Umbrage In The Gas Patch - ASPO's Steve Andrews On The Marcellus "Miracle", Berman's Resignation

[hatrack]

Last week, two remarkable events at World Oil magazine raised the decibel level about shale gas. First, WO columnist Art Berman’s latest shale piece, intended for the November issue, was yanked prior to publication. Berman immediately resigned. Berman and WO editor Perry Fischer issued on-line statements, saying the column was axed due to pressure applied by one or two natural gas companies on the president of Gulf Publishing. Fischer, the magazine’s editor for 11 years, reports that he fought the column’s cancellation, then took two days off. “When I returned I was fired,” Fischer relates. “I wasn’t told why, but neither was I surprised.” If you’re keeping score, this isn’t the first blood to be spilled over shale gas production, nor will it be the last.

The industry has been aware of shale gas for decades. Historically, few shale gas plays proved economic; the rocks were generally too impermeable to be tapped with vertical wells. But then came the Barnett, which was unlocked by ingenious new horizontal drilling and multi-stage frac techniques. More than 12,000 wells have since been drilled in the Dallas/Ft. Worth area, and the play now yields 5 billion cubic feet per day, or more than half of all the shale gas produced in the U.S. As it became clear that the Barnett was a world-class gas field, E&P companies went on a frenetic and successful hunt for other shale plays in Oklahoma, Texas, Louisiana, Arkansas, Pennsylvania, Colorado, and Canada. As a blogger noted last spring, most in the industry view shale gas as the energy equivalent of a winning lottery ticket.

Yet a handful of skeptics, most prominently Berman, have raised concerns about the economics of shale gas in the Barnett and elsewhere. Their critiques aren’t based on arm-waving, but on detailed statistical analysis that questions the productivity and cost assumptions behind optimistic shale gas forecasts. Defenders of the mainstream view, using different takes on much of the same well production data, are both numerous and vocal. The key issues revolve around the ultimate recovery of a typical shale gas well, and the gas price necessary to make it worthwhile to drill expensive horizontal wells with multi-stage fracs. The debate is a heated one, as the following clips illustrate:

From Kate Mackenzie, the Financial Times, energysource blog, November 3, 2009:

* “There’s a persistent bunch of doubters about the shale gas story. The explosion in shale gas is new, and the horizontal wells that are being drilled furiously by Chesapeake are widely known to decline in output fairly rapidly after the first 12 months. This has led some respected resource watchers, including Matt Simmons, to voice skepticism that shale gas is really about to revolutionize supply. Ben Dell, of Bernstein Research in New York, whose work is respected by both sides in the debate, says: “The average well deteriorates more in quality, and more wells fail, than people believe. Still, I think a rise in prices would make more (shale prospects) economic. Plenty of plays work at $9 per mcf <1,000 cubic feet>.’”

From John Dizard, the Financial Times, November 1, 2009:

“The leading shale skeptic, independent geologist Art Berman, is often described as a ‘radical.’ Rather soft spoken, though, he says: ‘I hope I’m wrong about shale.’ The problem, as he sees it, is that the standard industry analysis about shale well Estimated Ultimate Recovery, or lifetime production, is too optimistic. ‘They have fantastic initial rates, but the question is whether the rate of production persists as they say. In deep shale formations the rock collapses as gas is produced. This crushes the proppant that braces open the microscopic fractures. To keep the well producing you have to frac and frac and frac, which is expensive.’”

EDIT

http://www.energybulletin.net/node/50679

[pscot]

1. Frac addicts?

Mainlining a mix of salt water and diesel fuel. A real downer.