THIS Could Kill America's Shale Boom

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THIS Could Kill America's Shale Boom

Postby HVPA_research » Tue Nov 20, 2012 8:24 am

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* Archived from Angelnexus investment newsletter *

Here is a link to a recent article by Jeff Siegel ( Monday, November 19th, 2012). He is an investment adviser so all the usual qualifications apply. However, I have been following Jeff's articles for years and when he says that the American shale gas boom might be a bubble I take notice.

http://email.angelnexus.com/hostedemail/email.htm?CID=13833679612&ch=7B8540539108CBAB2C6BE5270BACC6C5&h=50dd23c540f91d38960a2a11aac810a0&ei=sRcPb-kZN

At at time when most folks look at shale gas as the “great white hope” for the United States, this is a pretty bold declaration.

But is Powers right?

A Shale Gas Folly?

Powers has a book due out next year that takes a closer look at the shale gas boom in the United States, so I understand that he's doing some early promotion for the book...

Still, in this recent interview he offers an early preview into some of his research, particularly as it relates to decline rates:

There is production decline in the Haynesville and Barnett shales. Output is declining in the Woodford Shale in Oklahoma. Some of the older shale plays, such as the Fayetteville Shale, are starting to roll over. As these shale plays reverse direction and the Marcellus Shale slows down its production growth, overall U.S. production will fall.

At the same time, Canadian production is falling. And Canada has historically been the main natural gas import source for the U.S. In fact, Canada has already experienced a significant decline in gas production — about 25%, since a peak in 2002 — and has dramatically slowed its exports to the United States.



Now, this isn't the first time we've heard counterarguments to the enthusiastic shale bulls...

In 2011, petroleum geologist Arthur Berman published a report in which he found that industry reserves had been overstated by at least 100% based on detailed review of both individual well and group decline profiles for Barnett, Fayetteville, and Haynesville Shale plays.

And just last month, energy and Peak Oil expert Chris Nelder wrote:

... the decline rates of shale gas wells are steep. They vary widely from play to play, but the output of shale gas wells commonly falls by 50% to 60% or more in the first year of production. This is why I have called it a treadmill: you have to keep drilling furiously to maintain flat output.

In the U.S., the aggregate decline of natural gas production from both conventional and unconventional sources is now 32% per year, so 22 bcf/d of new production must be added every year to keep overall production flat, according to Canadian geologist David Hughes. That's close to the total output of U.S. shale gas, after nearly a decade of its development. It will require thousands more shale gas and tight oil wells to keep domestic gas production flat.

So, what do you think?
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