One thought on “Marcellus Shale Drilling”

  1. 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 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.

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