The shale gas myth is shattered?

Summary In the coming decades, the United States hopes to rely on adequate supply of natural gas boost economic recovery, but this may vanish into thin air when it comes to the future of US President Barack Obama that the US economy will flourish, and this was largely Benefit from the huge natural gas reserves of the United States. in...
In the next few decades, the United States hopes to rely on sufficient natural gas supply to help the economic recovery, but this may become a bubble

When US President Barack Obama talks about the future, he believes that the US economy will prosper, and this is largely due to the huge natural gas reserves of the United States. In the 2012 State of the Union address, he even announced: "We have enough natural gas reserves in the United States for 100 years."

Obama’s remarks reflect the optimism that prevails in the United States. All of this is due to hydraulic fracturing, which extracts natural gas from shale, a fine-grained sedimentary rock, at a lower cost. In the United States, words such as "shale revolution" and "resource richness" have been echoed on the boards of major companies.

These companies have placed huge bets on cheap and large-scale natural gas predictions. It is expected that in the next 20 years, US industrial and power producers will invest hundreds of billions of dollars in natural gas projects. Billions of dollars will be invested in the construction of export equipment, which will enable the United States to export liquefied natural gas to Europe, Asia and South America.

All capital investment depends on natural gas production. As the US Department of Energy's Energy Information Administration (EIA) expects, the industry will continue to grow in the coming decades. EIA executive Adam Siemin ski announced in 2014: "EIA has no doubt that the momentum of rising natural gas production will continue until after 2040."

However, a careful analysis of the assumptions behind this grand prophecy will reveal that this expectation may be somewhat blindly optimistic.

Pessimism and optimism

The US government's expectation of natural gas extraction is based on a rough study of major shale gas formations or shale gas production areas. Currently, the researchers have conducted detailed analysis of these horizons and subsequently released more conservative estimates. Calculations show that “sweetspots, profitable oil and gas exploration sites” in this type of horizon exist less than expected.

As a member of the in-depth forecast of natural gas production projects, Tad Patzek, dean of the School of Petroleum and Earth Systems Engineering at the University of Texas at Austin, said the results were “bad”. At the moment, oil companies are sparing no effort to quickly extract and export large amounts of shale gas, but "we are putting ourselves in a huge defeat."

The impact of this incident has far exceeded the United States. If US natural gas production falls, plans to export large-scale overseas will be stranded, and other countries that wish to develop their own shale formations will reconsider the plan. "If the exploitation of shale gas in the United States is defeated, it will certainly hit the enthusiasm of the rest of the world," said Paul Stevens, an economist at the Royal Institute of International Affairs.

At first, people generally expressed pessimism about the prospects of natural gas. It was not until 5 years ago that such views changed dramatically, and people began to think that natural gas reserves were abundant. Throughout the 1990s, natural gas production in the United States continued to rise. Since natural gas supplies a quarter of the energy to the United States, if production falls, there is concern that the United States will have to rely on imports. By collecting energy-related data, EIA made an estimate for the US energy outlook in 2008: US natural gas production will remain stable over the next few decades.

However, the outbreak of shale gas has surprised people. The mining technology that shale gas relied on mainly existed decades ago, but at that time the price of natural gas was low, and the cost of hydraulic shale gas mining shale gas was too high. In the 21st century, the continued rise in natural gas prices prompted many companies to use this technology to extract shale gas. Thanks to the use of this drilling technology, US natural gas production reached its historical peak, regaining the title that the United States won decades ago, the world's largest natural gas producer.

High price rock

Natural gas production in the United States is primarily due to the Marcellus shale formations across West Virginia, Pennsylvania, and New York. In the past few years, companies have drilled more than 8,000 deep wells in forest-covered mountains and are still growing at more than 100 wells per month. Before entering the shale formation, each well was first drilled vertically for more than 2,000 meters, and then extended more than 1,000 meters laterally in the shale formation. The Marcellus shale formation provides 385 million cubic meters of shale gas per day, providing more than half of the natural gas consumption for power plants in the United States. A significant portion of US gas supply comes from three other major producing regions – Barnett, Texas, Fayetteville, Alaska, and Hynes, across the borders of Louisiana and Texas. Haynesville. The four major producing areas have a total of more than 30,000 wells, accounting for two-thirds of the total US shale gas production.

