Some environmental organizations declared this means utilities can now stop using polluting coal—and indeed coal consumption has plummeted as power plants switch to cheaper gas. Energy pundits even promised that Americans will soon be running their cars and trucks on natural gas, and the U.S. will be exporting the fuel to Europe via LNG tankers.

Early on in the fracking boom, oil and gas geologist Art Berman began sounding an alarm (see example). Soon geologist David Hughes joined him, authoring an extensive critical report for Post Carbon Institute (“Will Natural Gas Fuel America in the 21^st Century?”), whose Foreword I was happy to contribute.

Here, one more time, is the contrarian story Berman and Hughes have been telling: The glut of recent gas production was initially driven not by new technologies or discoveries, but by high prices. In the years from 2005 through 2008, as conventional gas supplies dried up due to depletion, prices for natural gas soared to $13 per million BTU (prices had been in $2 range during the 1990s). It was these high prices that provided an incentive for using expensive technology to drill problematic reservoirs. Companies flocked to the Haynesville shale formation in Texas, bought up mineral rights, and drilled thousands of wells in short order. High per-well decline rates and high production costs were hidden behind a torrent of production—and hype. With new supplies coming on line quickly, gas prices fell below $3 MBTU, less than the actual cost of production in most cases. From this point on, gas producers had to attract ever more investment capital in order to maintain their cash flow. It was, in effect, a Ponzi scheme.

In those early days almost no one wanted to hear about problems with the shale gas boom—the need for enormous amounts of water for fracking, the high climate impacts from fugitive methane, the threats to groundwater from bad well casings or leaking containment ponds, as well as the unrealistic supply and price forecasts being issued by the industry. I recall attempting to describe the situation at the 2010 Aspen Environment Forum, in a session on the future of natural gas. I might as well have been claiming that Martians speak to me via my tooth fillings. After all, the Authorities were all in agreement: The game has changed! Natural gas will be cheap and abundant from now on! Gas is better than coal! End of story!

These truisms were echoed in numberless press articles—none more emblematic than Clifford Krauss’s New York Times piece, “There Will Be Fuel,” published November 16, 2010.

Now Krauss and the Times are singing a somewhat different tune. “After the Boom in Natural Gas,” co-authored with Eric Lipton and published October 21, notes that “. . . the gas rush has . . . been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.” Krauss and Lipton go on to quote Rex Tillerson, CEO of ExxonMobil: “We are all losing our shirts today. . . . We’re making no money. It’s all in the red.” It seems gas producers drilled too many wells too quickly, causing gas prices to fall below the actual cost of production. Sound familiar?

The obvious implication is that one way or another the market will balance itself out. Drilling and production will decline (drilling rates have already started doing so) and prices will rise until production is once again profitable. So we will have less gas than we currently do, and gas will be more expensive. Gosh, whoda thunk?

The current Times article doesn’t drill very far into the data that make Berman and Hughes pessimistic about future unconventional gas production prospects—the high per-well decline rates, and the tendency of the drillers to go after “sweet spots” first so that future production will come from ever-lower quality sites. For recent analysis that does look beyond the cash flow problems of Chesapeake and the other frackers, see “Gas Boom Goes Bust” by Jonathan Callahan, and Gail Tverberg’s latest essay, “Why Natural Gas isn’t Likely to be the World’s Energy Savior”.

David Hughes is working on a follow-up report, due to be published in January 2013, which looks at unconventional oil and gas of all types in North America. As part of this effort, he has undertaken an exhaustive analysis of 30 different shale gas plays and 21 shale/tight oil plays—over 65,000 wells altogether. It appears that the pattern of rapid declines and the over-stated ability of shale to radically grow production is true across the U.S., for both gas and oil. In the effort to maintain and grow oil and gas supply, Americans will effectively be chained to drilling rigs to offset production declines and meet demand growth, and will have to endure collateral environmental impacts of escalating drilling and fracking.

No, shale gas won’t entirely go away anytime soon. But expectations of continuing low prices (which drive business plans in the power generation industry and climate strategies in mainstream environmental organizations) are about to be dashed. And notions that the U.S. will become a major gas exporter, or that we will convert millions of cars and trucks to run on gas, now ring hollow.

