A new study has cast serious doubt on whether the much-ballyhooed U.S. shale oil and gas revolution has long-term staying power.
The U.S. produced 8.5 million barrels of oil per day in July of this year — 60 percent more than just three years earlier. That is also the highest rate of production in three decades.
Put another way, since 2011, the U.S. has added 3 million barrels per day in additional capacity to global supplies. Had that volume not come online, oil prices would surely be much higher than they currently are.
That has “revolutionized” the energy industry and geopolitics, as scores of energy analysts have claimed. The Energy Information Administration (EIA) forecasts that U.S. oil production will hit 9.6 million barrels per day (bpd) in 2019, and gradually decline to 7.5 million bpd by 2040.
This would allow the U.S. to be one of the world’s top oil producers for an extended period of time. With such an achievement now at hand, many analysts are predicting an era of American dominance in geopolitics. For example, in an op-ed on Oct. 20, columnist Joe Nocera considered a “world without OPEC,” in which U.S. oil production soon kills off the oil cartel.
Or consider this rather triumphalist piece in Foreign Affairs from earlier this year, where two former National Security Council members who worked under President George W. Bush boasted that the recent surge in oil production “should help put to rest declinist thinking” and “sharpen the instruments of U.S. statecraft.” In the following issue, Ed Morse of Citibank went further. “Despite its doubters and haters, the shale revolution in oil and gas production is here to stay,” he declared.
But a new report throws cold water on the thinking that U.S. shale production will be around for the long haul. The Post Carbon Institute conducted an analysis of the top seven oil and top seven natural gas plays, which together account for 89 percent of current shale oil production and 88 percent of shale gas production.
The report found that both shale oil and shale gas production will peak before 2020. More importantly, the report’s author, David Hughes, says oil production will decline much more quickly than the EIA has predicted.
That’s largely because of high decline rates at shale wells across the country. Unlike conventional wells, which can produce relatively stable rates for a long period of time, shale oil and gas wells experience an initial burst of production in the first few years, followed by a precipitous decline thereafter.
Hughes estimates that the average shale oil well declines at a rate of between 60 and 91 percent over three years. Wells in the Bakken decline by 45 percent per year, which stands in stark contrast to the 5 percent annual decline for an average conventional well.
Or put another way, oil and gas companies will have to keep drilling at a feverish pace just to stand still. This means the industry is on a “drilling treadmill” that will be unsustainable over the long-term.
Predicting what oil production will be in 25 years is difficult, to say the least, but the Post Carbon report projects that oil production from the Bakken and Eagle Ford will be just one-tenth of the level that EIA is forecasting. The EIA predicts that the Bakken and the Eagle Ford will be producing a combined 1 million bpd in 2040. Hughes thinks it will be just a small fraction of that amount – a mere 73,000 bpd.
This is not the first time that David Hughes has taken aim at EIA data. In a December 2013 report, he skewered the high estimates for the potential of the Monterrey Shale in California, calling the EIA’s numbers “simplistic and highly overstated.” Several months later, the EIA was forced to back track on its figures, downgrading the recoverable oil estimates in the Monterrey by 96 percent.
Hughes says the implications of getting it wrong are “profound,” since so many companies are basing very large investments on incorrect projections. He says rosy estimates have cut into investment for renewables, while steering capital towards expensive oil and gas export terminals that should now be called into question.
An article in CleanTechnica points to the possibility of boom towns turning into “ghost towns” if the pace of drilling drops off. If David Hughes and The Post Carbon Institute are correct, there could be quite a few ghost towns popping up in the coming years as the shale revolution begins to fizzle.
Source and Full Report Here
Ecolab Inc. announced that it has agreed to acquire privately held Champion Technologies and its related company Corsicana Technologies (hereafter collectively referred to as Champion) in a transaction valued at approximately $2.2 billion, to be paid through a mix of approximately 75% cash and 25% stock.
Champion is a Houston, Texas-based global energy specialty products and services company with approximately 3,300 employees in more than 30 countries delivering product and service-based offerings to the oil and gas industry. 2011 sales were $1.2 billion. Closing is expected to occur by year-end 2012, subject to regulatory clearance and other customary closing conditions.
- Ecolab buying Champion Technologies for $2.2 bln (marketwatch.com)
- Ecolab buying Champion Tech for $2.2B, hints on good Q3 (bizjournals.com)
- Champion Technologies sold to Ecolab for $2.2B (bizjournals.com)
These Are The Companies That Will Make A Killing Off Of The Coming ‘Industrial Revolution’ In America
Last week, Citi analysts argued that technological breakthroughs—particularly in shale oil extraction—that will allow energy companies to exploit petroleum resources that were formerly inaccessible could spark an “industrial revolution” across the North American continent.
A follow-up report from Citi’s equities team highlights the companies that are already in position to take advantage of this energy boom. While analysts argue that the effect of an energy boom would be transformative and extend far beyond the oil industry, these are the companies that will be directly and locally impacted by the technological breakthroughs in resource extraction.