Like other agencies, EIA did not foresee an outbreak, and as always, underestimated the production of shale gas. However, with the gradual emergence of shale gas production, the agency has significantly raised its long-term forecast for shale gas production.

The EIA did not separately publish production estimates for several different production areas, but has disclosed the overall estimate to Nature. In the latest projections, production in the four major shale areas in the United States will continue to increase until 2020, after 20 years of production has stabilized. The rest of the shale area production will continue to grow until 2040.

Oil industry analysts have their own estimates, but are usually lower than EIA's estimates. Economist Guy Caruso previously served as head of EIA and currently works at the Center for Strategic and International Studies in Washington State. He said: "The EIA's estimate is quite close to consensus."

Ruud Weijermars, a geologist at the Texas A&M University, believes that these consulting firms rarely publish the details behind their predictions, making their assumptions and methods difficult to assess and discuss. He said that compared with industry and consulting institutions, the mainstream peer review mechanism in the scientific community is very different.

"Fatal" fineness

To provide accurate and transparent shale gas production estimates, a team of petroleum engineers and economists at the University of Texas at Austin spent three years systematically studying the main shale formation. The study received $1.5 million in funding from the Alfred P. Sloan Foundation in New York City, and its results will be published in academic journals and conferences. Wei Jiemas commented that this is by far the most authoritative work in the field.

If natural gas prices follow the EIA's projections in the 2014 annual report, the Texas research team expects shale gas production in the four major shale producing areas to peak in 2020 and then decline. By 2030, they can only reach half of the EIA's estimated production.

Moreover, even the EIA's conservative estimates are higher than the research team's estimates. Patek said: "The Texas research team clearly disagreed with the EIA estimates." The biggest difference between the Texas research team and the EIA estimate is that the two assessments used different levels of detail. The EIA divides each shale formation by block and then calculates the average capacity of the area. However, many districts and counties exceed 1,000 square kilometers, enough to accommodate thousands of wells.

In contrast, the Texas research team divided each region by 2.6 square kilometers, which is 20 times higher than the EIA resolution. Resolution is critical because each block has the best point of production, which produces a large amount of shale gas, while drilling capacity is low in many other areas. Oil and gas companies will first select the best point of production, so drilling after drilling will have lower capacity than current drilling. However, so far, EIA's predictive model assumes that in a given area, future drilling capacity will be at least as high as current.

Patek said: "It is because of this prediction that their results are too optimistic." The Texas research team conducted high-resolution studies that would allow the model to separate the best mining points from the marginal areas. Scott Tinker, a geologist at the University of Texas at Austin, who is co-director of the research project, said: "We can better predict future trends in production compared to the past."

Another difference between the Texas research team and the EIA study is how to estimate the total number of wells in different producing areas. The EIA did not explicitly publish this number, but it seems that the number of wells estimated is greater than that of the Texas research team. Because the Texas research team will exclude areas that are not suitable for drilling, such as lakes and large cities. It is estimated that this form is used to simulate reality, mainly because the members of the Texas Research Group are long-term practitioners in the oil industry and have extensive experience.

Constant controversy

There are also independent studies using simpler methods, and the conclusions are in line with estimates from the Texas research team. The results of David J. and Marc Kaiser of Louisiana State University and the geologist of the Canadian Geological Survey, David Hughes, show that if the output is increased as predicted by the EIA, it needs to be In the 25 years, the number of wells has been increased in a large and continuous manner, but such operations are difficult to make profit.

Some industry insiders were impressed with the results of the Texas research team. Neil Union, based in Colorado Springs, operates a database widely used in the oil and gas industry. One oil and gas analyst said that unconventional resource assessment should be done in accordance with the Texas research team.

