[Ferretlover]

Interesting interview I ran across today. Looks like these things are just about everywhere. Energy Tribune

A couple hghlights:

ET: Speaking of prices, what is a sustainable price for natural gas? I ask because I’ve heard some producers insist that shale gas wouldn’t be profitable when prices are under $8. Now, I’m hearing $5. What’s your take on the relationship between the relatively high cost of drilling for tight gas and the market price which has been so volatile lately?

RA: My take is that $5 to $6 will work in most cases and will make most shale plays competitive. However, there are several factors that have to be taken into account while considering your question. Depth of the reservoir and its relation to the size, lateral extent, thickness, initial productivity and production decline of the prize are key considerations. There are deep and shallow shale gas reservoirs. For example the Haynesville shales can reach more that 13,000 ft. On the other hand the Fayettville shales can be found at less than 4,000 ft. And there are even shallower shales with reasonable potential in Saskatchewan at about 1,000 ft. Availability of drilling, completion and hydraulic fracturing equipment is another key consideration. For example, for the same stimulation; mobilization of hydraulic fracturing equipment, materials and personnel to the Saint Lawrence Lowlands of Quebec to stimulate the Utica shale is very expensive compared with a more mature area where the required equipment might be readily available.

[...]

ET: We also discussed the Barnett Shale in Texas. You said “There will be many Barnetts around the world.” What did you mean? And where do you expect the future Barnetts to be found?

RA: As indicated in our World Petroleum Congress (WPC) paper you mention in the introduction of this interview, tight gas reservoirs are present in almost all petroleum provinces around the world. The same holds true for shales -- more so because shales are a very important source rock. So my vision of several Barnetts around the world stems from the pervasive presence of shales. Black shales of South America and Africa are similar to those of North America in their association with sandstone and siltstone. Black shales of central Europe and the western part of the former Soviet Union are associated with carbonate reefs, an association that as far as I know is not present in North America. But in the same way that all naturally fractured reservoirs are different, all shale gas reservoirs are also different. I like to consider each one as a research problem by itself. Repeating the same successful drilling and completion approach carried out in one shale reservoir, without the necessary research and careful evaluation, may lead to major fiascos, headaches and financial losses in another shale reservoir. As to where the future Barnetts can be found, I anticipate that it will occur primarily in regions which previously have shown significant discoveries of oil and gas. But because of the supply and demand issues mentioned above, it will take several years (maybe decades in some areas) before shales outside the US and Canada are developed.

[...]

[Southpaw]

easily debunked and you are full of crap oily.

http://www.energytribune.com/articles.cfm?aid=1174

Formation, formation, formation

A highly publicized Navigant Consulting report promises that the U.S has 100 years worth of natural gas supplies and Boone Pickens’ TV ads promote the increased use of wind and natural gas use as the way to energy independence. This heady optimism about gas supplies is based on the production increases over the last two years when natural gas producers in 2007 pulled off the biggest annual jump in production since 1984 and repeated their performance in 2008.

US gas production is expected to be nearly 8 percent higher this winter than a year earlier, based on an analysis by Virginia-based ICF International . The Barnett shale has been the single biggest driver in US gas production growth. Barnett shale production is now about 4.4 bcf/d cubic feet per day compared with 1 bcf/d just four years ago.

With the Barnett behind them and the Haynesville Shale play ramping up, Oklahoma City-based Chesapeake Energy has said it will move 10 of its 43 Barnett Shale rigs to the Haynesville area, attention is turning to the highly publicized Marcellus Shale in New York and Pennsylvania. At first, it was thought that roughly 10 percent, or about 50 trillion cubic feet of natural gas was recoverable. Now, newly revised estimates from Penn State geoscientist Terry Engelder and State University of New York at Fredonia geologist Gary Lash place the shale’s recoverable gas potential at around 363 trillion cubic feet.

