- February 27, 2010
- Posted by: Art Berman
- Category: The Petroleum Truth Report
The widespread belief that there is 100 years of natural gas supply in the U.S. because of shale plays is incorrect. The Potential Gas Committee (PGC) estimated 1,836 Tcf of technically recoverable gas resources for the U.S. in its report released in June 2009. Along with proved reserves of 238 Tcf, there are 2,074 Tcf or 85 years of total supply based on current demand of 25 Tcf per year (EIA). The contribution of shale gas is 661 Tcf, or about one-third
of the total, technically
recoverable resource (Figure 1). The PGC estimate of probable resource volume is 441 Tcf, or about 18 years of supply. Shale gas accounts for one-third of that amount, or 147 Tcf, which is about 6 years of supply at current U.S. demand. That is a lot of gas, but far less than the volume that is routinely stated in the press or by shale-gas advocates. These public statements often do not take high decline rates or anticipated future demand growth into account.
of the total, technically
recoverable resource (Figure 1). The PGC estimate of probable resource volume is 441 Tcf, or about 18 years of supply. Shale gas accounts for one-third of that amount, or 147 Tcf, which is about 6 years of supply at current U.S. demand. That is a lot of gas, but far less than the volume that is routinely stated in the press or by shale-gas advocates. These public statements often do not take high decline rates or anticipated future demand growth into account.16 Comments
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Thank you for your post,
A lot of analysts are indeed cheer-leading the Haynesville Shale as the new “Barnett” or as an energy panacea… My question is: Are they looking at the same data as I do?
The number of producing wells in the Haynesville Shale have increased from 44 in February 2009 to 305 in December 2009 (see http://dnr.louisiana.gov/haynesvilleshale/wbm-chart.pdf). During the same period, cumulative number of wells has increased from 260 to 856. What happened to production of natural gas in Northern Louisiana in this time frame? Well, it is down in 2009 relative to 2008 on average. (see http://dnr.louisiana.gov/haynesvilleshale/wbm-chart.pdf)
Am I missing something here?
I will be posting an update on the Haynesville Shale in a few days. The average well is about 2.0 Bcf EUR–non-commercial. The play appears to be structurally controlled so the better areas are already defined and the “core” area is relatively small compared to the outrageous claims of 250 Tcf. What a surprise that trap definition matters!
AEB
Thanks for continuing coverage, Art. Are you planning to attend AAPG in New Orleans?
Alan,
I will not attend the AAPG Annual Meeting because I am giving two talks in Calgary that week. Thanks for asking.
AEB
Art,
Is there any explanation as to why St. Mary books 1.75 bcfe in the Eagleford and HK books between 5 to 6 bcfe? I think DS may be behind the agressive booking and is basing this on limited data. Your thoughts are appreciated.
Thanks
there is quite an interesting article with the headline “The Disappearance of the Natural Gas Glut” to find under:
http://www.financialsense.com/editorials/powers/2010/0224.html
John Dizard had a very interesting article in this weekend’s Financial Times. “The true cost of shale gas production”
http://www.ft.com/cms/s/0/e34f5282-2899-11df-a0b1-00144feabdc0.html?nclick_check=1
Anonymous,
Your comment about St. Mary’s vs. Petrohawk is insightful. I have not looked at St. Mary’s production but I have done an early evaluation of HK’s Eagle Ford wells, and I cannot come close to their EURs.
With the SEC revisions, different companies are taking relatively more or less aggressive approaches to booking reserves. In the Haynesville Shale play, HK has been far more agressive than CHK, for example.
I attended Dr. John Lee’s SPEE lecture on the new SEC reserve rules last month. What I took away was that very little has, in fact, changed but there are many poorly defined areas that companies will interpret as they wish. I suspect that the aggressive booking of reserves, sometimes using 3 PUDs per PDP location will either be challenged or will be written down in a ceiling test impairment. Companies know this and, apparently, don’t care because they can book the reserves now, use them to bolster asset value, artificially reduce F&D costs, and make themselves more likely to be bought, the only way that I see to make money in the shale game.
