August 25, 2011
USGS Slashes Marcellus Shale Natural Gas Reserve Estimate
The US Geological Survey has cut its estimate of technically recoverable natural gas from the big Marcellus Shale by about 79.5%. You just got more energy poor. Get a more insulated water heater next time you need a new one.
The shale formation has about 84 trillion cubic feet of undiscovered, technically recoverable natural gas, according to the report from the United States Geological Survey. This is drastically lower than the 410 trillion cubic feet that was published earlier this year by the federal Energy Information Administration.
These are technically recoverable estimates. Economically recoverable reserves will be some amount less than these numbers and to get anywhere near the full technically recoverable number above might require substantially higher costs.
How does 84 trillion cubic feet compare to how much natural gas the United States uses per year? In 2010 the US used 24,136,666 million cubic feet in 2010 (i.e. about 24 trillion cubic feet). So the revision downward cost about 13.5 years of natural gas at current consumption rates. with the new total less than 4 years of consumption.
Shale natural gas has become the biggest fossil fuel energy hope. Cleaner than oil or natural gas and currently quite cheap. Shale natural gas enthusiasts claim the shales (Barnett, Haynesville, Fayetteville, Marcellus have huge supplies of natural gas can displace oil for many users (e.g. compressed natural gas cars) and natural gas is partially displacing dirtier coal in electric power generation. Therefore a lot is riding on how much natural the more optimistic view for the future of natural gas would have consumption rising substantially. While oil prices have gone up natural gas has stayed cheap since the 2008 financial crisis and US natural gas consumption grew by 21.7% in 2010. Cheap natural gas has made the construction of new nuclear power plants uncompetitive.
Back in June 2011 a New York Times article reported on skepticism inside the US Department of Energy's Energy Information Administration about the real potential for shale gas. With this big USGS downgrade on Marcellus the most important question becomes: Will USGS do similar downgrades on the other big shale formations? Anybody know whether the USGS is looking into reserve revisions on the other shales?
Bullcrapola...here's the the exact USGS report (http://www.usgs.gov/newsroom/article.asp?ID=2893&from=rss_home) about the shale gas increase, plus the very reputable Carp Diem has reported the same (http://mjperry.blogspot.com/2011/08/usgs-estimate-of-marcellus-gas-up-by.html).
This seems to be huge indictment on EIA's ability as a forecaster. The USGS has actually significantly increased their estimates. The second sentence of the USGS report says:
"These gas estimates are significantly more than the last USGS assessment of the Marcellus Shale in the Appalachian Basin in 2002, which estimated a mean of about 2 trillion cubic feet of gas (TCF) and 0.01 billion barrels of natural gas liquids."
OK, so a lot has happened in the Shale Gas arena in the last nine years - so much so that the EIA saw fit to increase reserves 205x when, according to the nation's foremost Geologists, they should have only increased them 42x. How many other figures from EIA are similarly inaccurate?
That is not purely a rhetorical question, a lot rides on the answer.
It is a question of half full or half empty. I do not think the half full perspective is the correct way to approach it. The USGS estimate is down from the 5 times larger EIA number. That's the relevant point of comparison because it has been bandied about and promoted as correct and used to justify rosy prospects for shale natural gas.
The 2002 USGS estimate (from 9 years ago - long before natural gas shale became extractable at scale) wasn't what people were believing before this report came out. They were listening to either the EIA estimate or an industry consortium's estimate. Both these were far larger numbers. Everyone knew the 2002 estimate was way out of date. It was no longer used in planning or policy proposals.
84 trillion cubic feet is just a few years of current US consumption. Not enough to get excited about. Geologists aren't turning up new big shale formations in the US.
EIA is a terrible forecaster of prices and production. Ditto CERA. They have really bad track records.
The recoverable percentage will increase over time, as new technology and higher prices eventuate.
There, I've said it, and I don't regret it.
Here are other relevant estimates:
The 84 Tcf technically recoverable undiscovered resource for the Marcellus is a considerable downgrade from the 262 Tcf technically recoverable resource reported by NETL of the DOE in 2009. Others have been using numbers for the Marcellus in the mid-400ís of Tcf Ė see for example Engelder (2009) who claims the Marcellus has 489 Tcf of P50 technically recoverable resources.
We've had high oil prices for several years now without a huge surge in recoverable percentages of oil. Oil production is near where it was 5 years ago.