One matter remains unclear: what’s the energy return on the energy invested (EROEI) in producing “fracked” shale gas? There’s still no reliable study. If the figure turns out to be anything like that of tight “fracked” oil from the North Dakota Bakken (6:1 or less, according to one estimate), then shale gas production will continue only as long as it can be subsidized by higher-EROEI conventional gas and oil.

In any case, it’s already plain that the “resource pessimists” have once again gotten the big picture just about right. And once again we suffer the curse of Cassandra—though we’re correct, no one listens. I keep hoping that if we’re right often enough the curse will lift. We’ll see.

21 Comments on "Heinberg: Gas Bubble Leaking, About to Burst"

BillT on Tue, 23rd Oct 2012 1:44 am 



“… From this point on, gas producers had to attract ever more investment capital in order to maintain their cash flow. It was, in effect, a Ponzi scheme … the gas rush has . . . been a money loser so far for many of the gas exploration companies and their tens of thousands of investors.” Krauss and Lipton go on to quote Rex Tillerson, CEO of ExxonMobil: “We are all losing our shirts today. . . . We’re making no money. It’s all in the red…”

“…shale gas production will continue only as long as it can be subsidized by higher-EROEI conventional gas and oil…”

Nuff said.

DMyers on Tue, 23rd Oct 2012 2:19 am 



No end in sight-the natural gas deception. Over a hundred years in the making. A great disappointment follows a great hope. The natural gas paradigm.

Plantagenet on Tue, 23rd Oct 2012 3:15 am 



The claim that NG investors are all losing money is silly. CHK is up 40% in just the last 5 months, and the price of NG is up 50%.

MrBill on Tue, 23rd Oct 2012 3:39 am 



And CHK is down 60% in just the last 15 months if one cherry-picked that time frame instead.

Arthur on Tue, 23rd Oct 2012 9:12 am 



Shale gas is in the red because of collapsing prices, no surprises here. But what if drilling slows so gas prices can recover?

http://www.spiegel.de/international/business/bild-833501-352453.html

Even Heinberg admits he has no clue about the EROEI. And even if these wells deplete quickly, what if you can drill millions of these wells? That could mean decades of postponing the eventual collapse. Obviously this ignores the potentially catastrophic environmental impact of fracking, but I am not yet convinced we have the top of the carbon age behind us.

Do not get me wrong, I am in favour of massive investment in renewables, even draconian, but I am afraid Al Bundy and his political leaders will object.

dissident on Tue, 23rd Oct 2012 1:07 pm 



The bottom line is that gas volumes in tight deposits are much lower than in regular deposits. There is no geophysical law that requires there to be much more volume of tight formations compared to regular formations just so that the total volume would be high enough for our BAU needs. So they can drill their million wells, but there will not be a return to the past.

Arthur on Tue, 23rd Oct 2012 1:22 pm 



“The bottom line is that gas volumes in tight deposits are much lower than in regular deposits.”

This spiegel.de source I linked to earlier does not in the slightest agree with that. This is from a German source, call me prejudiced, but they are a serious people.lol. Most of it is no doubt of low EROEI, but if it is 5 or higher, than industrial society could muddle on much longer than anyone here is willing to admit.

Oh, and we’ll hand over a poisoned world to our grandchildren when we are done.

The best scenario is that where gas prices from fracking are higher then the prices for electricity from wind and solar. This was the case in northern Germany, where it is very hard to find locations still available for a windturbines, as it is very profitable for farmers there to put turbines on their soil, because of the feed-in tariffs. Could work in the US as well, although I suspect that wind velocities are probable ‘continental’, read: much lower than the 6+ m/s common in North Sea coastal areas like Holland, Germany and Denmark.

Kenz300 on Tue, 23rd Oct 2012 1:37 pm 



Quote — ” problems with the shale gas boom — the need for enormous amounts of water for fracking, the high climate impacts from fugitive methane, the threats to groundwater from bad well casings or leaking containment ponds, as well as the unrealistic supply and price forecasts being issued by the industry.”
———————

Nuclear, coal, oil and natural gas all have huge environmental issues.

Safe, clean alternative energy from wind, solar, wave energy and geothermal are a much better option.

