fracked
- Unless the geology is significantly different, what happens in the Bakken over the next few years will be similar to Texas shales. A recent study of 1000 wells in the Eagle Ford, Texas field shows that each well will produce about 120,000 barrels over its lifetime. This is a long way from the 600,000 barrels North Dakota claims each well will yield.
Director of the North Dakota Oil & Gas Division:
- production may reach any where from 900,000 to 1.2 million b/d in the next 3 years and sustain this level until 2020 or even 2025 before tapering off to 650-700,000 b/d by 2050.
- the average Bakken well produces 329,000 barrels of oil in its first year
- Predicts a revenue 3 times higher over the lifetime of a well than Likvern:Over a 45-year lifetime, each well will produce 615,000 barrels of oil, easily covering the $9 million it costs to drill and frack. if avg prd is 329,000 barrels first year, even spectacular rates of depletion allows a well to produce 600,000 barrels in 5 or 6 years. If Likvern is right and the average well yields 85,000 barrels the first year, then it would only 200,000 barrels.
- Platts estimates each well generates $20 million in profits
An energy expert (I don’t have permission to give attribution) on oil and gas shales:
- Barnett (once our great natural gas savior) has peaked (at least for now)
- Haynesville has peaked
- Montana Bakken oil has peaked and is half way down
- North Dakota is increasing rapidly but gets most of its oil out of two sweet spots — Bakken is not nearly as big as it appears on maps… so far all the oil drilling is concentrated in 3 sweet spots: Parshall, Nesson anticline and Elm Coulee Montana. These areas, about 5-10 percent of of the Bakken area on the map, are packed with oil wells and there are essentially none in other areas and according to USGS those other wells produce little oil.
- The question is: is it all only about sweet spots? How many more sweet spots are there? …early estimate of the EROI of these sites is about same as US oil now (~10:1) FOR THE SWEET SPOTS only.
- Also from a Texas oil man: “Few are making profits in Eagle Ford. Its a vast Ponzi scheme“
Chris Nelder: “… the decline rates of shale gas wells are steep. They vary widely from play to play, but the output of shale gas wells commonly falls by 50% to 60% or more in the first year of production. This is why I have called it a treadmill: you have to keep drilling furiously to maintain flat output.
In the U.S., the aggregate decline of natural gas production from both conventional and unconventional sources is now 32% per year, so 22 bcf/d of new production must be added every year to keep overall production flat, according to Canadian geologist David Hughes. That’s close to the total output of U.S. shale gas, after nearly a decade of its development. It will require thousands more shale gas and tight oil wells to keep domestic gas production flat.”
American Geophysical Union conference 2012: TITLE: The Future of Fossil Fuels: A Century of Abundance or a Century of Decline? ABSTRACT: Horizontal drilling, hydraulic fracturing, and other advanced technologies have spawned a host of new euphoric forecasts of hydrocarbon abundance. Yet although the world’s remaining oil and gas resources are enormous, most of them are destined to stay in the ground due to real–]world constraints on price, flow rates, investor appetite, supply chain security, resource quality, and global economic conditions. While laboring under the mistaken belief that it sits atop a 100–]year supply of natural gas, the U.S. is contemplating exporting nearly all of its shale gas production even as that production is already flattening due to poor economics. Instead of bringing “energy independence” to the U.S. and making it the top oil exporter, unrestricted drilling for tight oil and in the federal outer continental shelf would cut the lifespan of U.S. oil production in half and make it the world’s most desperate oil importer by mid–]century. And current forecasts for Canadian tar sands production are as unrealistic as their failed predecessors. Over the past century, world energy production has moved progressively from high quality resources with high production rates and low costs to lower quality resources with lower production rates and higher costs, and that progression is accelerating. Soon we will discover the limits of practical extraction, as production costs exceed consumer price tolerance. Oil and gas from tight formations, shale, bitumen, kerogen, coalbeds, deepwater, and the Arctic are not the stuff of new abundance, but the oil junkie’s last dirty fix. This session will highlight the gap between the story the industry tells about our energy future, and the story the data tells about resource size, production rates, costs, and consumer price tolerance. It will show why it’s time to put aside unrealistic visions of continued dependence on fossil fuels, face up to a century of decline, and commit ourselves to energy and transportation transition.
