Shale gas supply debate heats up

Just as the rest of the world begins to get excited about prospects for shale gas reserves, a skirmish is growing over just how much shale gas is actually recoverable in the US.

Matt Simmons has said a few times this year that he doesn’t see evidence that the big shale plays such as Barnett are actually providing big increases in natural gas production, despite the number of wells being sunk. He also pointed to the environmental problems with the hydraulic fracturing used to extract shale gas.

Geologist and energy consultant Arthur Berman has also been pointing out the rapid decline rates for some of the big shale gas plays for some time now. Berman and Lynn Pittinger wrote about their attendance at Haynesville shale symposium earlier this month:

In preparation for my presentation at the meeting, Lynn and I updated our reserve forecasts for the Haynesville Shale. EUR projections were made for 67 wells based on standard rate versus time decline-curve analysis. Major challenges include the limited production history and lack of access to producing pressures. We recognize that our reserve estimates may be somewhat pessimistic because the average decline curve consisted of only seven months of data. Without pressure data, we do not know if for some wells decreasing flow rates represent depletion or flow against high production system pressures.
Despite these limitations, they came up with a gloomy forecast for the “estimated ultimately recoverable” (EUR) gas reserves at Haynesville:

We forecast a sub-commercial average EUR for the Haynesville Shale because of the extreme rates of production decline. Most wells with an IP of more than 10 MMcfd have a decline rate of 25% per month. The average EUR in our study is 1.72 Bcf/well, compared to the 6.5-7.5 Bcf/well reported by many operators. Only two wells of the 67 evaluated have an EUR greater than 6.0 Bcf. At the same time, seven wells have already produced more than 2 Bcf and one has exceeded 4 Bcf.

They also noted that their concerns were shared by “many presenters and participants” at the conference, run by the Gulf Coast Association of Geological Societies.

Berman’s own writing is fairly technical, but Bit Tooth Energy has a slightly more accessible take on points  canvassed at other Berman presentations, including a recent one at the US peak oil association meeting.

Just a few days later, Chesapeake, the most active gas driller, criticised Berman’s presentation as “misguided” in an interview with The Oklahoman.

Meanwhile Tudor, Pickering and Holt, a boutique energy investment bank, also wrote a strident criticism of Berman and Pittinger’s views, arguing, among other things, that they have used the wrong data, the wrong methodology for calculating decline rates, and erroneously underplayed the importance of peak rate in determining EUR.

Their final point was:

“One skeptic stated that “Lack of material response either means they do not take my position seriously, or they do not contest it”. A Chihuahua can only bark at a bull dog for so long before the bull dog snaps back.”

Ouch. Read their full rebuttal here, and Berman’s response here.

Related links:

International energy companies plan for global shale gas play (FT Energy Source, 24/08/09)
Natural gas bulls (FT Energy Source, 21/08/09)

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