What does the New York Times have against natural gas, for goodness sake? Seems nary a week goes by that the natural gas industry isn’t being hauled in front of the court of public appeal for some perceived naughtiness or another. Lately it’s been lies, damn lies, and statistics when it comes to the potential for shale gas in the US.
Channeling Art Berman, a former World Oil editor who lost his job after he became a closed-loop recording system decrying the plausibility of shale development, industry’s new “best friend” Ian Urbina of the Times seems dead-set on proving that oil companies are flat-out lying about the prospectivity of North American shale plays, despite the fact that most industry insiders consider the continent’s shale gas reserves to be the life preserver thrown to a drowning hydrocarbon industry. Citing internal e-mails from unnamed sources, among others, Urbina attempts to make the industry’s euphoria over its success in the shales seem like yet another attempt to dupe John Q. Public.
One weakness I’d like to point out in Urbina’s June 25 article, “Insiders sound an alarm amid a natural gas rush,” is that many of his sources data back to 2009. This isn’t ancient history, but so much has been learned in the last two years that yours truly would consider this information extremely outdated — i.e., not worth quoting.
For instance, he quotes an analyst from IHS Drilling Data as saying, “The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work.” That comment was made Aug. 28, 2009.
Another anonymous source, a retired geologist, said more recently that these “corporate giants” are having an “Enron moment.”
Additionally, he points to the rapid decline curve of many shale gas wells. This is common industry knowledge, not something I think anyone is trying to hush up, and the fact is that after astonishing initial IPs, some of these wells continue to produce respectable amounts of gas for decades. In the Barnett, for instance, he says production data indicate that the decline means that “many will become financially unviable within 10 to 15 years.” First of all, that’s a pretty respectable decline rate. Secondly, oilshalegas.com states that production in the Barnett may someday reach 3.4 Bcf/d, not bad for a bunch of junky little wells.
Additionally, he reveals that gas production data reviewed by the Times suggest that many wells may have more gradual decline curves, which is somehow portrayed as being a sinister fact.
Not surprisingly, the industry fired back immediately. Aubrey McClendon, CEO of Chesapeake Energy, took umbrage at the implication that it might be lying about its success in the shales on that company’s website. “Chesapeake stands behind all of its statements to shareholders, partners, and the public regarding our natural gas discoveries and production,” McClendon noted. “Our industry’s operations and investment decisions are informed and guided by the best geoscientific, petrophysical, and 3-D seismic data available and analyzed by some of the best drilling, completion, production, and reservoir engineers in the business. The results of the industry’s efforts to revolutionize natural gas development and production have been extraordinary and continue to improve.”
McClendon also jumped at the chance to showcase the naïve nature of the author’s economic conclusions, noting that the economics of today’s dry gas projects are worse – because of the abundance of shale reserves, not in spite of them. “It is also absurd to conclude that shale gas wells are underperforming while America is awash in natural gas and benefiting from natural gas prices less than half of what they averaged in 2008,” he wrote. “How can shale gas wells be underperforming if shale gas companies are beating their production forecasts, natural gas prices remain low, and US natural gas demand is at a record high?”
The Independent Petroleum Association of America’s “Energy In Depth” website issued the following rebuttal: “The United States produced more natural gas in 2010 than at any point in the previous 37 years, a stunning reversal of fortune given the country’s supply picture earlier this decade and one that could not have been possible without massive volumes of American energy that continue to be generated from shale.
“So what happens from here? By now, you’ve likely heard the stories and seen the estimates, with everyone from IEA to EIA to PGC to MIT projecting a future in which shale’s production trajectory continues along an aggressive upward path, delivering literally quadrillions of cubic feet of clean-burning natural gas to generations of consumers not only in the United States but around the world. It’s a view that’s supported by the preponderance of science and a majority of scientists, not to mention one that’s continuously reinforced by new data.”
Finally, I wish Mr. Urbina would take a step back and ask himself why companies would invest millions of dollars in horizontal wells and hydraulic fracturing if they secretly know that these wells are a waste of time and money. Why would huge companies like ExxonMobil, Total, and CNOOC invest in joint ventures or, in ExxonMobil’s case, simply buy a US independent if they didn’t think the shale had real potential? If they’re that dumb, Bernie Madoff could have a field day.
For a link to the latest Energy In Depth, visit http://www.energyindepth.org/2011/06/what-they%E2%80%99re-saying-36-hours-later/.
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