Claims of Chesapeake Energy CEO Aside, EIA Documents Directly Support NYT Story Questioning Shale Gas Claims

Jun 27th, 2011 | By Mark | Category: Fracking, Lead Articles

NatGas Consulting

Chesapeake Energy is one of the country's leading proponents of hydraulic fracturing and the virtues of shale gas recovery.

On Sunday, the New York Times published a well-researched story, supported by a trove of documents such as emails between natural gas industry executives, market analyst reports and internal agency documents, questioning the claims made by natural gas industry executives about the productivity of their hydraulic fracturing wells and the size of the reserves locked away in the shale formations across the United States.

The story prompted an immediate response from Chesapeake Energy CEO Aubrey McClendon, who questioned the reporter’s motivation for writing the piece and castigated the story as the work of a handful of anti-American environmental activists hell-bent on derailing our nation’s energy future.

The fact is, though, that other, more objective observers have also questioned the claims made by the natural gas industry — including the federal Energy Information Administration.

A few months ago, on April 26, the EIA issued its Annual Energy Outlook for 2011. The document is exactly what the title says it is: a detailed analysis of domestic energy issues across a variety of sectors. One of the issues given in-depth consideration is the ongoing prospects for shale gas.

The EIA raised exactly the same concerns detailed by the NYT reporter.

From the EIA Annual Energy Outlook for 2011:

Estimates of technically recoverable shale gas are certain to change over time as new information is gained through drilling and production, and through development of shale gas recovery technology. Over the past decade, as more shale formations have been explored and used for commercial production, estimates of technically and economically recoverable shale gas resources have skyrocketed. However, the estimates embody many assumptions that might prove to be untrue in the long term.

Chesapeake Energy CEO and shale gas defender of the faith Aubrey McClendon.

The EIA report goes on to note that the current claims about the size and economic value of the various shale plays around the country rest primarily on valuations made by private companies, like Chesapeake, and that these claims are, in large part, unverifiable.

There is also considerable uncertainty about the ultimate size of the technically and economically recoverable shale gas resource base in the onshore lower 48 States and about the amount of gas that can be recovered per well, on average, over the full extent of a shale formation. Uncertainties associated with shale gas formations include, but are not limited to, the following:

  • Most shale gas wells are only a few years old, and their long-term productivity is untested. Consequently, reliable data on long-term production profiles and ultimate gas recovery rates for shale gas wells are lacking.
  • In emerging shale formations, gas production has been confined largely to “sweet spots” that have the highest known production rates for the formation. When the production rates for the sweet spot are used to infer the productive potential of an entire formation, its resource potential may be overestimated.
  • Many shale formations (particularly, the Marcellus shale) are so large that only a portion of the formation has been extensively production tested.
  • Technical advances can lead to more productive and less costly well drilling and completion.
  • Currently untested shale formations, such as thin seam formations, or untested portions of existing formations, could prove to be highly productive.

Although public estimates of onshore lower 48 shale gas resources, as reported by private institutions, have grown over the past decade as more shale gas plays have been production tested, it is not known what shale formations were included in the estimates or what methodology and data were used to derive them. For example, an estimate relying only on publicly reported costs and performance profiles for shale gas wells would tend to overestimate the size of the economic resource base, because public information is skewed toward high-production and high-profit wells. Given the lack of information about how private institutions have derived their resource estimates, this analysis considers a set of alternative resource estimates that are intended to provide a plausible but not definitive range of potential shale gas resources.

Ouch.

The fact is, the NYT story simply made public what industry insiders and analysts have known for a long, long time: that the natural gas industry’s claims about shale gas are wildly overstated.

Aubrey McClendon can castigate the messenger all he wants, but the message remains — when it comes to shale gas, the emperor has no clothes or, at the very least, a considerably smaller wardrobe than the natural gas industry would have us believe.

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2 Comments to “Claims of Chesapeake Energy CEO Aside, EIA Documents Directly Support NYT Story Questioning Shale Gas Claims”

  1. HL says:

    “when it comes to shale gas, the emperor has no clothes or, at the very least, a considerably smaller wardrobe than the natural gas industry would have us believe.”

    The EIA sources you cited never said this. They state that reports can’t yet be confirmed due to limited testing in massive formations, not that there definitely isn’t as much natural gas as predicted. There could be less, but with more wide scale testing/drilling, more reserves could just as easily be discovered.

    Try not to show your bias so much, it will help your credibility.

  2. [...] if you think its view of shale gas’s future is rosy, the agency has been upfront about the uncertainties in its analysis. And to the credit of the New York Times, its articles have brought the reality of these [...]

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