However, headlines about the Barnett and Haynesville shale successes have overshadowed the fact that these shale formations vary in quality from one part of the country to another. Clearly we are starting with the most promising formations and shouldn’t automatically project similar success for other regions. Improvements in technology have made a big difference in the amount of production that can be recovered economically to date. But technology improvements are likely to be smaller in the future.

With much of the new production shifting to regions with little previous experience such as New York, there are questions about whether the infrastructure exists to get the production to market. Ownership and right-of-way issues may make it difficult to get permits and there will be certainly more environmental push back, especially those related to groundwater. All of these factors are likely to raise costs for producers.

[Southpaw]

but wait there is more

Where to From Here?

There is really little comparison between conventional and unconventional production. With conventional one well might produce 30 to 40 billion cubic feet of gas over its useful life. But an unconventional well might only produce a fraction of that. While these wells have an initial high production rate, it will drop off dramatically in a few years.
EOG Resources has estimated that production from the Barnett Shale will peak in 2009 at 4.8 bcf/d and then hold at a plateau for 2 to 3 years before gradually winding down. CEO Mark Papa notes that estimates vary and that some within industry expect the Barnett to peak at 6 bcf/d. Described as a drilling treadmill, as wells start their steep declines, companies must drill more wells to replace them. Considering that it is the growth in reserve volumes that drives their stock prices, they must continue to drill even if they only recover capital costs. Drilling more wells creates the need to drill even more wells in the future to maintain the same production. Although wells have a rapid decline, production is expected to decline to a low rate that can be sustained for decades as old wells provide a solid base of production.

Others argue that it is a mistake to characterize all unconventional production the same and low but long-term sustainable production may be more characteristic of coal bed production. But unlike coal bed methane wells, shale wells diminish to almost nothing during a 2 to 5-year period leaving no real residual base of production. The Barnett Shale may be approaching its production peak, and if the latter school is correct, a sudden drop in drilling would cause a dramatic production drop off. James Williams, energy economist with WTRG Economics, has noted that almost a third of current gas production comes from wells completed in the preceding 12 months. And data from the Texas Railroad Commission show production has been declining nearly every month this year.

If the credit crisis and current low prices persist for another two or three years, leading to a large decline in the number of rigs working in the US, questions about the long-term production profile of gas shale will be answered. Everyone will also be watching closely the decline rates for the unconventional fields as drilling slows.

The recent success in shale production has led to certain euphoria about an enhanced role for natural gas in our energy mix. The predictions that unconventional production would quickly reach a peak and decline was temporarily put aside by the record production of the last two years. Excitement about shale production has led some to announce that we will soon be self sufficient in gas. Now, renewed uncertainty about the economics of these supplies has turned the debate on its head. Will shale production allow natural gas to replace coal under a vigorous climate program and avoid creating new dependencies on foreign sources of natural gas? Will the demand be there to cause prices to rise enough in the short-term to continue the development of unconventional supplies?

In recent presentations, analysts at Merrill Lynch have gotten more bearish on gas in the near-term and long-term. They noted that as recently as June, the mix of drivers appeared supportive for even higher prices with a year-on-year storage deficit and lagging LNG imports. Since late summer, however, negative factors appear to dominate the near-term and long-term outlooks, including significant US production increases from shale gas and other unconventional plays, a weaker economic outlook and possible recession, lower demand over the summer, and the increasing role of renewables.

Producers are hopeful that the supply glut that caused prices to tumble will start to turn around in late 2009 and early 2010 and prices start to rise. A wild card is whether or not the new global liquefaction capacity coming on line in 2009 and 2010 will be soaked up by existing customers or, as some have predicted, flood into the US. If analysts are correct about the resource potential, the great challenge for the Obama administration will be to find a bigger role for natural gas in America’s long-term energy strategy. That will mean creating policies that increase demand and therefore elevate prices to levels that can help finance the next generation of shale gas plays.

