Art Berman – Is Shale Oil Over-Hyped?

Posted in Audio/Video & Articles, Presentations & Publications on April 8, 2017

Art Berman – Is Shale Oil Over-Hyped?


11 comments on this entry


  1. Enjoy your articles, keep up the quality work.

    Ed


  2. Thanks Ed.

    Art


  3. Dear Art, it is a good post,as usually. But there is one position I can not agree with. You say that substantial improvement in shale oil production technique and economics is impossible because the industry is so old. Yes, the industry is old. Yes, hydrocarbon production from shales is known for 200 years. But contemporary shale sector is very young. There is still no definition of “shale play”. The term “shale” is used very loose. The exploration model is oversimplified. The operators believe, that horizontal drilling and massive hydrofracturing is the only techniques needed to take care about everything, so there is no need in geological foundations for drilling. I believe that there is a potential for dramatic improvement of “shale” plays economics via improved exploration methodology and drilling/completion techniques. We could discuss it. Best regards


  4. Simon,

    Thanks for your comments. I just spoke at the Unconventional Research Group session that was part of the AAPG Annual Meeting in Houston. All of the talks were about what has been learned about unconventional reservoirs and it is considerable and will increase.

    The problem that I see is that the extraction part is an old technology and process and fraught with unpredictable operational risks and costs. I drill wells all the time and know about this too well.

    My latest post today discusses how most of the lower break-even prices are because of write downs because of lower oil prices and that future net cash flows have been greatly reduced. That is the dark side of lower break even prices.

    I don’t mean to be cynical but it is difficult for me to imagine more than small, incremental improvements in cost going forward.

    All the best,

    Art


  5. Interesting article… to support that one can question what innovations service companies can bring to the table when they are barely paid to nothing. Pumping more & cheaper sand in longer sections hardly to be called a true new technology….. there is some good stuff on production optimization side is showing up though. For many of us to produce the risk mitigation comes from not innovation but cost reduction and that is a cheaper service in all of its forms. Hence, room is for improvement still there…


  6. Art,

    We have communicated several times regarding fossil fuels, and you have been a great help to me as I have studied and learned something about that source of power.

    Unfortunately, you really don’t have a fix on what is going on with renewable energy, most specifically solar. The narrative you cite is woefully out of date. You don’t understand the exponential growth of solar and the exponential reduction in costs that has been occurring in the last couple years. You mention that one of the problems with solar and wind is that the sun doesn’t always shine and the wind doesn’t always blow. That was a problem from 5 years ago. The third leg of the stool (in addition to the vast energy we can increasingly draw from solar at lower and lower cost, and which we can use to power our society, whether transport or industrial) — the third leg is the exponential growth in the technology and cost reduction of electrical storage. This technology has been following a similar exponential cost reduction, technical curve to solar, only about 4-5 years behind. It is the nail in the coffin of fossil fuels, and it will take a lot less time than you suggest.. There’s nothing like robust exponential growth in any technology.

    I don’t mean to be catty about this, but I have found that the experts in Fossil don’t follow the the Renewables. You could not build and run a Nat Gas power station today in the southwest for the a price of and maintenance of a utility scale solar field.

    As for the grid, our current grid is so decrepit and vulnerable that it’s way past been patched and bandaged. It needs to be rebuilt, almost ground up, and it will take into account the advantages of DER (distributed energy generation).

    The catch phrase that one is starting to hear about these subjects is call “The Solar Singularity,” the point at which fossil becomes more expensive than renewables. And this massive shift doesn’t even take into account the social cost of climate change. It’s going to be an interesting decade or two.

    Best,
    Alan Beattie
    ISI Strategies


  7. Alan,

    Thanks for your comments.

    I said that I am very much in favor of more renewable energy and that it will become an increasingly important part of the total energy landscape going forward. The main point about solar and wind energy is that there is a very long way to go to get from less than 3% of total U.S. energy consumption at year-end 2016 to anything meaningful.

    I am equally enthusiastic about advances in electricity storage but the same comment applies: current storage is about 2% of electric installed capacity (and most of that is old pumped hydro) and it will take a long time to make significant progress away from intermittent renewable supply requiring natural gas backup.

    Many assume we can seamlessly replace fossil fuels with low carbon technology without much underlying change to our consumption habits–I don’t see how that is possible. Today many new renewable energy technologies show promising energy returns (EROI), even higher than the equivalent fossil (e.g. new coal plant) would. But fossil energy underlies all mining, extraction, industrial processes needed for renewables. A solar panel is not ‘renewable’–it’s ‘rebuildable.’

    The problem of renewables is not the headline cost per kWh, but that they’re a bad match with the demand-driven system our culture has built over last 50 years. ~80% or so of USA energy use (after conversions) is non-electric. Most renewables are electric.

    The larger issue is the weakness of the global economy and its unsustainable debt load. No combination of fossil and renewable energy will maintain economic growth for much longer given that debt overhang. Renewable energy will face the same barriers in coming years as fossil energy and many other sectors of society – a lack of funding. 1/3 or more of societal energy uses would have to be set aside to invest in new renewable energy.

    I am a vocal critic of the unrealistic propaganda about the potential for shale gas and tight oil to meet our energy needs going forward. Renewable energy propaganda is equally misleading. It proclaims that society can seamlessly move from fossil to renewable sources without any change in consumption habits or lifestyle. Most things that sound too good to be true are, in fact, untrue whatever their source or constructive intent.

    All the best,

    Art


  8. Listened to your talk at the recent AAPG Unconventional Group 4/5/17. I would appreciate a copy of your presentation. Thanks.


  9. Henri,

    Thank you for your comments about my AAPG/EMD Unconventional Research Group presentation. I suggest that you contact AAPG for a copy of that presentation.

    This presentation includes all of the slides on the decline of the Bakken play. The chart showing that most cost reductions are because of lower oil-field service costs and not efficiency is in this recent post.

    All the best,

    Art


  10. Great article as always.


  11. great articles!