By Olivia LaRosa
December 20, 2012
The first of the “Everything We Know is Total BS” series.
Thank you Scott, my West Coast energy correspondent, for sending on the article that got me started here. It used a line from the Red Queen in Alice in Wonderland, who said that you have to keep running to stay in place. That describes what is happening in the North Dakota Bakken shale oil formation. It’s also worth reading. You don’t have to figure out the tables, but the map is chock full of information. http://
I had just read yet another nauseating tribute to corporate interests from the
respected economist shill Robert J. Samuelson, Don’t kill the shale gas boom, at the Washington Post, when I read this.
This is an article from the Energy Policy Forum, which is not a slave to oil interests, which is saying a lot! It’s hard to escape being a slave to oil interests.
The site features a series of articles about shale production. The main takeaway from these articles is that the shale wells are only producing for the first year, then they drop down to nearly zero production in the third year. It’s all just more corporate welfare, to keep the oil companies smiling. As soon as the wells drop in production, the oil cos sell them off or jv (Joint Venture) them out. I wonder how many tax breaks they get for moving around all this cash amongst themselves. I wonder who is going to pay to restore the land raped by this ponzi scheme.
Which brings us to the final point that “the proof is in the pudding”. No one disputes that we are sitting at record capacity but is this truly the product of “game changing”, “revolutionary” activity in shales or is this simply the logical outcome of drilling thousands of new wells all of which have high initial production but very steep decline curves? Does it not stand to reason that such activity would necessarily produce a great quantity of gas in the early days? It seems to me that the larger and more important question is whether it can sustain such growth.
And the answer to that is unequivocally “no”.
The Barnett shale which is the oldest and most mature shale play in the US was surpassed in production by the Haynesville over a year ago. It is interesting to note, however, that at the time of the Barnett’s demise, there were more than 15,000 wells in the Barnett as opposed to 1,500 in the Haynesville. So ten times the number of wells could not keep production at levels equivalent to the newer play. This is called decline curve reality. This is also, no doubt, why all the major operators in the Barnett sold their properties outright or jv’ed.
But Platt’s said it best:
“…perpetual expansion [of shale wells] cannot forever disguise a serious problem with the bottom line.”
Ah yes, but perpetual expansion is the very nature of the beast. After all, it is the only way to keep the money flowing…into shales. What flows out is altogether a different story. How about those impairment charges?