Bill Powers: “There is production decline in the Haynesville and Barnett shales. Output is declining in the Woodford Shale in Oklahoma. Some of the older shale plays, such as the Fayetteville Shale, are starting to roll over. As these shale plays reverse direction and the Marcellus Shale slows down its production growth, overall U.S. production will fall. At the same time, Canadian production is falling. And Canada has historically been the main natural gas import source for the U.S. In fact, Canada has already experienced a significant decline in gas production — about 25%, since a peak in 2002 — and has dramatically slowed its exports to the United States.”
Art Berman: in 2011 published a report showing industry reserves had been overstated by at least 100% based on detailed review of both individual well and group decline profiles for Barnett, Fayetteville, and Haynesville Shale plays.
Ian Urbina. 25 Jun 2011. Insiders Sound an Alarm Amid a Natural Gas Rush. New York Times.
[Natural] gas may not be as easy and cheap to extract from shale formations deep underground as [energy] companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.
In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.
“The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work,” an analyst from IHS Drilling Data, an energy research company, wrote in an e-mail on Aug. 28, 2009.
Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.
The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.
If the industry does not live up to expectations, the impact will be felt widely…if natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.
There are implications for the environment, too. The technology used to get gas flowing out of the ground — called hydraulic fracturing, or hydrofracking — can require over a million gallons of water per well, and some of that water must be disposed of because it becomes contaminated by the process. If shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste.
The e-mails were obtained through open-records requests or provided to The New York Times by industry consultants and analysts who say they believe that the public perception of shale gas does not match reality.
Studying the Data
Ms. Rogers, a former stockbroker with Merrill Lynch, said she started studying well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake, Aubrey McClendon. The math was not adding up, her research showed that wells were petering out faster than expected.
In May 2010, the Federal Reserve Bank of Dallas called a meeting to discuss the matter after prodding from Ms. Rogers. One speaker was Kenneth B. Medlock III, an energy expert at Rice University, who described a promising future for the shale gas industry in the United States. When he was done, Ms. Rogers peppered him with questions.
Might growing environmental concerns raise the cost of doing business? If wells were dying off faster than predicted, how many new wells would need to be drilled to meet projections?
Mr. Medlock conceded that production in the Barnett shale formation — or “play,” in industry jargon — was indeed flat and would probably soon decline.
Some doubts about the industry are being raised by people who work inside energy companies, too.
“In these shale gas plays no well is really economic right now, they are all losing a little money or only making a little bit of money.“ Around the same time the geologist sent this e-mail, Mr. McClendon, Chesapeake’s chief executive, told investors, “It’s time to get bullish on natural gas.
In September 2009, a geologist from ConocoPhillips, one of the largest producers of natural gas in the Barnett shale, warned in an e-mail to a colleague that shale gas might end up as “the world’s largest uneconomic field.”
Forecasting these reserves is a tricky science. Early predictions are sometimes lowered because of drops in gas prices, as happened in 2008. Intentionally overbooking reserves, however, is illegal because it misleads investors. Industry e-mails, mostly from 2009 and later, include language from oil and gas executives questioning whether other energy companies are doing just that.
The e-mails do not explicitly accuse any companies of breaking the law. But the number of e-mails, the seniority of the people writing them, the variety of positions they hold and the language they use — including comparisons to Ponzi schemes and attempts to “con” Wall Street — suggest that questions about the shale gas industry exist in many corners.
“Do you think that there may be something suspicious going with the public companies in regard to booking shale reserves?” a senior official from Ivy Energy, an investment firm specializing in the energy sector, wrote in a 2009 e-mail.
A former Enron executive wrote in 2009 while working at an energy company: “I wonder when they will start telling people these wells are just not what they thought they were going to be?” He added that the behavior of shale gas companies reminded him of what he saw when he worked at Enron.
Production data, provided by companies to state regulators and reviewed by The Times, show that many wells are not performing as the industry expected. In three major shale formations — the Barnett in Texas, the Haynesville in East Texas and Louisiana and the Fayetteville, across Arkansas — less than 20 percent of the area heralded by companies as productive is emerging as likely to be profitable under current market conditions, according to the data and industry analysts.