Pacek said that EIA's approach is "founded guessing" but it is difficult to accept. He also said that EIA has done its best with the time and resources they have.

In 2014, EIA's budget for data collection and projections for all energy types was only $117 million, which is equivalent to the cost of drilling 12 wells in the shale area of ​​the Heinesville. Caruso said that the EIA's estimate is "value for money", but I always feel that we are underfunded, EIA has to do more and more things, and the funding is getting less and less. Patek acknowledged that shale gas production is estimated to be difficult and uncertain, in part because technology and drilling methods are rapidly evolving. At the new shale formation, the company is still looking for the best mining sites. Moreover, before the wells and wells can have a significant impact on each other, it is always a problem to be able to lay out the wells at what density.

Representatives of the EIA agreed with the assessment and stated that they should not compare it to the research of the Texas Research Group because they used different assumptions and different situations. John Steub, head of the EIA Oil and Gas Exploration and Production Analysis Working Group, said: "The two models have their own strengths and complement each other in many ways. In fact, EIA has integrated the views of the University of Texas Working Group. ""

On October 14th, in a working paper published online, two EIA analysts acknowledged that the agency's approach has been problematic so far. They believe that it is best to use high-resolution geological maps to estimate, taking the Texas research team as an example, and think that its model can improve the estimation accuracy when describing the best mining point. The paper published a disclaimer stating that the author's views do not represent EIA analysts, and in 2015, the agency will plan to use new methods to estimate Marcelus shale production in accordance with the above principles.

Dream or dream

Members of the Texas research team are still arguing about their findings and implications. Tinker is more optimistic that the research team's conclusions are too conservative and the actual output may be higher than the estimated value. He said that the four major shale gas producing areas will make a huge contribution to the US gas production in the coming decades. Moreover, this has already won us a lot of time.

Pacek believes that actual natural gas production will be lower than the research team's estimate. He said that the production of shale gas will reach its peak in the next decade or so, and then "there will be a rapid decline." He also said, "At that time, the whole United States will wake up and find that this is just a dream of Nanke." Pacek expects natural gas prices to rise rapidly, and the United States will be overwhelmed by excessive gas-fired industrial projects. The same dangerous world is the natural-powered motor vehicle system. He said: "In any case, it will have a negative impact on the US economy."

The United States is able to make estimates based on data from tens of thousands of shale gas wells. If the estimate is still so difficult for the United States, then for countries with fewer wells, the uncertainty is even greater. EIA has commissioned the United States International Advanced Energy Corporation (ARI) to evaluate the potential of global shale gas. The results released in 2013 show that the proven natural gas reserves in the global shale formation totaled 220 trillion cubic meters. Estimating today's consumption rate—the contribution of natural gas to global energy accounts for a quarter of the total—will provide 65 years of energy supply. However, ARI's report does not mention the uncertainty of this assessment and the economic aggregate of the total amount of natural gas that can be mined.

Stevens believes that such an estimate is "very doubtful and has the suspicion of following the trend." He used ARI's assessment of Poland as an example: Poland was expected to have the largest shale gas reserves in Europe, and in 2011-2013, ARI lowered the expected shale gas reserves in Poland's most promising areas by one-third. That is to say, the production of some wells in the area is lower than expected. At the same time, the Polish Institute of Geology carried out its own research, which showed that the natural gas reserves in the same area were less than one tenth of ARI's original estimate.

Experts say that if the US natural gas supply depletes faster than expected, or if environmentalists are more vocal, then shale booms will be difficult for countries like Poland.

Especially in the United States, optimism about shale gas still dominates. Therefore, some energy experts are very worried. Neil also said: "There is a huge uncertainty in this. People always say 'Please give me a number'. It's just numbers, even if there is a problem, it is more reassuring than uncertainty."

(The author of this article, Mason Inman, who lives in California, is a freelance writer. The translation is Xiaojing.)

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