Bishop HillEpic 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)
There is a concerted effort to spread misinformation about shale gas and fracking (hydraulic fracturing) in general. It is the crux of the Gaslands propaganda video. The COOP in the UK are gleefully distributing the DVD. Fortunately there are places to get more realistic views, for example:
http://www.energyindepth.org/2010/06/debunking-gasland/
It should also be noted that it is highly likely that fracking will be necessary for CCS if it is to become reality.
Check out the library at Energy in Depth for other fracking information:
http://www.energyindepth.org/library/
The link to "(See pictures of the effects of global warming.)" in Time magazine doesn't actually depict any global warming at all. Calving and ice shelf breaks happen all the time, and even more on advancing glaciers. The "dramatic" breaking of Perito Moreno glacier happens precisely when the glacier advances. This creates a natural ice dam and the lake level builds up on the other side. Eventually pressure is higher than ice resistance and the natural dam gives away in quite an impressive way. It really shows a very healthy glacier. The use of the image in an alarmistic way is rather pathetic.
If it means we can stop burning coal for baseload, it is wonderful news.
If it means we can get by with a smaller global nuclear fleet, it is wonderful news.
If.
Nick Grealy is not exactly a dispassionate observer when it comes to shale gas, but for the record I hope he is right.
And as ever, I hope the doom-sayers are wrong.
Not sure it's such good news for us if most of it is still outside the UK. It still leaves the challenges and risks of getting it here, and perhaps storing it as a strategic reserve. It doesn't really seem to help energy security as much as nuclear could, and the price is making nuclear less competitive.
What all this does is confirm what we've already suspected - wind power will have to continue to compete with the low prices for electricity fueled by natural gas. The natural gas bubble continues to expand into the future.
At the moment, the price of natural gas in America is so low, the big companies betting on shale gas are poised to lose their shirts based on over investment in natural gas found in tight "shale gas" formations.
The hype on gas shales overlooks a number of problems which will, in the short term likely separate a fair number of investors from their capital. The problems relate to the costs of drilling the wells (typically over $5 million); the very high rate of decline in production in the first year (typically over 60%) and, as a result the inability of the well to produce viable quantities of gas after 3-6 years. Putting these together the price of the product has to be considerably above current prices for the resource to be viable long-term, and with significant quantities of LNG coming onto the market from a variety of sources at lower prices, this is unlikely to be the boon that is currently being sold.
Art Berman at The Oil Drum is, however, better qualified than I to explain this, which he has at these two refs - among others.
Mr. Atomic Hair Drier, there will be no good news for Britain untill, to quote HRH the Duke of Edinburgh, Britain "gets its finger out".
Art Berman is the lonely contrarian voice over shale gas in the US. Who knows if he is right? Most analysts disagree with him, but I'm not advancing an argument through consensus.
It is interesting that so very many energy companies - and the EIA - now regard shale gas as potentially revolutionising global energy supply.
Of course there will be problems, but it does look increasingly as though the world energy industry is taking shale gas very seriously indeed.
This will upset the Peak Doom brigade no end.
Walt Stone
Ironic, isn't it, given $4 a gallon gasoline in the US and $8 a gallon petrol in the EU? And my neighbor with a F250 Ford pickup converted to Natural gas is smiling ear to ear.
Invest in companies that convert petrol automotive equipment to nat gas. Also the distribution of nat gas on the retail level. While it will be a couple years for this trend to develop, just watch the politics as people rebel against the price of driving to work.
BBD: Nick Grealy may not, as you say, be “a dispassionate observer when it comes to shale gas” but I think the US Energy Information Administration, where he got his data, probably is. See their report here. And note that it’s an “initial assessment” of a few, albeit important, regions.