Richard K. Stoneburner, president and chief operating officer of Petrohawk Energy, said that looking at entire shale formations was misleading because some companies drilled only in the best areas or had lower costs. “Outside those areas, you can drill a lot of wells that will never live up to expectations,” he added.
Although energy companies routinely project that shale gas wells will produce gas at a reasonable rate for anywhere from 20 to 65 years, these companies have been making such predictions based on limited data and a certain amount of guesswork, since shale drilling is a relatively new practice.
Most gas companies claim that production will drop sharply after the first few years but then level off, allowing most wells to produce gas for decades. Gas production data reviewed by The Times suggest that many wells in shale gas fields do not level off the way many companies predict but instead decline steadily.
“This kind of data is making it harder and harder to deny that the shale gas revolution is being oversold,” said Art Berman, a Houston-based geologist who worked for two decades at Amoco and has been one of the most vocal skeptics of shale gas economics.
The Barnett shale, which has the longest production history, provides the most reliable case study for predicting future shale gas potential. The data suggest that if the wells’ production continues to decline in the current manner, many will become financially unviable within 10 to 15 years.
A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10% of the wells had recouped their estimated costs by the time they were 7 years old.
In private exchanges, many industry insiders are skeptical, even cynical, about the industry’s pronouncements. “All about making money,” an official from Schlumberger, an oil and gas services company, wrote in a July 2010 e-mail to a former federal regulator about drilling a well in Europe, where some United States shale companies are hunting for better market opportunities.
“Looks like crap,” the Schlumberger official wrote about the well’s performance, according to the regulator, “but operator will flip it based on ‘potential’ and make some money on it.”
David Hughes at the 2012 American Geophysical Union conference 2012: Shale Gas and Tight Oil: A Panacea for the Energy Woes of America? ABSTRACT: Shale gas has been heralded as a ggame changerh in the struggle to meet Americafs demand for energy. The gPickens Planh of Texas oil and gas pioneer T.Boone Pickens suggests that gas can replace coal for much of U.S. electricity generation, and oil for, at least, truck transportation1. Industry lobby groups such as ANGA declare gthat the dream of clean, abundant, home grown energy is now realityh2. In Canada,
politicians in British Columbia are racing to export the virtual bounty of shale gas via LNG to Asia despite the fact that Canadian gas production is down 16 percent from its 2001 peak). And the EIA has forecast that the U.S. will become a net exporter of gas by 20213. Similarly,
recent reports from Citigroup and Harvard suggest that an oil glut is on the horizon thanks in part to the application of fracking technology to formerly inaccessible low permeability tight oil plays. The fundamentals of well costs and declines belie this optimism. Shale gas is expensive gas. In the early days it was declared that gcontinuous playsh like shale gas were gmanufacturing operationsh, and that geology didnft matter. One could drill a well anywhere, it was suggested, and expect consistent production. Unfortunately,
Mother Nature always has the last word, and inevitably the vast expanses of purported potential shale gas resources contracted to gcoreh areas, where geological conditions were optimal. The cost to produce shale gas ranges from $4.00 per thousand cubic feet (mcf) to $10.00, depending on the play. Natural gas production is a story about declines which now amount to 32% per year in the U.S. So 22 billion cubic feet per day of production now has to be replaced each year to keep overall production flat. At current prices of $2.50/mcf, industry is short about $50 billion per year in cash flow to make this happen4. As a result I expect falling production and rising prices in the near to medium term. Similarly,
tight oil plays in North Dakota and Texas have been heralded as a new gSaudi Arabiah of oil. Growth in production has been spectacular, but currently amounts to just one million barrels per day which is less than 15 percent of US oil and other liquids production. Tight oil is offsetting declines in conventional crude oil production as well as contributing to a modest production increase from the 40–]year US crude oil production low of 2008. The mantra that natural gas is a gtransition fuelh to a low carbon future is false. The environmental costs of shale gas extraction have been documented in legions of anecdotal and scientific reports. Methane and fracture fluid contamination of groundwater, induced seismicity from fracture water injection, industrialized landscapes and air emissions, and the fact that near term emissions from shale gas generation of electricity are worse than coal. Tight oil also comes with environmental costs but has been a saviour in that it at least temporarily arrested a terminal decline in US oil production. A sane energy security strategy for America must focus on radically reducing energy consumption through investments in infrastructure that provides alternatives to our current high energy throughput. Shale gas and tight oil will be an important contributors to future energy requirements, given that other gas and oil sources are declining, but there is no free lunch.
