Bishop Hill Epic shale
The shale gas boom just keeps getting bigger and bigger, having now reached what Nick Grealy calls a Wow! moment (H/T GWPF).
And surprise, surprise: China! Largest shale reserves in the world, surpassing even the US by far. I've said it before, and I'll say it again. The only way I have been wrong about shale is by underestimating it's impact. But the Chinese figures change everything. World LNG? Toast! Which can't help Australia too much even with 395. Which leads to the other southern hemisphere wonders, although since this site mentioned them both in Q3 2009, it's only the massive scale of the resource that surprises, not the locations:
South Africa 485!
Argentina 774! Repeat that. That is not a mistake. That is technicially recoverable. That is astounding.
For some, however, this kind of good news just can't go unchallenged and I sense that there is a concerted effort to hype up the idea that there might be some important environmental concerns. Take this article in Time magazine for example, or this forthcoming conference.
Meanwhile, Zeke, writing at Lucia's blog, looks at an old chart of hydrocarbon deposits and the proportion used to date - it's hard to get the two figures on the same chart because mankind has used so little. Zeke wonders what it would look like now we have discovered all this shale gas.
Reader Comments (106)
I became very skeptical of the EIA when I read their modeling assumptions in the 1998 Annual Energy Outlook. They basically admitted to fabricating their forecasts for political purposes -- "non-technical considerations." It is online here:
http://tonto.eia.doe.gov/FTPROOT/forecasting/038398.pdf
the referenced quote is on p221
Their predictions on price and production have not been that great either.
"These adjustments to the USGS and MMS estimates are based on nontechnical considerations that support domestic supply growth to the levels necessary to meet projected demand levels."
I know when I go to the beach, I adjust the weather forecast based on non-technical considerations that support my vacation plans.
Skipped over the whole peak oil phenomenon and went right to natural gas in shale.
Really should look into http://TheOilConundrum to understand non-renewable resource constraints.
Don't you mean, why do really large companies want to buy chunks of Chesepeakes' holdings for really large sums?
That is easy. All you need to do is to look at the SEC rules and you will find that many companies that have trouble replacing reserves are buying shale plays to take advantage of the 6:1 allowance. They wat to keep their share prices high and that will not happen if they have to show reserve declines. Buying shale players is one way to avoid showing that decline.
Big companies want in. Chesepeakes cashes in some of its value to focus on the most profitable partsof its business.
But that is the problem. It does not have a profitable part that is related to shale. The company has been losing on the production side of shale gas for quite some time and cannot turn a profit without hedging at much higher prices. Given that the LNG price is below what Chesapeake needs to break even it has no way of being profitable in shale gas and is selling itself off to companies that can afford to wait and need a way to hedge their exposure to the USD.
"Vangel, do you know who gave The Oil Drum 100,000$ in cash to startup the site?"
Sorry Bruce but I do not particularly care. What I care about is the data and the record. From what I can tell the IEA and EIA were way too optimistic and made assumptions on the basis of the need to have things work out. This is why they kept assuming that new production would be there to meet ever growing demand and why they ignored the depletion rates for as long as they could. I was very optimistic on the shale argument for a while before I looked at the actual decline curves and the recovery assumptions that were being made by the industry. While I had no problem with the assumptions for some of the formations it became very clear that they could not be applied to most of the shale gas areas. After that I began to pay attention to the conference calls and the funding issues. It was soon very evident that without hedging at very high price levels there was no way to make a profit in shale gas. Because continued production requires profits it was soon very evident that the producers would have to do something else. One of the activities that made sense was selling off assets to energy companies with falling reserves since the assumptions made and the SEC rules, unrealistic or not, allowed the acquirers to hide the decline.
"Natural gas from shale formations comprised 23 percent of total U.S. production in 2010, according to the U.S. Department of Energy’s Energy Information Administration.
Shale gas output was 4.87 trillion cubic feet in 2010. That's a 57 percent increase from the 3.11 trillion ft3 produced in 2009."
Not at all. The problem was that to make money producers need a much higher price and a lower decline rate. A lot of the financing in the sector comes due this year. Expect to see many more shale gas plays taken out by low cost conventional producers needing to add to their reported reserves.
Of course, if you believe in shale gas you are free to buy the service sector companies that are making huge profits drilling wells that do not break even in most cases.
I think the thing that really annoys the Doom and Gloomers at The Oil Drum is that cheap Shale Gas makes oil sands and oil shale production cheaper.
"CIBC's Andrew Potter estimates that oil sands production will jump from 1.5 million barrels a day in 2010 to five million barrels by 2020."
I think that the people at the Oil Drum are realists. The fact that oil production will peak does not mean that new viable sources of energy will not be developed. Tar sands oil is a viable source of new oil. But as someone who has a great deal invested in tar sands I can tell you that the total production levels will not be enough to offset depletion from conventional sources and that the energy returns for each barrel produced will be significantly lower than for conventional crude.
In the quote above you have a statement that suggests that in nine years the tar sands will provide an increase that will offset less than a year's worth of depletion from conventional sources. How exactly is this optimistic?