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
The Utica Shale contains about 38 trillion cubic feet of undiscovered, technically recoverable natural gas (at the mean estimate) according to the first assessment of this continuous (unconventional) natural gas accumulation by the U. S. Geological Survey.
The Utica Shale has a mean of 940 million barrels of unconventional oil resources and a mean of 9 million barrels of unconventional natural gas liquids.
The Utica Shale lies beneath the Marcellus Shale, and both are part of the Appalachian Basin, which is the longest-producing petroleum province in the United States. The Marcellus Shale, at 84 TCF of natural gas, is the largest unconventional gas basin USGS has assessed. This is followed closely by the Greater Green River Basin in southwestern Wyoming, which has 84 TCF of undiscovered natural gas, of which 82 TCF is continuous (tight gas).
“Understanding our domestic oil and gas resource potential is important, which is why we assess emerging plays like the Utica, as well as areas that have been in production for some time” said Brenda Pierce, USGS Energy Resources Program Coordinator. “Publicly available information about undiscovered oil and gas resources can aid policy makers and resource managers, and inform the debate about resource development.”
The Utica Shale assessment covered areas in Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia.
Some shale rock formations, like the Utica and Marcellus, can be source rocks – those formations from which hydrocarbons, such as oil and gas, originate. Conventional oil and gas resources gradually migrate away from the source rock into other formations and traps, whereas continuous resources, such as shale oil and shale gas, remain trapped within the original source rock.
These new estimates are for technically recoverable oil and gas resources, which are those quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations.
This USGS assessment is an estimate of continuous oil, gas, and natural gas liquid accumulations in the Upper Ordovician Utica Shale of the Appalachian Basin. The estimate of undiscovered oil ranges from 590 million barrels to 1.39 billion barrels (95 percent to 5 percent probability, respectively), natural gas ranges from 21 to 61 TCF (95 percent to 5 percent probability, respectively), and the estimate of natural gas liquids ranges from 4 to 16 million barrels (95 percent to 5 percent probability, respectively).
USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters. The USGS Utica Shale assessment was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol.
The gas fields extend from the booming Eagle Ford play of South Texas deep into the ranch and coal country stretching inland from this violent border city. This is Zetas country, among the most fearsome of Mexico’s criminal badlands.
U.S. and Mexican energy companies long have been besieged by the gangsters here – their workers assaulted, extorted or murdered – despite a heavy military and federal police presence. Now, with feuding Zetas factions bloodying one another and fending off outside rivals, what has been a bad situation threatens to get much worse.
Northern Mexico’s gas production has suffered for years as gangland threats or attacks have kept workers from servicing the wellheads, pipelines and drilling rigs in the Burgos Basin, the territory between the Rio Grande and the city of Monterrey, which now provides up to 20 percent of Mexico’s natural gas.
“Petroleos Mexicanos has problems with security … principally in Burgos,” Guillermo Dominguez, a senior member of the National Hydrocarbons Commission, told the Mexico City newspaper Reforma.
And now the surging Zetas bloodletting pits the gang’s top bosses – Heriberto Lazcano and Miguel Angel Treviño – against Ivan Velazquez, a former underling known as “El Taliban.” From his base in the western state of Zacatecas, Velazquez reportedly has allied with the remnants of other gangs to launch a challenge for control of Coahuila state, which holds most of the shale gas reserves.
Challenge to control
Banners recently hung by both Zetas factions have accused one another of treason and other transgressions that will be avenged with death. Fighting has rattled Nuevo Laredo, the Zetas stronghold that also is the busiest land port for U.S.-Mexico trade, killing scores this month alone.
Still more banners appeared in Nuevo Laredo Tuesday, reputedly written by beleaguered civilians, promising all the gangster factions further bloody vengeance.
“Zetas are pretty much in control, but they have been challenged,” said a U.S. official in Mexico who monitors the situation, speaking on condition of anonymity. “You have all these groups fighting one another, shifting alliances and internal fights … It’s a wilderness of mirrors.”
The Zetas’ spats with rivals already have turned Coahuila’s other large cities – Torreon in the west, Monclova in the center and Saltillo in the east – into fierce gangland battlegrounds. State officials are blaming the Sept. 17 escape of 131 prisoners from a Piedras Negras prison on the Zetas seeking to replenish their ranks for new battles.