[Southpaw]

conclusion

1. oil shale has a rapid decline rate and peaks very soon in each well.
2. during this economic crisis wich will never end because all your jobs are moving to China
3. nobody will give shale gas compagnies credit.
4. Shale gas will become more and more expensive because of (hyper) inflation people will reduce natural gas consumption.
5. evironment issues
6. Can you really trust the ugcs? ofcourse not
7. reserves are probably overestimated

Shale gas will stay in the ground and maybe when China has become the new U.S.A. they will buy all your shale gas in the distant future because everyone in the U.S.A. is prepared to work for 3 bucks a day now.

You see oily It certainly is not the end of the world or civilisation. Only the end of the U.S.A. and maybe Europe but people in africa asia and south america have suddenly all the resources that they need to expand for a while.

And i think most people on this site are preparing for the collapse of the U.S.A. and not for the collapse of the world. the world will be a better place once the big fat pigs like Europe and U.S.A. have to go on a carbon diet.

What really sickens me about you is that you say that business as usual can continue in your country while your country is burning faster then Rome.

I'm sorry if someone got offended by my cruel remarks but this guy doesn't seem to get it that the U.S.A. is finished, and he thinks that some great new technology will arrive made by an american ofcourse who then can safe the economy of the U.S.A. and everyone can get their flying cars and immortality.


Ps. I have nothing against U.S.A. or Europe only that they consume to much and that's a fact.

[RdSnt]

An essential element of the rosy analysis is the energy input costs. Horizontal drilling and high amounts of fracturing are very expensive energy-wise. The extraction rates they are getting now are marginal at best and due to the costs they must extract as quickly as possible.
As oil costs move back towards $100 expect to see shale gas fall off the map again.

One other note, as rigs are pulled out of the shale gas fields and production rates fall, the rates can't be recovered if you put rigs back in much later. The gas reserves left behind dissipate to reach a new, lower density equalibrium.

[copious.abundance]

Funny thing is Southpaw, nothing you wrote debunked what that guy said.

You and the writer of your article don't even understand the nature of these plays. They complain about the dramatic drop-off in production for each well, but what they fail to mention is that the land area some of these shale plays cover is so large they can keep drilling new wells in them for decades, if not centuries.

Nice try, though.

[copious.abundance]

easily debunked and you are full of crap oily.

http://www.energytribune.com/articles.cfm?aid=1174

BTW, your own source tells us there is a glut of natural gas on the market, and that this could continue for some time.

In recent presentations, analysts at Merrill Lynch have gotten more bearish on gas in the near-term and long-term. They noted that as recently as June, the mix of drivers appeared supportive for even higher prices with a year-on-year storage deficit and lagging LNG imports. Since late summer, however, negative factors appear to dominate the near-term and long-term outlooks, including significant US production increases from shale gas and other unconventional plays, a weaker economic outlook and possible recession, lower demand over the summer, and the increasing role of renewables.

Producers are hopeful that the supply glut that caused prices to tumble will start to turn around in late 2009 and early 2010 and prices start to rise. A wild card is whether or not the new global liquefaction capacity coming on line in 2009 and 2010 will be soaked up by existing customers or, as some have predicted, flood into the US. If analysts are correct about the resource potential, the great challenge for the Obama administration will be to find a bigger role for natural gas in America’s long-term energy strategy. That will mean creating policies that increase demand and therefore elevate prices to levels that can help finance the next generation of shale gas plays.

There's so much of the stuff floating around, the problem is finding demand for all the stuff they can produce. Supply is NOT an issue.

[Maddog78]

This guy is funnier than pstarr.

I really enjoy reading people's posts who have no idea about the business.
Very entertaining.

[copious.abundance]

>>> LINK <<<

May 21, 2009, 12:28 PM ET
No End in Sight to the Natural Gas Glut
By Ben Casselman

Natural-gas producers just can’t help themselves.

