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2016 Shale Gas Reality Check

December 12, 2016

In 2014, Earth Scientist David Hughes took a hard look at the EIA’s existing Annual Energy Outlook shale gas and tight oil forecasts and conducted his own play-by-play, in-depth analysis to create the groundbreaking report, Drilling Deeper. In Drilling Deeper, as in the follow-up report 2015 Shale Gas Reality Check, he found that EIA projections for shale gas production and prices were consistently and greatly overstated.

In September 2016, the EIA released its Annual Energy Outlook 2016. Consequently, David Hughes applied the same scrutiny to AEO2016 as he has in the past to explore how the EIA’s projections and assumptions regarding shale gas have changed over the last two years, as well as assessed the AEO2016 against both Drilling Deeper and up-to-date production data from key shale gas plays.

The findings in this year’s analysis are consistent with previous assessments of the EIA’s shale gas projections – they trend toward a very high optimism bias, with increasingly unexplained volatility. The EIA’s yearly AEO has enormous influence with policymakers, the media, and through them the general public. The AEO influences government policy and industry investment.

Key Conclusions

  • Shale gas production overall has been revised upward in all years, with revisions exceeding 30% after 2025 and reaching 50% in 2040.
  • All plays have been revised upward with the exception of the Eagle Ford and early years in the Fayetteville and Barnett – in some plays/years by more than 60%.
  • AEO2016 production estimates from 2014 to 2040 is 22% higher than AEO2015, and 83% higher than Drilling Deeper.
  • Actual shale gas production overall has declined by 4.7% since peaking in February 2016. All shale plays have peaked and older plays, like the Barnett and Haynesville, are down 38% and 52%, respectively.
  • Prolific shale gas plays are not ubiquitous, as some would have us believe. Just five plays, the Marcellus, Eagle Ford, Utica, Haynesville and Barnett, made up 74% of August 2016 production.
  • The EIA drilling rates in AEO2015 require a little over one million wells to be drilled between 2015 and 2040. At an average cost of $6 million each that represents an investment of $6 trillion.

Questions for the EIA

After closely reviewing the AEO2016, David Hughes raises some urgent questions about EIA’s U.S. shale gas forecasts, such as:

  • What justifies the substantial forecasted growth in shale gas production, given that drilling rates are projected to remain below 2014 levels through 2040, with only a modest increase in oil price?
  • What is the reason for the substantial variation in AEO2015 and AEO2016 projections?
  • How can overall shale gas production increase by 31% in AEO2016 compared to AEO2015 while assuming gas prices are 20% lower over the 2015-2040 period?

Hughes’ findings point to not only increasingly overstated forecasts by the EIA, but also increasingly volatile assessments – both of which are highly troubling. The report raises critical questions about the veracity and volatility of the EIA’s estimates, questions that are especially important as the Trump Administration sets its domestic energy policy.

One Comment, RSS

  • More US-centricism as global carbon emissions are expected to increase 50% by 2040, of which 85% will come from the developing world as they seek to industrialize like the US did 100 years ago–with little example from the U.S. to do that with conservation, efficiency, and renewable energy.

    Can US-Centricism solve the Global Climate Crisis?
    [Legacy of CO2 in atmosphere: US-27%, Europe-25 China-11 India-1 {US has 4% of world population}
    Current per capita CO2 emissions: US-20 tons/yr Europe-10 China-6 India-1]

    Ban fracking, Stop drilling on public lands, Stop drilling off the US coast … in ANWR, … are messages i get frequently from green organizations. They are largely US-centric and NIMBY, and there is little or no mention of reduction in the huge US oil deman.

    The U.S. has been an oil importer for decades and became a big oil importer again in 2016: http://www.bloomberg.com/news/articles/2016-03-31/the-u-s-is-a-big-oil-importer-again

    “If we don’t take it out of our ground, we’ll take it out of someone else’s.” -Ca Gov Jerry BrownBrown

    Oil from foreign lands has often been extracted without minimal environmental, safety, and human rights concerns. The 1996 book ‘Savages’ by Joe Kane tells of the destruction of native people and the Ecuadorian rainforest by US oil interests, quoting a native leader: “Americans kill without knowing they are doing it. You don’t want to know you are doing it. Yet you are going to destroy an entire way of life. So you tell me: Who are the savages?”

    California and US environmentalists have had concern about drilling for oil off the Ca coast and about fracking in Ca but haven’t had much concern about drilling in Ecuador though most of the oil from Ecuador is refined in Ca and burned in west coast vehicles.

    Many in the US think that the oil ‘over there’, under someone else’s ground, is our oil. It is the attitude of the schoolyard bully.

    Activists have rejected proposals for state Initiatives for a carbon tax with 100% return equally across-the-board or to put the sales tax and annual vehicle license tax on sliding scales based on fuel efficiency–to move the U.S. vehicle fleet to more efficiency faster than prescriptive stands alone.
    Naomi Oreskes: “The UN has no authority to impose a carbon tax…. Only national governments or the European Union have that kind of authority. At some level, it has to be implemented on the level of the nation states that are part of the agreement. But the reason the voluntary aspect of the Paris Agreement upsets me is because of the role of the United States. The reality is that the U.S. HAS BEEN THE SINGLE BIGGEST OBSTACLE to a huge amount of potential for dealing with climate change. It goes back to Kyoto, where we insisted on emissions trading as the appropriate mechanism, convinced Europeans to go along with that, then we scuttled the accord at home [prior to Kyoto CO2 in atmosphere increasing 1.5%/year, after Kyoto 2.5%/year] And again, we’re playing an obstructive role, saying we will only agree to something that’s voluntary. So even though we in the U.S. like to act like we’re a great international leader on this issue, not only have we not led, we’ve been an obstacle. That’s sad and depressing as an American who loves my country.” Oreskes is a Harvard science professor and coauthor of “Merchants of Doubt” made into an award-winning documentary.
    Kevin Anderson, Prof Univ. of Manchester, Deputy Director of the Tyndall
    Centre for Climate Change Research in the UK, from the COP21 U.N. climate negotiations in Paris: According to Anderson, ‘The Copenhagen text included aviation and shipping emissions, that together are as large as the emissions of Britain and Germany combined, but they are not mentioned in the Paris text.’ Overall, he says, the agreement ‘is weaker than Copenhagen’ and ‘not consistent with the latest science.’ Anderson also said the voluntary promises put forward by all of the countries–when you add them up, they are FAR above dangerous climate change, to avoid going above 2C… if we carry on like we’re going now, 4, 5, possibly even 6C above baseline.’-Democracy Now!

    At the Climate Change Conference in Copenhagen in 2009, there was statuary near the Little Mermaid, including one with this wording on a plaque: ‘An obese First World person (representing excessive carbon emissions) on the back of a starved African or Haitian…confronting the real world’s deficient sense of justice with the world’s hypocritical self-righteousness: ‘I’m sitting on the back of a starving man–he’s sinking under the burden. I will do everything to help him–except to step down from his back.’