Shale or sham?
COMMENT: Art Berman is not alone in suggesting that shale gas isn't the pot of gold at the end of the energy rainbow. His message is supported by Canadian energy analyst David Hughes. These two slides are from a recent presentation of his. (Check it out - note the well density around Dalla-Fort Worth, and the armada of fraccing trucks ready to go to work.)
This graph shows the approximate quantity of gas that can actually be produced from the stated "gas-in-place" in the major US plays. Irrespective of the resource - oil, conventional gas, coalbed methane, tar sands - the recoverable quantity is never even close to 100% of the stuff in the ground.
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This chart illustrates how rapidly most of the production from a shale gas well takes place - 65% of it is out in the first year.
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Combine much lower production than the headlines would indicate, with hugely accelerated up-front well depletion, with the fact that companies across North America (including northeast BC) are jumping on all the shale opportunities all at once, could mean that most of the continent's shale gas, which some headline writers claim could meet North America's gas demand for 100 years, will be played out in the next ten years.
In the context of climate change, is that all for the best (they won't be burning all the gas they claim is there) or is it worse (they'll be burning more sludge from the tar sands)?
By LOREN STEFFY
Houston Chronicle
Nov. 12, 2009
Art Berman didn't set out to become the Cassandra of shale gas.
That's simply been the result as the Sugar Land petroleum geologist and consultant has persisted in raising doubts about the hottest play in the domestic energy industry.
Natural gas extracted from shale formations has transformed the U.S. energy outlook, leading to predictions that it could produce as much as half of our natural gas by the end of the next decade. Shale gas, though, requires more expensive drilling techniques to produce than conventional gas. That made shale gas attractive last year, when natural gas was selling for $13.58 per million British thermal units, but it can be a money-loser at today's prices of less than $4.50.
In a boom-prone industry known for greeting new discoveries with wide-eyed hype, shale gas has unleashed a gusher of zeal, sparking a drilling craze and soaring lease rates across millions of acres from Texas to New York.
Berman isn't saying that the major shale players — companies such as Chesapeake Energy, Devon Energy and Houston-based Petrohawk Energy — are wrong, but he's skeptical that shale gas will be the domestic energy boon that the companies claim.
“I'm saying it's a bubble,” Berman said. “They're creating an illusion.”
Decline rates disputed
That view puts Berman at odds with a host of energy companies, consultants and investment bankers, who claim shale gas may more than double our domestic supply. They argue Berman's analysis is flawed.
The two sides disagree on how to calculate the decline rates for the wells. In simple terms, Berman believes that shale gas wells will play out much faster — producing much less gas — than his detractors do. He also believes that many of the wells being drilled in shale won't be commercially viable.
His conclusion is based on production rates from the Barnett Shale near Fort Worth, the country's oldest field, which he says show steep and persistent declines. Supporters say the initial declines ease over time and settle into a steady production stream.
In criticizing shale, though, Berman has become something of an Oil Patch pariah.
“I'm being creamed,” he said. “There's a brotherhood of defenders out there, and they're all lined up against me.”
A column he wrote for the trade publication World Oil got spiked, and Berman resigned in protest. He claims the shale companies put pressure on World Oil's publisher to silence him.
‘Time to move on'
John Royall, president and chief executive of Gulf Publishing, said he didn't receive any pressure from gas companies. World Oil serves a global audience, and gas shale is largely a domestic issue. Berman had written on the topic for a year, and Royall decided that was enough.
“Art had an interesting take on shale gas,” he said. “It was interesting, provocative stuff, but it was time to move on.”
Berman doesn't come off as obsessed or paranoid. He simply believes that the industry has abandoned caution when it comes to shale, wasting millions drilling wells with a lack of scientific analysis.
“All of my instincts say if you approach it this way, it's just insanity,” he said.
If he's right, the insanity could affect us all. As Congress discusses carbon capture and environmentalists champion converting vehicles to run on natural gas, the prospect that gas supplies could be far less than we think could have a profound economic impact on the country.
“My message isn't ‘this is bad,' it's that we need to practice some caution here,” Berman said.
Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.
Posted by Arthur Caldicott on 13 Nov 2009