Atomic Hairdryer: you say, “most of it is still outside the UK”. Well, yes – but, even so, the UK has (see the EIA report) some 20 trillion cubic feet of technically recoverable resource (compared to only 9 of proved natural gas). That’s a lot – it only seems a little because shale gas reserves elsewhere are so vast. Moreover, the UK assessment is incomplete and, in any case, we have friendly near-neighbours (especially France and Norway) with huge amounts. I suggest you need not be so concerned about energy security.
The rub my friends lies in the words "technically recoverable," and various meanings that can be applied to them. While it is technically possible to get the gas out of all the gas shales if you saturate the deposit with wells at a close spacing, it is not economically viable to do so. As those who are now drilling the gas shales in the States have found, it is only currently economic when (as with the Eagle Ford Shale) there is sufficient additional hydrocarbon liquid in the reservoir to sell that to help cover costs.
There is a considerable body of evidence (that Art quotes, but that I have checked) that shows the short life of the wells in the Barnett Shale and lots of evidence about the need to find the "sweet spots" in formations such as the Haynesville. but hey that's physical evidence, as opposed to theoretical assumptions, and we all know that those models are much more reliable (grin). (Some of the arguments relate to decline curve modelling).
Re Robin
But we're not allowed to play with our gas, or coal, or nuclear because the charming Ms Lucas says "NO". Which must be part of this post-normal democracy thing. We have a leader who's dad farms wind, his deputy's Mrs works for a wind company and then there's Lord Oxburgh advising the government to subsidise businesses he has interests in. Such is life in UK Plc. So we pray for wind, or the wind famers pray the subsidies keep flowing.
I'd still rather see more nukes for baseload. Current proposed designs should be good for 40yrs of baseload and by then, we may have figured out how to get fusion working cheaply and reliably. Although given the UK's increasing energy costs, the UK probably won't be able to afford to do any high energy physics research.
"costs of drilling the wells (typically over $5 million); the very high rate of decline in production in the first year (typically over 60%) "
I've found when researching it is just the opposite.
They wells are cheaper (and in fact some locations have a choice of 3 layers to drill into) than they thought as technology progresses, and production goes on longer than they thought.
Some shale gas wells have been producing for 75 years in Appalachia.
And some people have surmised that a log of conventional gas is above shale gas and the natural pockets were filled by natural fracturing in the shale.
So there may be shale formations under every conventional field.
Some of the Barnett wells are producing at 1,000,000 cu/ ft per day = 4,000$ a day = 1.5mil per year
I am amazed at the reference-free anti-Shale propagandists posting here. I guess they consider themselves the backup plan if the anti-shale propaganda movie fails.
"Statoil ASA and Chesapeake Energy project that they could drill as many as 17,000 natural gas wells into the Marcellus Shale over the next twenty years. More in the West Virginia Gazette."
Does that sound like they think they will lose their shirts over the low price?
http://shaleblog.com/2011/17000-marcellus-shale-gas-wells/
Heading Out:
The EIA report claims that their recovery factor,
Isn't that a reasonably cautious approach?
Atomic Hairdryer:
True enough. But I suspect that quite soon even the dimmest politician (except the fragrant Ms L) will begin to understand that, given that (a) gas, coal and nuclear are unacceptable and (b) wind and solar produce damn all power, Britain is facing a grim and impoverished future – unless some new thinking is undertaken. I would hope that would mean a complete review of the CAGW theory – especially as other major economies are, in practice, ignoring it. But, in view of the hold the theory has on established UK opinion, I’m not holding my breath. However shale gas – abundant and with low CO2 emissions – may well come to be seen as the only practical solution.
"In the 12 months between July 1, 2009. and June 30, 2010, the state's 632 producing Marcellus wells released 180 billion cubic feet of gas - an amount that more than doubles Pennsylvania's annual natural gas production from the years before the shale exploration began."
"production reports show that the expected ultimate recovery for the wells - the cumulative amount of gas each well will produce - is going to exceed predictions made by the industry in the earliest days of the shale exploration."