Read more: BI
- The US Energy Industry Is Going To Grow So Fast, It Will Spark A New ‘Industrial Revolution’ (tarpon.wordpress.com)
Siemens AG (SIE) has revealed its intention to introduce technology in 2015 that will enable conversion of wind-turbine electricity into gas, providing wind farms with an alternative revenue stream when the grid is fully charged.
Michael Weinhold, Chief Technology Officer of Siemens’ Energy Businesses, says the electrolyser, a soccer-field sized plant that converts power into storable hydrogen, is in the testing phase, reports Bloomberg. It offers a promising capacity necessary for overcoming the challenge of how to harness fluctuating electricity output from wind farms, especially at night when demand is the lowest.
Munich-based Siemens allocates 1 billion euros ($1.3 billion) on annual bases to devising new technology for the energy industry. Wind farms have faced hardship in commercial terms because power cannot be stored on a large scale, however the converted hydrogen can be stored by feeding it into the gas grid.
“The main problem today is the mismatch of renewable power generation and demand,” Weinhold said in an interview. “If we can offer solutions to solve that, we have a business case.”
Posted on January 27, 2012 at 6:40 am by Dan X. McGraw
President Barack Obama has gotten an earful from Republicans and energy industry officials for claiming his administration has helped to spur a rise in oil and natural gas production.
So who’s right?
For industry folks, it isn’t exactly what you imagine, but Rapier says the graph doesn’t paint the clearest picture of who is responsible for driving production of oil and natural gas.
“The reason that oil production has risen under President Obama is due to events that happened years earlier. In this case, it wasn’t some grand initiative that President Bush passed, rather it was years of steadily increasing oil prices that caused oil companies to approve a number of new projects that had marginal economics at lower oil prices. But these projects take some years to build, and as in the case of the Alaska Pipeline, decisions that were made (four to six) years earlier benefited President Obama with increased domestic oil production.”
- Oil, gas industry opposes use of word ‘fracking’ for method 1/27/12
- Looking for work? Click here to see job openings 1/27/12
- Steffy: President needs a dose of energy reality 1/27/12
- Cloudy Europe outlook depresses P&G 1/27/12
- Shell president says federal permitting may have turned the corner 1/27/12
Italian energy company ENI said it encountered nearly 700 feet of continuous gas pay at the Mamba South discovery about 25 miles north of Mozambique. The company said the discovery could contain as much as 15 trillion cubic feet of natural gas.
ENI said the “impressive discovery” will lead to major developments in the natural gas sector in Mozambique. This includes access to regional and international markets through liquefied natural gas capacities.
The discovery was made in 5,200 feet of water.
ENI said the Mamba South discovery marks the largest operated discovery in the company’s exploration history.
The company added that its results at Mamba South exceeded initial expectations. ENI serves as the operator with a controlling interest in the area.
- Mozambique gas field discovered (bbc.co.uk)
- Venezuela: Repsol, Eni Await Approval for Gas Extraction from Cardon IV (mb50.wordpress.com)
- Unconventional No More: Huge Gas And Oil Plays Emerge (mb50.wordpress.com)
Americans are cynical about energy companies’ control over pricing, think government is failing on energy issues, and believe the environment should take a backseat in energy concerns that spur economic growth.
Overall, Americans think the country is on a bad path when it comes to energy. More than 43 percent said the nation is heading in the wrong direction in dealing with energy issues. Just 14 percent we’re heading in the right direction.
The nationally representative survey of 3,400 adults was developed by the Energy Management and Innovation Center at the University of Texas McCombs School of Business and its results were released this week.
Americans praised their own households’ handling of energy issues, but thought government and big businesses are falling far short on their responsibilities. Among the respondents, 71 percent said they were dissatisfied with how congress has addressed energy concerns and 54 percent were critical of President Obama on the issue. Oil and gas companies, the Sierra Club and the U.S. Department of Energy all fell to the bottom of the pack, too.
Yet, 57 percent said they were satisfied with how they’ve handled energy in their own homes.
“This survey shows that the public craves leadership on energy issues,” said UT-Austin President Bill Powers in a written statement.
When asked to identify the most powerful factor in the cost of energy, Americans pointed to energy companies and utilities. Thirty-six percent of the respondents said energy businesses have primary control over the price of energy. By comparison, 21 percent said global politics made the biggest impact and 18 percent pointed to government regulations. Just 15 percent said consumer demand was the biggest factor.
In energy policies, respondents gave economic growth greater importance than environmental concerns, a result the researchers linked to atough economy. While 37 percent responded that economic growth should be given priority, 33 percent gave more weight to environmental concerns. The rest believed the issues should be balanced.
- Energy poll: Americans fret about Congress, foreign oil (content.usatoday.com)
- Is Germany’s Green Energy Plan Failing? (environmenteng.wordpress.com)
- Poll: 81 percent dissatisfied with nation’s governance (thehill.com)