Friday, October 14, 2011

Chart of the Day: The Shale Gas Revolution in PA Has Helped the U.S. Become No. 1 in the World

The Pennsylvania Shale Gas Revolution
The chart above is from the Energy Information Administration and illustrates graphically the significant increases in natural gas production in recent years from increased drilling activity in the Marcellus Shale region of Pennsylvania.  In only about a three-year period, natural gas production in the northeast United States has tripled from 1.5 billion cubic feet per day in July 2008 to more than 4.5 billion cubic feet per day by July 2011, with almost all of the increase coming from new drilling in Pennsylvania.  The shale gas revolution in Pennsylvania has been responsible for America going from the ninth largest producer in the world ten year ago to the No. 1 producer in the world starting last year.    

15 Comments:

At 10/14/2011 7:59 PM, Blogger Benjamin said...

The shale gas is amazing.

BTW, you can make methanol from natural gas, right now about $1.30 a gallon, with about one-half the BTUs of gasoline, so call it $2.60 a gallon.

Indy cars used to run on methanol, before ethanol. Some say the switch was just PR.

We seem to have unlimited supplies of natural gas. Ergo, we could run ours cars and trucks, with minor modifications, on methanol.

And call home the 5th and 6th fleets, which eat money every year, without producing one barrel of oil.

 
At 10/14/2011 8:50 PM, Blogger VangelV said...

What a joke. I guess that Mark missed the USGS downgrade of the Marcellus Shale formation in August. Current estimates place reserves 80% lower than previously published estimates. I suspect that after some more of the production data comes in and more producers go bankrupt the estimates will be revised down again.

 
At 10/14/2011 8:56 PM, Blogger Hydra said...

What do we do after the shale gas?

 
At 10/14/2011 9:55 PM, Blogger Rufus II said...

We imported a larger percentage of our nat gas (yes, we're, also, the world's largest Importer of nat gas) this year than we did last year.

It is an "Imported," Depleting, Fossil Fuel that was $13.00 per thousand cu ft a couple of years, ago, and could well be that much again in a few short years.

 
At 10/14/2011 11:00 PM, Blogger juandos said...

"I guess that Mark missed the USGS downgrade of the Marcellus Shale formation in August"...

Are you talking about this one as reported by UPI?

USGS ups Marcellus Shale reserve estimate

Published: Aug. 24, 2011 at 8:41 AM

 
At 10/15/2011 1:52 AM, Blogger Cabodog said...

Even NPR did a story a few days ago about the effect of Marcellus on the steel industry (new investment and plants to produce pipe) and the jobs being created, not only for drilling/production, but all the support industries as well.

 
At 10/15/2011 10:20 AM, Blogger Buddy R Pacifico said...

"I guess that Mark missed the USGS downgrade of the Marcellus Shale formation in August"...

Adding to Juandos' reply to VangelV's misinformation:

The 2002 USGS Report states "...872 million barrels of undiscovered natural gas liquids in the Appalachian Basin Province".

vs.

The 2011 USGS Report stating a 95% probability of 1.6 billion barrels of natural gas liquids.

 
At 10/15/2011 10:54 AM, Blogger UrbanBard said...

Hydra asked, "What do we do after the shale gas?”

You mean after the next two hundred years?

Coal. America has the largest supplies of Coal in the world and it is easily converted to Methanol and DiMethyl Ether (to replace Diesel.) All you need is a reliable source of heat.

There is enough Thorium in Wyoming to supply our electrical energy needs for thousand years. Waste heat form Liquid Fluoride Thorium Reactors could supply the heat to make synthetic fuels.

Our energy problems are political not a lack of resources. It is not even environmental, since these technologies are not polluting. And no, Carbon is not a pollutant, it is plant food.

 
At 10/15/2011 7:20 PM, Blogger VangelV said...

Adding to Juandos' reply to VangelV's misinformation:

The 2002 USGS Report

states "...872 million barrels of undiscovered natural gas liquids in the Appalachian Basin Province".

vs.

The 2011 USGS Report stating a 95% probability of 1.6 billion barrels of natural gas liquids.


How deceptive of you. The USGS did not go to sleep between 2002 and 2011. It actually jumped on the shale hype bandwagon and made some very optimistic claims that were never supported by the data. Once that became obvious, it downgraded its previous estimates by around 80%. But that is not enough because gas is clearly not economic at anywhere near these prices.

http://www.postcarbon.org/blog-post/464781-new-usgs-marcellus-shale-anaylsis-drastically

http://www.nytimes.com/2011/08/25/us/25gas.html?_r=2&ref=science

 
At 10/15/2011 7:40 PM, Blogger VangelV said...

Hydra asked, "What do we do after the shale gas?”

You mean after the next two hundred years?


Try again. The US does not have nearly as much shale gas as you have claimed. In 2009 the USGS was hyping shale gas and suggesting 200 years of production. In the case of the Marcellus Shale area, the P95 estimate only represents 2 years of consumption. That is several decades less than the optimistic predictions made just three years ago.

Coal. America has the largest supplies of Coal in the world and it is easily converted to Methanol and DiMethyl Ether (to replace Diesel.) All you need is a reliable source of heat.

This is not entirely accurate. Fist, many of your deposits are not going to be developed due to safety and environmental concerns. Second, even if you could mine all the coal that is available the net energy return is not all that high due to the high transportation and processing costs. Third, quality counts. Production of the best coal, anthracite, peaked in the US nearly one century ago. Bituminous coal production peaked two decades ago. Increased total production has come from low grade lignite, which has a very high ash content and would be difficult to convert to liquid fuels due to the huge amount of waste product that has to be taken away and sequestered. Transport costs are so high for lignite that it is often used very close to the mining site, usually to create electric power.