The insecurity in Mexico’s gas fields contrasts sharply with the drilling and production frenzy seizing the ranchlands just north of the border. Oil field pickups and semi-trailer fuel tankers choke Highway 83, the once-desolate ranch-country highway that cuts northwest from Laredo though the lower reaches of the Eagle Ford.
Some 6,000 drilling permits have been issued for Eagle Ford shale in Texas, and 550 wells are producing there. By comparison, Pemex so far has drilled five exploratory shale gas wells, but hopes to drill 170 more in the next four years. The company plans to spend $200 million on exploration in the short term.
Those first exploratory wells have been drilled to the west of Nuevo Laredo and below the border at Piedras Negras, ranch and coal country that remains relatively violence free for now. But that tranquility may owe more to the now-threatened dominance of the Zetas bosses than to rule of law.
“They are in control,” said a U.S. official. “They are pretty much just doing their thing.”
At least eight Pemex and contract employees vanished in May 2010 near a gas facility near Falcon Lake, territory under the Zetas’ firm control. Last March, two men working for a Mexican company doing contract work for Houston-based Halliburton disappeared outside Piedras Negras.
Halliburton spokeswoman Tara Mullee-Agard said employees get regular security briefings, but the company declined to comment on the contractors’ disappearance.
“Many companies that were active in the areas have stopped until Pemex or the government can provide security,” said an employee of one Reynosa-based company. “In places where there have been incidents we don’t operate anymore. When darkness falls, we stop wherever we are.
- Zetas crimping gas industry in northern Mexico (mysanantonio.com)
- Banners claim an alliance has been formed against the Zetas (mysanantonio.com)
- Mexico: State Officials Killed in Nuevo Laredo (hispanicallyspeakingnews.com)
- Piedras Negras “megafuga” just the latest massive prison break (mysanantonio.com)
- 132 inmates escape from Mexican prison near U.S. border (theprovince.com)
(Reuters) – Britain sent a clear signal of support to its oil and gas industry when it named an advocate of shale gas fracking as environment minister and a wind farm sceptic as energy minister.
The appointments in Prime Minister David Cameron‘s ministerial reshuffle on Tuesday mark a departure from his pledge to run Britain’s greenest government, in favour of the fossil fuel sector that generates billions of pounds in tax revenue.
“There is a shift away from greener ministers in posts towards less green ministers and I think that’s serious,” Alan Whitehead, a member of the Energy and Climate Change Select Committee, said during an industry event on Tuesday.The government last year put a brake on the development of shale gas extraction due to environmental concerns after it triggered two small earthquakes near Blackpool.
But Owen Paterson, a member of Cameron’s Conservative Party who was appointed Environment Secretary in the reshuffle, has hailed the potential economic benefits of shale gas, a message likely to sway the country’s decision in favour of the drilling method.
“If developed safely and responsibly, shale gas could generate massive economic activity and a wealth of new jobs,” Paterson said in May, when he was Secretary of State for Northern Ireland.
He said huge shale gas deposits in Northern Ireland could be exploitable, adding that discoveries in the United States had shrunk its gas price to a quarter of British levels.
“(Shale gas) has also ended America’s dependence on unreliable and dictatorial regimes,” he said.
The decision on whether Britain will resume shale gas fracking, a method of drilling through shale deposits to retrieve gas by injecting liquids and chemical, is in the hands of the energy ministry, but support from the Department for Environment could speed up a decision.
NEW ENERGY MINISTER
John Hayes replaced Charles Hendry as Energy Minister in the reshuffle.
In his final media interview as Energy Minister, Hendry said a decision on shale gas was not imminent, but that Britain could not ignore its impact on the U.S. energy market.
Hayes has been a vocal opponent of wind farms, a technology the government regards as key to meeting climate change goals.
“Such tall structures will have a detrimental impact on the quality of life for local residents, the attractiveness of the area and its potential for tourism,” Hayes said at a local council meeting, reflecting the views of his constituents campaigning against the construction of a wind farm.
He said wind farms would always be backed up by conventional power plants because of their unreliability and that they had a detrimental impact on wildlife.
“Wind power (considerably) increases the average household energy bills as the profit-hungry energy companies continue to chase the taxpayer funded subsidies and credits,” the new Energy Minister said.
(Reporting by Karolin Schaps; Additional reporting by Susanna Twidale; Editing by David Cowell)
- Pennsylvania’s Booming Shale Gas Energy Industry (tarpon.wordpress.com)