Thanks for your comment,
Art
David,
I saw John Dizard’s article “The True Cost of Shale Gas Production”. This is the third that he has written in the past several months. John interviewed me and cited my work in his previous articles in FT. He is very clear on what is going on with the shale plays, and I agree with his view.
All the best,
Art
Art,
Have you published your article on the Haynesville yet? I’m curious to see the conclusions. Will it appear here on your blog?
Another question. I think you (or someone) has mentioned that additional fracking is not really helping with well production. Is there an article/data on that topic that I can read?
Art – Enjoy your posts; keep it up.
I was quite surprised by the Petrohawk annual results (http://oilvoice.com/n/8de6434dc.aspx).
Besides the “addition” of 1.5 Tcfe during the year, they state for the Haynesville:
“The type curve of 7.5 Bcfe/well continues to be supported by the average EUR of the wells that the Company has on production. This type curve assumes first month average production of 16 Mmcfe/d, first year decline of 82%, a hyperbolic factor of 1.1, and an economic life of 32 years. The type curve assumes that 33% of the total EUR, or 2.5 Bcfe, will be produced during the first year, and 80% of the total EUR, or 6.0 Bcfe, will be produced during the first 10 years.”
This does not jive with your average EUR of about 2.0 Bcf. We are all looking forward to your new Haynesville post.
Also, we never heard from you concerning the DrillingInfo post on the Barnett by Gilmer, Hovey & Simmons. Do you have any reaction to their analysis refinements?
GB
Dear Arthur: Are you saying then, or what are you saying, I’m in the core of the core. What do you expect the average well will produce 2.0 bcf or 8.0 bcf.? Some wells have already produced 3.2 b’s in the first year, look fwd. to reading more posts from you.
Thanks for the stimulating (if not fractured) debate on shale gas in recent months. I appreciate that there is a wide range of production rates, EUR values and well costs, but the dominant feature of the discussion is that US gas prices appear to be well below the value required for shale gas production (in a range of $5-9 Mcf). I note that the EIA states that an abundance (not so much with a recovery factor of 15%) of shale gas means lower prices over the long term. So is the boom a financial play to lift nominal reserve assets or are we expecting costs to fall below $4 Mcf? From Europe, this sudden frenzy looks more like Wall Street hype than a spectacular geological revelation.
Yet so many wells have been drilled that one must assume that money is being made despite the apparent arithmetic.
Interesting article “Shale Gas Shenanigans” on
http://www.declineoftheempire.com/2010/03/shale-gas-shenanigans.html
Attended a seminar and the engineer very carefully laid out why use of expotential declines in the shale was wrong, using a b exponent of more than 1 was wrong, and made the case for something I hadn’t really heard of, Power Law decline. I had heard of power law, which is a Chaos Theory concept. The Power law model will increase reserves by some 150% over expotential declines…but the leader pointed out that this increases the life to 30 years but the NPV increases only 7%…in other words, they were still uneconomic and the 5% decline in the “out years” may be true but doesn’t help much when the rate of production is so close to the economic limit…and that limit will be dicey if prices stay low. The 2008 prediction of $9 gas for 2011 appears to be way optimistic.
I further went back to the Fayetteville decline curves and am convinced they are expotential. Perhaps the Haynesville which is somewhat overpressured, will exhibit power law declines. I’d hate to bet my company on it.
A buddy of mine was fishing a few weeks back and finally cemented up a big chunk of the Downhole Assembly & kicked off. Do you think they will stay in that $3 million dollar budget?
Also in the seminar, the engineers pointed out you do not get a dollar for dollar increase in production just for having more fraccing stages.. There is a point of no return AND they point out that there is clear evidence (from the Barnett, & I would aver from the Fayetteville) that suggests many wells frac into the same fracture system thus only serve to produce gas already behind pipe.