Don't believe the hype about U.S. shale gas, report says

Posted: Nov 16, 2012

Written by

GAYATHRI VAIDYANATHA, EnergyWire
Shale gas basins

On the heels of an optimistic report by the International Energy Agency (IEA) suggesting the United States will surpass Russia and Saudi Arabia as a top energy producer by 2020, a report released today has attacked the promise of shale gas and tight oil as nothing more than a mirage.

The report goes to the often-touted claim that the United States has a century's supply of natural gas, thanks to the shale revolution. President Obama said as much in his State of the Union address earlier this year. And this week, the IEA said the United States would achieve self-sufficiency by 2035 because of the "rising production of oil, shale gas and bioenergy, and improved fuel efficiency in transport" (EnergyWire, Nov. 13).

But such reports conflate numbers to amplify the promise of shale, according to a report by Hugh MacMillan, a senior researcher at Food and Water Watch (FWW). The United States has only enough shale gas to satisfy demand at current levels for the next 22 years, the report finds. That amounts to about 542 trillion cubic feet of gas, a number that closely tracks the U.S. Energy Information Administration's (EIA) shale gas estimates.

As for oil, the United States has about 33.2 billion technically recoverable barrels of shale oil, according to the EIA. The nation currently consumes 18.8 million barrels per day (bpd). At this rate, seven years' worth of tight oil is available to be tapped, according to the FWW report.

These numbers matter because behind them is a promise of energy security and energy independence for the United States, and a low gasoline price at the pump for consumers. Security implies that the nation has an uninterrupted supply even when energy markets are disrupted; independence implies the nation is not dependent on foreign sources, according to the FWW report.

When the IEA promised "self sufficiency" for the United States by 2035, it was saying the nation would be energy independent. The agency found U.S. oil production would peak at 11.1 million bpd by 2020, before falling to 9.2 million bpd by 2035, as reported by Reuters. That is about half of the amount of oil consumed daily today, but the agency assumes that new fuel efficiency standards for vehicles in the United States will significantly curb demand after 2020.

That there is disagreement about future production illustrates how little is known about tight oil reserves in the United States. The IEA did acknowledge its numbers were optimistic given that tight oil is a relatively new phenomenon whose extent is not fully understood.

Shale gas

The FWW report finds that the 100-year supply rhetoric is a result of a conflation of various numbers, with one major assumption: that all available resources in the lower 48 states and Alaska would be open for drilling.

The EIA estimates that there are 2,214 trillion cubic feet (tcf) of technically recoverable gas in the United States. However, of that number, 542 tcf is from shale gas, according to the EIA. At a 2010 rate of consumption, that comes to a 22-year supply.

To bring this up to a 100-year supply, companies would have to drill across the entire U.S. outer continental shelf and other areas, including the Great Lakes, the report finds.

Meanwhile, it also questions EIA reserve estimates, which are derived using a measure of extrapolation. The reserves depend on the "estimated ultimate recovery" of natural gas or oil wells over their lifetime of 30 years, but there is much uncertainty in this calculation for shale assets.

Companies also preferentially tap "sweet spots" of gas that are more economically recoverable, while leaving reservoirs untapped that are not as profitable, the report states.



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