Radical Gas Price Thought: Much Higher

Mr. Groppi points out that the average depletion rate in conventional gas wells is about 25% each year, while for gas shale wells it is 45% or more.  (Mr. Groppi may be generous in his estimate of gas shale well depletion rates as many wells are showing 80+% first year declines.)  In his view, the rapid pace of gas shale drilling is doing little more than draining those reserves much faster than they would otherwise.  He noted that gas shale production accounts for just 6% of U.S. natural gas production.  The other 94% – conventional gas – has experienced a 70% decline in drilling since immediately before the financial crisis dawned in September 2008.  He went on to say, “With that extraordinary drop in drilling, the decline rate from all these [conventional] sources is accelerating – and will much more than offset whatever increases you get in shale.”

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