"John Harper, chief of the mineral resources division of the Pennsylvania Geological Survey, noted that the Marcellus wells that produced gas in the last fiscal year averaged almost 2 million cubic feet per day - "a lot better" than the earliest dozen or so Marcellus wells in the state that produced an average of only 89,000 cubic feet per day"
Read more: http://thetimes-tribune.com/news/marcellus-shale-production-data-exceeds-expectations-1.1000300#ixzz1Ir1ZJeDd
Bruce
For some reason that I have never fathomed, this blog attracts a few Peak Doom types.
Keep up the good work - your posts are interesting and informative. And in key with my anti-doomist leanings, of course ;-)
What I find interesting is that despite the uncertainty about the volume, price, and type of hydrocarbon reserves that exist within a tyical 10-year E&P planning horizon, the IPCC still manages with a straight face to predict the emissions from them in 100 years' time.
And that's without knowing the population level in 100 years' time and what the majot technology changes will be.
Either they are farsighted genius seers, or they are guessing like b@stards and have no more clue than anyone else.
I can tell you as a driller we have been fracing for years and i really don't see the hubbub! shale is deep and the only thing the greenies got is shelow gas from coal.
Robin
Of course you are right, but I have yet to see any evidence that Mr Huhne is any brighter than Ms Lucas; if he is, then she certainly has him bemused and befuddled. On paper, and pre-McIntyre, it might have looked sensible to put one person in charge of energy security and "climate change" but in practice we have been sacrificing both energy security and the wider economy on Michael Mann and Rajendra Pachauri's altar. Perhaps Steve Holliday of the National Grid was being more realistic and subversive than we realised when he raised the bogey of blackouts and power rationing.
What Huhne should do is produce a clear control framework for shale gas so that it can be exploited without destroying the environment, replacing coal (dirty, CCS too expensive), wind (doesn't work), offshore oil (running low) and Russian or Gulf gas and oil (money goes to dictators and kleptocrats). But he won't.
David S:
And, while he's at it, it might be a good plan if the good Huhne were to commission a thorough examination of the environmental damage done in mining the rare earth minerals that are essential to his beloved wind mills, solar panels and electric cars - and of the dangers involved in their processing. And he might wish to consider how China's near monopoly of REM production could be a serious threat to the UK if, as he plans, we become increasingly reliant on such devices.
But he won't do that either.
"the very high rate of decline in production in the first year (typically over 60%) "
this has first year decline in production graph showing they're up to 60% in Barnett shale.
http://bittooth.blogspot.com/2009/01/why-europe-arent-only-ones-who-should.html
"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. "
The total amount of gold in all the seas is about 7 to 75 billion kg.
We're rich! /sarc
Biggest threat I think from China is not their renewables manufacturing, or rare earth control but the amount of money they're investing in education and supercomputers, and they don't seem to be wasting that capacity on climate models. They're doing a lot of R&D. Too bad we're not and we've given up on making tangibles. Having a service industry is all well and good providing there's an economy to service. Bigger threat to the UK though are people like Huhne and Lucas who seem hell bent on destroying our economy.
I'm still not convinced shale is the future, mainly because it's old tech. So we have an extra 200+ years worth of gas. Without investing in R&D for new forms of power generation it seems to me or future generations will be having the same debate about peak oil/gas. I've been coming around to thinking a modest carbon tax invested in sensible R&D makes a lot of sense.. Just as long as that's not building bigger wind follies or mansions for scammers like Vince.
Re Frosty
Never mind the gold, if metal prices keep rising, the manganese nodules might be worth a look again :)
Frosty, horizontal drilling (the key technology in the current shale boom) did not start until 2003.
The data you point to was compiled in 2005, which really is quite old.