Gas Demand is falling, supplies are bulging and prices are slumping, but producers just keep on producing.

Witness this morning’s natural-gas storage data from the Energy Information Administration. Stockpiles rose by 103 billion cubic feet, significantly more than analysts’ already-bearish 91 bcf consensus forecast. Storage levels are now nearly a third higher than at this time last year, and 22.4% above the five-year average.

The reaction was swift: gas prices are taking a hit this morning, down more than 30 cents per million British thermal units to under $4 per million BTUs. That pretty much kills the commodity’s recent rally, which most analysts figured was tied to a rebound in oil prices. (Oil is down today, too.)

Today’s storage numbers are just the latest evidence that natural-gas companies are having a hard time slowing their production after years of frantic drilling. U.S. gas production was up 3.9% in February over the previous year, and industry heavyweights like Devon Energy Corp. and XTO Energy Inc. reported double-digit production increases in the first quarter.

Why aren’t producers doing a better job reining themselves in? They’re partly victims of their own success. In recent years, rising prices, easy financing and new technology spurred the discovery of huge new gas fields in Louisiana, Texas and elsewhere. Those discoveries haven’t gone away just because prices have fallen—in fact, the results keep getting better. It’s hard for production to fall when companies keep announcing wells with initial production rates in excess of 20 million cubic feet per day. For those who don’t follow the natural gas industry too closely, that’s a certifiable monster well.

But there’s also another problem, what game theorists call the “prisoner’s dilemma.” The industry as a whole needs production to fall in order to push prices back up. But individual companies don’t want to stop drilling because they need the cash. So they keep on drilling, and keep on hoping that everyone else will cut back. (It’s worth noting that at least one company has shut-in some gas until prices recover.)

Of course, low prices mean companies have less money to spend on drilling, which explains why the U.S. rig-count has fallen by more than half since September. That’s led some industry leaders to predict a big rebound in prices by the end of the year. But not everyone is convinced. After all, there’s an awful lot of gas sitting in storage, and not much interest in burning it.

[copious.abundance]

or in the case of shale gas (tightly bound) and thus cost extra energy and money to produce.

Since you seem to have a very short memory I'll repeat what I said in the other thread. Please read and comprehend. Thank you.

pstarr I am glad you're beginning to understand these shale gas plays. But here's why your complaints are no big deal.

I agree that these wells do require more energy to produce gas than conventional wells. I claim this does not matter. Why does it not matter? Because the size of the resources in them are immense.

Let's say the EROEI of a conventional gas field is 30:1. Then let's say the EROEI of a shale gas field is 10:1 (disclaimer: I don't know the actual #'s, these are just illustrative).

A large conventional gas field would be something on the order of 5 Tcf to maybe 20 Tcf, perhaps 50 Tcf at the top end. Let's use a larger 30 Tcf conventional field. With an EROEI of 30:1 you would use the energy equivalent of about 1 Tcf to recover the 30 Tcf, leaving you 29 Tcf as "available energy."

These shale plays, however, tend to be orders of magnitude larger. 20 and 50 Tcf is a smaller one. The largest one yet - the Haynesville shale - is anywhere from 200 to 1500 Tcf of recoverable reserves, depending on who you ask. Let's be conservative and say it's only 200 Tcf. With an EROEI of 10:1, you'd consume the energy-equivalent of 20 Tcf to recover the 200 Tcf, leaving you 180 Tcf as "available energy."

In other words, because of their immense size, using up some extra energy to extract the gas is no big deal, because it still leaves you immense amounts of gas left over as "available energy."

[Maddog78]

Fracturing and horizontal well digging are pretty expensive enterprises for leaky stove gas wouldn't you say?

No, not really.
Costs are dopping fast in this down turn.
Like I said in another thread, it's looking like our wells will cost 25-30 percent less than this time last year.
Part of it is also with practice you get better at something.

