"Faster Drilling, Diminishing Returns In Shale Plays Nationwide?"
By Sharon Kelly via DeSmogBlog
Today’s shale gas boom has brought a surge of drilling across the US, driving natural gas prices to historic lows over the past couple of years. But, according to David Hughes, geoscientist and fellow at the Post Carbon Institute, in the future, we can expect at least the same frenzied rate of drilling – but less and less oil and gas from each well on average.
“It’s been a game changer,” Mr. Hughes said of the shale gas boom at a talk last week in Maryland, “but I would say a temporary game changer.”
After crunching data from hundreds of thousands of oil and gas wells across the U.S., Mr. Hughes found that just five of the country’s 30 best shale plays have been responsible for 80 percent of domestic shale gas production: the Haynesville shale in Louisiana; the Barnett shale in Texas’s Fort Worth region; the Marcellus shale, which underlies New York, Pennsylvania, and parts of Maryland and West Virginia; the Fayetteville shale in Arkansas; and Oklahoma’s Woodford shale. When it comes to natural gas, all of the other plays pale in comparison to these five regions.
But the data reveals that in four of these top five shale-gas plays, drillers have been less and less successful in hitting the next big strike-it-rich well. Average well productivity in four of the five best American shale plays has been falling since 2010, Hughes found. The exception, at least for now, is the Marcellus.
Everywhere else, the regional drop-offs are steep. In the Haynesville play, which quite recently was the nation’s top shale play, wells delivered roughly one third less gas on average in 2012 than in 2010, Hughes found.
In other words, shale gas regions start to lose their luster fast. Mr. Hughes pointed out that the Haynesville was hardly even targeted by shale gas drillers until 2008 – and now the best areas, the sweet spots that produced the gushers the Haynesville became famous for, seem to have been found.
Drillers have known for a long time that individual shale gas wells tend to decline at a startling rate. Within three years, the amount of gas flowing from a single shale well can drop 95 percent, Mr. Hughes found — turning what used to be a gusher into a garden hose. Some experts believe that shale gas wells will tend to dry up within 8 to 10 years unless they are re-fracked. Of course, re-fracking not only costs drillers money, making the gas more expensive for consumers, it also has major environmental impacts.
But these fast declines don’t mean that drilling will stop. Quite the opposite. It means that in order to keep the same amount of domestic natural gas flowing, drillers will need to drill faster and faster – in part to keep up with the declines from each well, and in part because on average, the new wells they drill will perform worse and worse.
If Mr. Hughes’ research is correct, each year, it will be an increasingly massive endeavor just to keep producing the same amount of shale gas that was produced the year before. And for consumers, this means rising natural gas prices.
Hughes, who recently published his findings alongside an analysis by the Energy Policy Forum‘s Deborah Rogers of Wall Street’s role, calculated that nationwide, 7,200 wells will need to be drilled annually, at a cost of more than $42 billion each year, simply to keep shale gas production from falling. But last year, drillers didn’t even make enough money to cover that $42 billion, Hughes discovered.
“In 2012, US shale gas generated just $33 billion (although some wells also produced substantial liquid hydrocarbons, which improved economics),” Hughes wrote in a February 21 article in the journal Nature.
The Bakken shale formation, which has been touted as one of the richest and most lucrative shale plays in the country, is a quintessential example of these problems, Hughes found. Because Bakken wells are running dry faster than drillers had hoped, new wells will have to be drilled there at an increasing rate to keep the total oil production up.
“Projections by pundits and some government agencies that these technologies can provide endless growth heralding a new era of ‘energy independence,’ in which the U.S. will become a substantial net exporter of energy, are entirely unwarranted based on the fundamentals,” Hughes concluded in his report.
Why does this matter for anyone but the Wall Street investors who were promised a steady flow of profits from these wells?
Hughes offers a simple answer:
“Governments and industry must recognize that shale gas and oil are not cheap or inexhaustible,” he wrote in Nature. “70% of US shale gas comes from fields that are either flat or in decline. And the sustainability of tight-oil production over the longer term is questionable.”
So far, President Obama has ignored these doubts. His administration has continued to call for an “all of the above” approach to energy. In essence, this means continuing to promote oil and gas instead of shifting to renewables. President Obama has also repeatedly cited the claim that American unconventional reserves can provide a century’s worth of natural gas.
But increasingly, the current administration is an outlier in making these sorts of hyped projections. Washington insiders are paying closer attention to the emerging data about how these wells perform. In the past year, many of them have become unconvinced by the industry portrayal of shale gas as cheap, abundant and beneficial.
Jeffery D. Sachs, Professor of Health Policy and Management at Columbia University and a renowned economist and author, is the most recent pundit to join these ranks. In a March 31 editorial in the New York Times, he wrote, “We are in the midst of a short-term boom of shale oil and natural gas.”
Mr. Sachs used his editorial to call for the Obama administration to tackle the hard challenges involved in shifting from dependence on fossil fuels to renewable energy.
“A clearly laid out federal program to support large-scale solar and wind energy, electric vehicles and other smart technologies — and backed partly by public money — would unlock hundreds of billions of dollars of private investments,” Mr. Sachs wrote. “It would secure America’s energy future and protect the environment, too.”
– Sharon Kelly reposted from DeSmogBlog with permission