Is Shale Gas Shallow or the Real Deal?

Is Shale Gas Shallow or the Real Deal? by Kennedy Maize, December 1, 2012, Powermag
One major voice on the skeptical side of the emerging debate is that of Arthur Berman, a Houston-based petroleum geologist who is also a leading figure in the “Peak Oil” posse, a group of analysts who argue the U.S. has reached the bottom of its crude oil bucket and the rest of the world will soon follow. Berman writes frequently for “The Oil Drum,” a leading peak oil publication. Looking at U.S. shale gas, Berman says he sees a precipitous production decline coming as the need to drill new gas wells to replace rapidly declining production vastly outpaces the capacity of industry to deploy the rigs needed to drill. In an interview with POWER, Berman argued that the boom in drilling shale gas wells has obscured a long-term decline in conventional gas supply. But a coming rapid decline in shale production, he said, will soon reveal the overall limits to the gas boom, and volatility and upward pressure could return to natural gas prices. “It’s not a problem for today or tomorrow,” Berman said, “but it is coming. Once we work through the current oversupply, if capital is not forthcoming,” prices will spike. The gas supply bubble will burst.

Greatly complicating the supply equation, said Berman, is the nature of shale gas wells. “Shale wells decline 30 to 40% per year,” he said. “Conventional wells decline 20 to 25%. What most don’t grasp is how many wells it takes just to keep supply flat.” In the Barnett Shale in Texas, where Berman is most familiar with the geology, he calculates that the annual decline in the gas resource is 1.7 bcf/day. In order to add to the net Barnett production, Berman says, companies would have to drill 3,880 wells, at a cost of $12 billion. “We are setting ourselves up for a potential reduction in supply and price will go up,” said Berman. [Emphasis added]

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