There is enough Thorium in Wyoming to supply our electrical energy needs for thousand years. Waste heat form Liquid Fluoride Thorium Reactors could supply the heat to make synthetic fuels.

Nuclear can be the solution but it will not be very cheap compared to liquid fossil fuels. Sadly, there are too many idiot politicians in the US to allow the type of development that is now needed. Instead of allowing the utilities to build nuclear plants they have been subsidizing loser plays like wind and solar.

 
At 10/15/2011 9:21 PM, Blogger Buddy R Pacifico said...

"How deceptive of you."

Your link is broken and you are busted for magical bs.

 
At 10/15/2011 10:00 PM, Blogger VangelV said...

Your link is broken and you are busted for magical bs.

Nonsense. The downgrade has been well documented. You should do your own reading instead of paying attention to the hype artists. Here are some links on the matter.

http://tinyurl.com/3f273cp

http://tinyurl.com/3ekdbvr

http://tinyurl.com/3b32ouq

http://tinyurl.com/3kvp6r7

You are comparing the 2002 USGS estimate with the 2011 USGS estimate. Clearly the later estimate is much higher than the first one. But in between the US government was claiming huge reserves that could not be supported by any of the production data. These claims were downgraded by more than 80% in the 2011 USGS report.

Note that the number being claimed is the P50 estimate, not the more certain P90 figure. If you used that estimate the number falls by a further 50%. And even those estimates assumed a much higher gas price and significantly higher EURs than are shown by the actual production data. As the NYT e-mails I quoted above show, many of the insiders believe that the shale gas story is a Ponzi scheme. If you look at the cash flows in the 10-K reports filed with the SEC, that belief has a lot of support in the accounting.

 
At 10/16/2011 7:05 AM, Blogger juandos said...

"It actually jumped on the shale hype bandwagon and made some very optimistic claims that were never supported by the data"...

Well vangeIV several many someones still believe there is supporting the data:

From the New York Times: Just last month, the Energy Department more than doubled estimates of recoverable shale reserves to 827 trillion cubic feet, the energy equivalent of roughly 140 billion barrels of oil. That’s slightly greater than the proven oil reserves of Iran, the world’s third largest repository of crude...

From the US Energy Information Agency: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves

 
At 10/16/2011 8:44 AM, Blogger VangelV said...

Well vangeIV several many someones still believe there is supporting the data:

From the New York Times: Just last month, the Energy Department more than doubled estimates of recoverable shale reserves to 827 trillion cubic feet, the energy equivalent of roughly 140 billion barrels of oil. That’s slightly greater than the proven oil reserves of Iran, the world’s third largest repository of crude...


You are confusing narrative with data. The claim of massive reserves could not be made without the SEC rule change that no longer requires that companies prove that wells are economically viable. Now I would have no problem with this if the shale gas players would actually show that they can make profits at current gas prices and if I saw some financing of exploration and development out of operational cash flows. After all, it is not as if shale gas is brand new. Many companies have been using fracking for enough time that their first wells are already depleted. If those companies need to keep borrowing or raising equity to finance operations you know that there is a huge problem with the assumptions.

Then there are the analysts who actually did their homework and used the actual production data to see if the estimates hold up. As Art Berman tells us:

"In 2007, I projected EUR for almost 2,000 horizontal wells in the Barnett Shale (World Oil, November 2007). At that time, these were the only horizontal wells with enough production history to evaluate. Now, with two additional years of production, I revised the decline curves for the same control set of 1,977 horizontal wells. The overall EUR decreased 30% from my previous estimate, and the average per-well EUR fell from 1.24 Bcf to 0.84 Bcf. The reason is clear: most wells do not maintain the hyperbolic decline projection indicated from their first months or years of production. Production rates commonly exhibit abrupt, catastrophic departures from hyperbolic decline as early as 12-18 months into the production cycle but, more commonly, in the fourth or fifth years for the control group. Pressure is drawn down and hydraulically produced fractures close...

Operators often state that shale plays have about a 30 to 40-year production life, but I found that the average commercial life for horizontal wells is about 7.5 years, although the mode is four years. There are many wells that should have 8-12 years of production but few that will extend beyond 15 years. About 75 percent of predicted EUR in horizontal Barnett wells has been produced by Year 5. In the control group, the first wells were drilled in 2003, and already 15% have reached their economic limit five to six years into their production life cycle..."


Add to this the move away from shale gas by early pioneers like Chesapeake. If the hype was actually true why would they be giving up the huge upside? Or why would it be needing so much cash?

The truth here is a simple one. If you want to see things as they are and be able to explain many of the predicitons go no further than this rule change. And remember when the investors in shale gas get wiped out that it was not the companies, who are acting as expected, but the government that is to blame. Without its loose accounting rules and promotion of fraud investors would be harder to fool.

 
At 10/16/2011 10:42 AM, Blogger juandos said...

"You are confusing narrative with data"...

Wrong again vangeIV since one has to assume that a supposedly professional rag like the New York Times has data to back up its narrative...

Still I do understand where you're coming from on this...

"Now I would have no problem with this if the shale gas players would actually show that they can make profits at current gas prices and if I saw some financing of exploration and development out of operational cash flows"...

Hence vangeIV you might find this Bloomberg story about some Exxon wells interesting...

 

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