[copious.abundance]

But more to the point: One minute you claim that EROEI analysis is only for pointy-heads and academicians (unlike yourself, an Oilfinder (or should I say looser)) and the next minute you abuse the concept to justify this business.

no consistency.

You're right, I think EROEI is mostly just some pointy-headed academic babble invented by greenies to make the argument we're doomed. I suppose it's "nice" to have stuff with a good EROEI, but it's not really a big deal. But the main reason I mention it when I do is to "humor you." That, I assume for the sake of argument that EROEI is an important concept, but then, as I did in the example above with huge shale gas plays, then go on to show why, even if it is an important concept, it's not a big deal (because in this case the size of the resource is so large).

In another words, until the plays mature and actual production over time can be measured, and we find ways as a society to use very expensive gas (for a natural gas auto infrastructure that currently does not exist) then cries of WE ARE SAVED are a bit premature. Wouldn't you say?

In the case of these shale gas plays, a few of them are already fairly mature (namely, the Barnett, and to a lesser extent, the Fayetteville shale, the New Albany shale and the Antrim shale). They already know how to get the gas out of these things, and are getting better at it all the time (ask Maddog ). In that regard they have little left to prove, it's already proven. As for the size of these things, that will take decades to get a firm grasp on, and they will likely get larger as they get better in figuring out how to suck out more gas from the rocks. In the meantime, the only thing anyone really needs to know is, "These things have immense amounts of gas and the only thing you need to do to increase production from them is drill more wells." Imagine it as counting the number of stars in the Milky Way galaxy: How many stars are there? "A lot." Make a best guesstimate, then as telescopes and technology gets better you can pin down an increasingly accurate number over time. But while you're gradually pinning down that number you do not need to worry about "running out of stars."

[copious.abundance]

BTW pstarr, this is what your arguments on this topic amount to:

OF2: Mt Everest is big. Really big. Really really big. Really really really big. It could be the biggest mountain in the world.
pstarr: Could be. I don't believe it. When they've spent decades measuring it, thousands of times to make sure they get it right, and compare it to every other mountain on earth, and then publish the results in a peer-reviewed scientific journal, then maybe I'll believe it. Until then it is just cornucopian speculation that we've got a mountain that big.

That's pretty much what you sound like. You don't believe these things will pan out because you don't want them to pan out. How do I know you don't want them to pan out? You basically admitted it here:

I do not want to see this economy recover. It is based on perpetual debt, suburbanization and the construction industry. It depends on resource destruction and the end of healthy forests, rivers, aquifers, and soils. It means the death of healthy families, communities, and small towns that made America great. It is an abomination.

Like so many others here, your biggest fear is that we will find an abundant source of energy that will allow us to continue modern technological civilization, with all the cars, houses, freeways, gadgets, and the whole shebang we've been using for a century. A resource like shale gas, with numbers in the tens and hundreds of trillions - and even quadrillions - of cubic feet of recoverable gas in a single shale, is just such a threat. It bothers you that natural gas makes a perfectly good transportation fuel, and that some countries, like Argentina, use it thusly on a large scale. It bothers you that NG can be used to create electricity, and a lot of other things. But most of all, it bothers you that there appears to be gobs of it. So what do you do? You go into denial. You make idiotic claims like, "There are very few cars running on natural gas in the US, so that means there never will be." That would be like someone saying 110 years ago, that there were no flying machines, so that meant there never will be. But you can't even make that excuse for this one, because, unlike the person 110 years ago, I can actually show you 7 million or more of just what you do not want to exist.

I'm afraid you're going to have to get used to this. Your quote from the other thread above tells me you live in some sort of Little House on the Prairie nostalgic world and you want society to return to that world. I'm telling you right now: You will not get it. You're wasting a lot of mental and emotional effort wishing for something that will never happen.

But go ahead, continue wishing all you want. As time passes and your desires fail to come to fruition, you will gradually (and grudgingly, no doubt) realize I was right.