As Asjylyn Loder and others at Bloomberg have noted, another 19 billion dollars of debt of shale oil and gas producers is going into default as of the second week of March, 2016:
Since the start of 2015, 48 oil and gas producers have gone bankrupt owing more than $17 billion, according to law firm Haynes and Boone. Fitch Ratings Ltd. predicts $70 billion of energy, metal and mining defaults this year, and notes that $77 billion of energy bonds are bid below 50 cents, according to a note Thursday (3/09/2016)Asjylyn Loder, just like Mason Inman, is one of the few thoughtful reporters informed on the subjects of shale oil and gas production, and their economics.
In December 2014, Mason wrote a controversial article published by Nature, one of the most influential scientific journals:
"Natural gas: The fracking fallacy: The United States is banking on decades of abundant natural gas to power its economic resurgence. That may be wishful thinking."In his Nature article, Mason included this quote from me:
The results are “bad news”, says Tad Patzek, head of the University of Texas at Austin's department of petroleum and geosystems engineering, and a member of the team that is conducting the in-depth analyses. With companies trying to extract shale gas as fast as possible and export significant quantities, he argues, “we're setting ourselves up for a major fiasco”.This particular quote reverberated in the media around the world and caused a storm of ad hominem attacks on me. Here is the letter signed by Mr. Howard Gruenspecht, Deputy Administrator of the U.S. Energy Information Administration. In that letter I was called a relatively minor player in the definitive UT BEG Shale Study and, much worse, President of ASPO, the Association for the Study of Peak Oil.
Ouch, that hurts! Of course there were other letters and more howling.
Never mind that the BEG study used this model of shale gas production in all of their calculations. Our model was published in the Proceedings of the U.S. National Academy of Sciences (NAS) and was awarded by NAS the 2013 Cozzarelli Prize for best paper in engineering. And never mind that in early 2011, I made an accurate prediction of gas production from the Barnett shale, based on the model originally proposed by Dr. M. King Hubbert, who was the original pre-ASPO researcher. Of course, early on, in 1956, Hubbert was called a lunatic and idiot. But I wrote on this subject many times, see here and here and several other posts, and do not want to repeat myself.
Since in this post I am talking about oil and gas, I will express their production in the units of energy, instead of barrels of stock tank oil and standard cubic feet of gas. To obtain numerical answers between 0 and 30, I will use exajoules (EJ). 1 EJ = ten to the power eighteen of joules is an astronomical amount of energy. 1EJ when digested as food, feeds 320 million Americans for one year. Americans use about 100 EJ per year of primary energy, mostly as fossil fuels, most of them oil and gas. Also, 1EJ equals the high heating value of 1 (0.8 to be exact) trillion standard cubic feet of natural gas (1 Tcf). Currently, U.S. consumes about 28 Tcf (35 EJ) of natural gas per year.
The plots below have consistent x- and y-scales for all mudrock (shale) plays I consider: the Barnett, Fayetteville, Haynesville, Eagle Ford and Bakken. I do not have much faith in the Marcellus shale calculation; it is a relatively young development and production data reporting in Pennsylvania is incomplete and awful. I am very grateful to my friend, Dr. Art Berman, for providing me with the spreadsheets that contain data dumps from the Drillinginfo well production database.
Disclaimer: The plots below are only for the active producing wells up to date. To the extent that robust drilling will continue unabated in each play, the three shale gas plays described below might produce another 50 percent more energy. If the rate of drilling rapidly diminishes, as is the case today, the ultimate production from these three shales may be only 10-20% above the projections in this blog.
Let's do a quick summation: According to my calculations, the Barnett shale will ultimately deliver 9 months of U.S. gas consumption, Fayetteville 4 months, Haynesville 6 months, and Marcellus 14 months. Suppose now that the Marcellus shale will produce as much as these three plays together, or 19 months of U.S. gas consumption (40% more than my calculation). Also suppose that the ultimate recovery from all four shales will exceed my current predictions by 50%. This brings us to (19+19)*1.5 = 5 years of U.S gas consumption (I always round my recovery estimates). I will add the estimated ultimate gas production from the Eagle Ford (5 months of U.S. consumption) and Bakken (2 months of U.S. consumption) in Part II of this blog, and they will add another 1.5 years of U.S. gas consumption. So much for the 100 or 200 years of gas supply from shales "predicted" by the robust technologists.
Warning: When I said in December 2014, that my country is setting herself up for a major fiasco, I was not idly joking nor was I seeking cheap publicity. I merely tried to encourage those who care to listen to refocus their thinking. Is anyone listening a year and a half later?
|Click on the image to see it in full resolution. Production rate of natural gas from the Barnett shale in EJ/year. 1EJ = 0.8 Tscf. Data source: Drillinginfo and Texas Railroad Commission, accessed January 2016.|
|Production rate of natural gas from the Marcellus shale in EJ/year. 1EJ = 0.8 Tscf. The production data from Pennsylvania are listed every 6 months and are of poor quality. Data source: Drillinginfo and other sources, accessed January 2016.|