This document is from 2008, and they had already drilled over 4,000 new horizontal wells.
http://www.barnettshalenews.com/documents/A%20History%20and%20Overview%20of%20the%20Barnett%20Shale.pdf
"The Fort Worth Star-Telegram has reported that North Texas' Barnett Shale, the largest natural-gas-producing area in the U.S., has reached a milestone by exceeding 9 trillion cubic feet of production, dating back to 1982, according to the Powell Shale Digest, an authoritative source on the huge shale field.
The Barnett Shale achieved record production of nearly 1.9 trillion cubic feet of gas in 2010,"
I wouldn't worry about the Barnett.
In production for almost 30 years, yet 21% of its total production came in 2010.
On top of that they are now drilling in areas that are "wet" -- they have liquid petroleum products that are worth more than the gas.
Frosty
More Peak Doom please.
Doomer, denier - the names seem to come whenever you challenge orthodox thinking. I was not planning on writing a scientific paper when I started this, and don't intend to now, my days of doing that are pretty much over - why bother? But that doesn't mean that the information isn't out there - For example Swindell has reported on the declining life in texas wells (which I wrote about here for a while, and I use a graph from Swindell's 2005 SPE paper here. Myself, in the same way that I go to look actual temperature records to draw my conclusions about warming, I went and looked at the well records from the Railroad Commission of Texas to validate what those gentlemen were pointing out. (I also read the odd e-mail after reading the Bish's book, (I guess I'm just one of them doubting Thomases).
"they had already drilled over 4,000 new horizontal wells."
That's the point tho isn't it Bruce, they have to keep on drilling new wells because 60% of them decline in the first year.
BBD do your own research ;^)
Frosty
We'll see
xx
Just to reconfirm what some say above eg Lorne 50 is absolutely right: fraccing (to some of you here:not with a "k", please!) has been around for years. Most production targets are way below ground water levels, so not risk of harm to water supply AT ALL.
Similarily horizontal drilling has been with us since way before 2003 - at least from the mid 1990's or so. Its standard technology, the problem is not drilling or steering the wells, its ensuring you are within the target formation you want to be in, and that is a seismic imaging and inversion problem.
Re the comment: "costs of drilling the wells (typically over $5 million)". Quite frankly a $5 million dollar well is nothing remarkable, especially offshore. A well in the Southern Gas Basin in the UK North Sea will likely cost $20 - 40 million. As a comparison, the 3 recent exploration wells offshore Faroes by Cairn Energy cost $150 million EACH. And they were dry holes.
As I recall oil sands in Canada represent a recoverable resource equivalent to 4 times all the produced and current estimated reserves worldwide combined for all conventional hydrocarbons. Oil sands are profitable on an OPEX basis at around $80 - 100 per barrel oil price, and practical on a full cost (ie OPEX + CAPEX basis) at about $150 / barrel. People I have spoken to in oil sands are working on project time lines of up to 100 years (a typical oil field is typically 15 - 30+ years).
For those who want good estimates of world resources the BP annual report on this is the widely read industry view that is considered pretty authorative. Not sure if its available on line.
Frosty, old style conventional gas is like a bubble filled with gas that can be tapped until the pressure gets too low. Shale is different. You drill a vertical well and then send the drill bit horizontally and then fracture the shale (but not too big a fracturing) and then all the available gas is going to the wellhead. But only in a specific zone around the fractured rock.
And then that well produces for 10,20 30 years and makes you a lot of money because there are almost no dry shale wells.
Then you keep drilling wells in a slightly different locature and drain that fractured area making money all the way.
From one drilling site you can send out horizontal pipes in 3,4 or 5 directions.
Notice that the wells are producing 2,000,000 cu ft per day of gas. Thats a lot of gas and a lot of money
I suspect you are just peddling the Art Berman garbage ... but his reputation is based on Peak Oil coming true and vast quantities of gas is ruining his schtik.
Heading Out, i looked at the well records. Gas production from 380 bcf to 1,828 Bcf since 2004.