2012 American Geophysical Union conference 2012: Charles A. Hall. Quantity vs quality of oil: Implications for the future economy ABSTRACT: There has considerable interest recently in various indications of important changes in the technology of oil production and its impact on US oil production. The data indicate a clear increase in oil production for the US after 40 years of year by year decline. This has led some commentators to predict that the US will become a net oil exporter before long. Maps showing the enormous extent of e.g. the Bakken formation in North Dakota and Montana,
and our ability to now exploit this oil using the new techniques of horizontal drilling and fracking, gives the impression that there are enormous new oil reserves that can satisfy our wants indefinitely. Other assessments indicate that the amount of oil still available globally is 3, 4 or more times the usual assessments of about 1 trillion barrels. But “oil” is not a single substance, but rather a suite of materials of widely varying qualities and hence utility. One important index is the energy return on investment (EROI), the ratio of energy returned from energy used to get it. EROI reflects the balance of the countervailing impacts of depletion and technology and ultimately determines the price of a fuel. This ratio is declining all around the world, and gives a practical limit to how much oil we can exploit at an energy and economic profit. Bringing quality of oil into the equation gives a much more restrictive estimate of how much oil we are likely to be able to exploit for fuel.
The Shale Gas Revolution: is it already over? by Ugo Bardi
The “shale revolution” has been often touted as a game changer in energy production (1). Indeed, during the past few years, the increasing production trend of shale (or “tight”) gas in the US has generated a wave of optimism invading the media and the Web. However, not everyone has joined the chorus and several commentators have predicted that the trend would be short lived (see, e.g. Sorrell (2), Laherrere (3), Hughes (4), and Turiel (5)). Some have flatly stated that the effort in gas production in the US is simply a financial bubble, destined to deflate soon (see e.g. Orlov (6) and Berman (7)). Some, such as R. P. Siegel (8) even argue that the bursting of the gas bubble might bring about a financial collapse not unlike the one of 2008.
While the optimism about the future of natural gas seems to be still prevalent, the data show that the gas bubble may be already bursting. The most recent data from EIA (9) show that that the total US gas production has not been growing for the past 1-2 years and that it shows signs to be declining. Fitted with a Gaussian curve, it shows a peak taking place around the end of 2012.
The declining trend is not yet very pronounced and specific data about shale gas production after 2011 are not available in the EIA site (9). However, since the production of conventional gas has been declining since 2007, the production of shale gas may not be declining yet, but it is surely not growing any more at the rates that were common just a few years ago.
In any case, there are data indicating that the decline of total gas production in the US was expected. Drilling rigs for gas has been plummeting down during the past few years, as shown in the following figure (data from Baker and Hughes (10)
Obviously, one can’t extract anything without having drilled first to find it. Since the lifetime of shale gas wells is of the order of a few years, it was unavoidable that the drop in the number of gas drilling rigs would generate in a production decline; which is what we are seeing today.
Basically, these data seem to confirm the interpretation that we are facing a financial “gas bubble”, rather than a robust trend of development of new resources. The gas glut produced by the rush to gas of the past few years has lowered prices to the point that companies have been extracting gas without making any profit, actually losing money in the process (7). That couldn’t last forever.
In the near future, the decline in gas production in the US may lead to an increase in prices which, in turn, may direct the industry to restart drilling for gas. But it remains to be seen if prices high enough to generate a profit are affordable for consumers. In any case, the idea of a “gas revolution” that will bring for us an age of abundance is rapidly fading.
In the end, what we are doing with gas is simply one more step along a path that we are forced to follow. With the gradual disappearance of high grade mineral resources, we must extract the minerals we need from lower grade resources, and this is more expensive and more polluting. That’s exactly what happening with gas but it is much more general. As described in the most recent report of the Club of Rome (Plundering the Planet (11)), the gradual depletion of high grade mineral resources is leading us to a world where mineral commodities will be rarer and more expensive. We will have to adapt to this empty new world.
* Ugo Bardi teaches physical chemistry at the department of Earth Sciences of the University of Florence, in Italy.