Forbes: The Popping of the Shale Gas Bubble
Bill Powers "I write about oil and gas."
Forbes 9/03/2014
Shale gas plays in the United States, as of early 2010. (EIA)
For much of the past decade we have been inundated by reports of how the wonders of technology, specifically horizontal drilling and hydraulic fracturing, have unleashed a new era for energy supplies. Industry leaders have touted that shale gas, along with burgeoning shale oil production, will lead to America’s energy independence, kindle a manufacturing renaissance, lower bills for everyday Americans and create millions of much-needed jobs. While there is little doubt that booming shale gas production, along with a very deep recession put an end to the natural gas price spike of 2008, much of the accepted conventional wisdom about the longevity of the shale gas bonanza is wrong. America’s shale gas resources and reserves have been grossly exaggerated and today’s level of shale gas production is unsustainable. In fact, due the distortions of zero interest rates and other factors, an enormous shale gas bubble has developed. Like all bubbles, this one will pop sooner than expected and when it does, the aftermath will be very unpleasant.
By now I am sure you are saying to yourself, ‘Who is this guy?’ He certainly does not know what he is talking about since everybody who is somebody has been saying the exact opposite for a long time. From the US government’s Energy Information Administration (EIA), to Pulitzer Prize-winner author Daniel Yergin to T. Boone Pickens, to Michael Lynch; all these experts have supported the notion that we have a surfeit of natural gas just waiting to be harvested. How can they be wrong? Similar to the prevailing belief about the housing bubble before it burst, much of today’s thought regarding natural gas supplies has come from people with a vested interest in selling the dream of a ‘Shale Gale’ that will eliminate foreign energy imports, boost employment and increase GDP. However, reality is far different from what has been portrayed in the mainstream media. In my book, Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth, published a year ago, I examine many of the reasons for this disconnect. Unlike much of the hyperbole published about shale gas, my book contains nearly 600 footnotes and much empirical evidence supporting my thesis. Cold, Hungry and in the Dark overwhelmingly refutes the idea that increasing shale gas production will create a “new era” in America’s economy and instead shows that a severe deliverability crisis quietly looms on the horizon. And, no, I am not an environmentalist with an ax to grind against the oil and gas industry. I am an independent analyst who has covered the energy industry for more than 15 years, an author and contrarian.
Make no mistake; shale gas production over the past 12 years has been nothing short of phenomenal. From a standing start a dozen years ago, shale gas production has grown to account for nearly 50 percent of America’s gas production. However, the shale gas boom is rapidly maturing and we are quickly approaching a point where shale gas production heads into decline. In fact, the majority of shale gas basins in America are already exhibiting declining production.
Before discussing how the coming natural gas crisis will unfurl, let’s debunk some of the most commonly held myths about the shale gas.
1) The US has a 100-year supply of shale gas. While many grandiose claims about the potential supply of shale gas, such as ‘the US has a 100-year supply’, have been made in recent years; almost none have ever been supported by any empirical evidence....
http://www.forbes.com/sites/billpowers/2014/09/03/the-popping-of-the-shale-gas-bubble/
Future Fuel Now
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All you have to do is go far enough back to look at whether what he claimed turned out to be true. He is on firmer ground when discussing the environmental impact... but as a predictor of production? Not so much.
His 2011 "Will Natural Gas Fuel America in the 21st Century" is barely three years old and it's already clear that his assumptions/predictions are off.
In the section on "A reality check on the EIA"... he found it ridiculous to assume that shale gas production would climb to 45% of production in 2035 or that annual production (then at around 5tcf/a) would climb as high as 10 tcf/a by their 2028 prediction.
In reality. It was wise to question their predictions because they were far off...
... the only problem with that is that they were far off in the other direction. It's already over 10 trillion cubic feet per year just three years into that 20+ year estimate. Similarly, what was 20% of production at the time... he has already had to confess (in the 2013 piece you cite) that it was 40% last year.
And let's keep in mind... the real limiting factor right now (apart from the obvious environmental concerns) is that the US can't export much natural gas. If prices doubled or tripled (still well below global prices), production would skyrocket.
Here's that EIA prediction that he attempted to refute in 2011. You like charting data... where are we now on that graph?
Then you might review "The North American Red Queen: Our Natural Gas Treadmill" thread from TOD back in 2006 that was based on his presentation to ASPO.
Oh... and let us not forget his predictions for Canadian oil sands production a bit less than a decade ago.