Similarly, last I checked gold extraction was still off its peak of 9 or so years ago in spite of very high gold prices.
USGS 2002 = 2TCF
USGS 2011 = 84TCF
"New Marcellus Shale well production data shows a 55 percent spike in natural gas production in southwestern Pennsylvania over the last six-month period.
In this region, which includes Allegheny, Armstrong, Beaver, Butler, Fayette, Greene, Washington and Westmoreland counties, Marcellus drilling yielded:
127 billion cubic feet of gas
195,851 barrels of condensate
364,012 barrels of oil
Thatís based on data for 2,143 unique wells, of which more than half were not producing for various reasons. Some havenít been drilled. Some hadnít been fracked yet. Others were waiting for a pipeline connection and 65 of the well permits were canceled or expired. EQT Corp. (NYSE: EQT) had the most prolific well in the state. The Morris Township well in Greene County produced nearly 3 bcf during the past six months.
Statewide, Marcellus companies pulled 432.5 billion cubic feet of gas out of the ground, along with 492,533 barrels of condensate and 364,183 barrels of oil.
This is much higher than the results reported during the last period, for the last six months of 2010.
Back then, southwestern Pennsylvania wells produced 82 bcf of gas, 320,069 barrels of condensate and 41,674 barrels of oil."
At some point we must recognize that there is a serious credibility issue with anything the current administration says about energy. We are no longer shocked at the idea of politics driving the direction these figures move. The current administration in its ecological ardor seems hell bent on discouraging if not utterly wrecking domestic energy production in any and every way possible. They apparently have little if any more regard for the truth than GreenPeace or Al Gore. Anything they say on the subject simply must be viewed in that light.
Randall: "The USGS estimate is down from the 5 times larger EIA number."
The USGS estimate is up 42 times its previous estimate. In a few years it will go up again.
Interesting how one company categorizes reserves:
"The company also released its Marcellus Shale reserves by category as of 12/31/2010:
140 Bcfe - Proved developed reserves
719 Bcfe - Proved undeveloped reserves
859 Bcfe - Total proved reserves
1.156 Tcfe - Probable reserves
1.907 Tcfe - Possible reserves
3.922 Tcfe Ė Proved, possible and probable reserves"
Yep, actually a huge upgrade of Marcellus by the USGS. The EIA is a different group using different estimation techniques. Stop comparing apples to oranges. You lose credibility that way. Don't let your readers down.
USGS's latest and 2002 estimates are apples and oranges. Nobody believed the 2002 estimate. The debate has been over much more recent estimates. I've said this repeatedly. My credibility isn't the problem here. The facts just aren't what some people want to hear.
The relevant comparisons are to other estimates I've linked to above as well as the Potential Gas Committee's April report claiming 350 Tcfe as compared to the USGS 84 Tcfe. All these other estimates were from 262 to mid 400s. It wasn't EIA alone that was using too large a number.
The Upper Devonian might be too shallow to support fracturing, and the pressures in the Utica might be too high, or the rock too soft, to keep fractures open for production.
The USGS estimates of gas in the Marcellus are less than 4 years of US consumption. Even if the entire amount is economically recoverable (big IF) and the other two layers have the same amount of economical resource each, that's just over a decade of reprieve. We need to go nuclear with FBRs or LFTR; we have hundreds of years of uranium already in warehouses.
EP: "... or unicorns may show up ... "
The last 6 months saw 325bcf from the Penn. part of the Marcellus. The previous 6 monthas production was 250bcf.
Penn. alone will be producing 1tcf per year soon ... 5% of all US NG consumption.
84 years worth -- rock bottom minimum. And that just one of the 3 shale layers.
At current prices, horizontal drilling for shale gas reserves that have little condensate or natural gas liquids produced with them is questionable at best. Oil prices currently are hovering around $90-100/bbl. Natural gas prices, on the other hand, are approximately $2.50/MCF. The price of natural gas has fallen dramatically over the last several years. Oil prices, however, have remained high. The cost of drilling did not decrease with the fall of gas prices, but has remained high due to the higher oil prices.
If the natural gas prices rise, additional infill drilling for shale gas will sharply increase the natural gas storage, and the price of natural gas will quickly fall again. This scenario appears to be true for the foreseeable future.
The economics of drilling for these shale gas reserves is marginal at best.
Just a view from a petroleum geologist in the oil and gas business ...