Gas Well Gas Production –
January 2004 through December 2004 = 380 Bcf
January 2005 through December 2005 = 503 Bcf
January 2006 through December 2006 = 717 Bcf
January 2007 through December 2007 = 1,104 Bcf
January 2008 through December 2008 = 1,612 Bcf
January 2009 through December 2009 = 1,775 Bcf
January 2010 through December 2010 = 1,828 Bcf
http://www.rrc.state.tx.us/data/fielddata/barnettshale.pdf
The BP Statistical Review of World Energy is here:
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf
Do you guys all do this? The numbers that Bruce gave are the cumulative production from ALL the wells in the Barnett. The number of wells drilled per year relative to the above can be assessed from the number of drilling permits
January 2004 through December 2004 1,112
January 2005 through December 2005 1,629
January 2006 through December 2006 2,503
January 2007 through December 2007 3,643
January 2008 through December 2008 4,145
January 2009 through December 2009 1,755
January 2010 through December 2010 2,157
Adding up this total one gets 16,944 wells, and there is a total of 14,886 so its not a bad assumption. So if you divide production by the number of wells per year, and if you assume that they are all still productive, you don't get 2 million bcf you get around 296,000 cf/day which at $4 per kcf brings in $1,182 a day or $431k a year. Sounds not bad but if you're paying $5 mill per well just to put it in (and I have heard of costs going much higher) that isn't necessarily wonderful (and by the way your costs don't stop when the well comes in). I have done the math on the 60% declines (ad incidentally I have talked about these numbers with a number of well operators including folk at Devon) and it only then, and when you accept only a 28% success rate that you can the way that some folk can see a good return on their money.
Well ... lets not guess.
"Twenty-two natural gas wells, clustered on only 2 1/2 acres in Arlington, are producing 62 million cubic feet of gas per day for Houston-based Carrizo Oil & Gas."
"Carrizo estimates that the 22 wells will produce a total of 110 billion cubic feet of gas over 25 years, said Richard Hunter, vice president of investor relations. That would represent an average estimated ultimate recovery of 5 billion cubic feet each and rank them among top-tier Barnett producers.
Even at a modest average price of $5 per 1,000 cubic feet, the wells would yield $550 million in production revenue over their lifetime."
Read more: http://www.star-telegram.com/2010/09/30/2510136/ut-arlington-pad-site-exemplifies.html#ixzz1Itjk0hXX
Thats a 2.5 acre pad, that gets gas from 1100 acres - less than 2 sq miles.
And thats assuming it doesn't have any gas liquids which are closer in value to oil.
"Barnett wells not only produce dry gas, but also higher-priced liquids, including oil, condensate and natural gas liquids such as butane and propane."
So, thats just under 3 million cu feet per day for each of the 22 wells, which cost way, way less than 5 million each because they were all drilled from just one pad.
Thats what you get for paying attention to old, old stats. Oil men learn ... they change techniques. Do things for less money.
Atomic Hairdryer:
Shale may not be the solution for the long term. But it could well be the solution to a serious short term problem: the imminent gap in our energy supply.
If past centuries are any guide, the twenty-first will bring many threats and challenges - some completely unexpected today. We will cope only if we develop a successful, innovative and flexible economy; sound R&D will be an essential component of that. But, without reliable energy, such development will be impossible.
(PS: the comments problem is back. I tried to post this several times yesterday (replying to AH at 8:29 PM) before actually doing so today. Very frustrating.)
Heading Out
Why? Why are you doing this? Are you ideologically opposed to fossil fuels, or just another Peak Doomer watching your belief system crumble?
It is utterly incomprehensible to the rest of us. Be assured of that.
Heading Out:
I agree with BBD. Do you think that the EIA report (see my post at 5:11 PM yesterday) is insufficiently cautious in its assessment of shale gas's recovery potential? And, if so, have you any ideas about what might be a solution to what, at least for the UK (see my comment to Atomic Hairdryer in the same post), is a looming energy crisis?