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Tags: Energy | US | Shale | Pipe Dream

Energy Study: US Shale Revolution Could Be A Pipe Dream

By    |   Sunday, 02 November 2014 05:58 PM EST

A new study throws cold water on the argument that the much-celebrated shale revolution in America — and U.S. dominance of energy production — is going to last a long time.

The study by David Hughes of the Post Carbon Institute reviews the 12 shale plays that account for 82 percent of the tight oil production and 88 percent of the shale gas production in the U.S. Energy Information Administration (EIA) forecasts for the next three decades.

“This report finds that tight oil production from major plays will peak before 2020. Barring major new discoveries… production will be far below the EIA’s forecast by 2040,” Hughes wrote.

The study, “Drilling Deeper,” projects that production rates from the two largest shale plays — the Bakken and Eagle Ford fields — will be less than 10 percent of that projected by over optimistic and unrealistic forecasts from the EIA.

“Shale gas production from the top seven plays will also likely peak before 2020,” the study finds.  “Production from shale gas plays other than the top seven will need to be four times that estimated by the EIA in order to meet its reference case forecast.”

The upshot, according to Hughes’ research, is not exactly upbeat.

“What this means is that the country's current energy policy, which is largely based on the expectation of domestic oil and natural gas abundance far into the future, is badly misguided and is setting the country up for a painful, costly, and unexpected shock when the boom ends,” the study concludes.

Oilprice.com said the Post Carbon Institute’s findings are consistent with high decline rates at shale wells in general. “Unlike conventional wells, which can produce relatively stable rates for a long period of time, shale oil and gas wells experience an initial burst of production in the first few years, followed by a precipitous decline thereafter,” Oilprice.com said.

Hughes estimates the average shale oil well declines at a rate of 60 percent to 91 percent over three years, a far higher decline rate than the 5 percent decline rate of average conventional wells.

“Or put another way, oil and gas companies will have to keep drilling at a feverish pace just to stand still. This means the industry is on a ‘drilling treadmill’ that will be unsustainable over the long-term,” Oilprice.com said.

It’s not like Hughes has not been right before on the topic.

“In a December 2013 report, he skewered the high estimates for the potential of the Monterrey Shale in California, calling the EIA’s numbers ‘simplistic and highly overstated.’ Several months later, the EIA was forced to backtrack on its figures, downgrading the recoverable oil estimates in the Monterrey by 96 percent,” according to OilPrice.com.

In a column for Forbes, veteran energy author and writer Loren Steffy asserts, in looking at tumbling oil prices, that the hope of U.S. energy independence may be a pipe dream in any event.

“At the current prices, some producers are beginning to worry that shale wells, which use the expensive hydraulic fracturing process, may become too expensive to drill, at least in some parts of the country. While we haven’t seen a significant pullback yet, it’s a reminder of that the U.S. is unlikely to ever produce all the oil it consumes.”

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A new study throws cold water on the argument the much-celebrated shale revolution in America - and U.S. dominance of energy production - is going to last a long time.
Energy, US, Shale, Pipe Dream
Sunday, 02 November 2014 05:58 PM
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