BillT on Tue, 23rd Oct 2012 3:12 pm 



Kenz, I think we all agree, but ALL ‘alternatives’ depend on oil/natural gas to exist. You will NOT mine/refine ores with wind or solar power. Not even with coal because the coal left is only one step above wood as far as energy content. Therefore, you will not be able to make and replace the ‘alternatives’ when they wear out.

I do think that the world economy is shortly (next 2-5 years) going to take all high priced fraked/drilled hydrocarbons out of the picture as the world banking system collapses under the quadrillions of dollars worth of debt and a global shrinking GDP that will never allow it to be repaid, not even a very small percentage of it. At least, I hope so. I would like my grand kids to have a survivable world to live in. At this point, it will be a merely difficult one. It does not have to get worse.

SOS on Tue, 23rd Oct 2012 3:43 pm 



Not much to say about this author. There is a tremendous amount of NG and oil ready to be developed, tight and not so tight.

NG is following predictable curves depended on supply/demand with supply being the driver at this time. Cherry pick your investment numbers for a gain or a loss, as you wish, but the fact a lot of producers have lost money has nothing to do with the vast quantities of NG now available for use. It has everything to do with markets.

Ignorance reigns supreme when false assumptions are held out as indisputable facts supporting more false assumptions.

SOS on Tue, 23rd Oct 2012 4:53 pm 



In North Dakota more water is produced by wells than ever used in fracking it out. The water is so abudant its a problem.

Fracking fluids are recovered and stored for approved disposal and reuse. The idea that huge quantities of water and chemicles are being pumped into the ground filling up aquifers is abdurd. The fluids are circulated, only a tiny fraction of the fluids are put under tremendous pressures, all fluids are contained in the hole and recovered through the circulation process.

Arthur on Tue, 23rd Oct 2012 4:56 pm 



SOS, so why is it not allowed then in other countries?

Have you seen the Gasland movie, where several private persons were able to set their tap water on fire?

A hoax?

James A. Hellams on Tue, 23rd Oct 2012 10:51 pm 



No one has even begun to grasp the reality of the depletion of the NG.

As the end of the oil supply comes to fruition, the push will be on to convert more, and more of the transportation system to NG.

No one has ever calculated the billions of gallons of fuel, worldwide, used by all forms of transportation each year, the thermal content of each gallon of fuel used; and then divided this by the thermal content of a cubic foot of NG (1,000 BTUs) to find out how many trillions of cubic feet of NG it would take to fuel all this transportation every year.

When you add the trillions of cubic feet of NG needed worldwide for all transportation to the trillions of cubic feet of NG already drawn worldwide, the draw on the NG will be enormous; and the worldwide reserves of NG will be drawn down at an enormous rate.

SOS on Tue, 23rd Oct 2012 10:51 pm 



Hysteria in other countries is possibly causing the ban? Im not sure why they would be so foolish and short sighted?

The gasland movie was staged. the tap water was known to have methane. They drilled the water well through methane pockets. the movie presented it as something else.

There are very small amounts of facking water injected, less than half of which is even liquid. Its all injected into the down hole circulation system, pressurized in zones where fractures occur, miniscule tiny tiny tiny fractures. The fracking water is recovered, recycled and/or properly disposed of under state supervision.

DMyers on Wed, 24th Oct 2012 12:27 am 



Arthur, it looks like SOS is answering in the affirmative. He says Gasland was a hoax.

My frank impression is that SOS probably just clocked out of the office building which houses Fracking Advocates, International. I haven’t seen Gasland. If it is a hoax, I would think this could have been firmly established, in which case I wouldn’t expect Arthur to believe it.

SOS, you make a fracking operation sound like a medical hospital. Everything is clean and shiny and completely under control. The down hole circulation system is a huge mechanical circulatory system, balanced and self-perpetuating.

I want to make one thing perfectly clear. You’ve stated that less than half the water used to frack ..”is even liquid.” That’s impossible. “If it ain’t liquid, it ain’t water.” A tobacco chewing mechanic told me that more than fifty years ago.

As for pressurized zones, that’s exactly what we’re worried about. Is their pressurizing so precise, or does it inadvertently push some of the wrong things into the wrong places, via all those wonderful tiny fractures and their progeny.

However many assurances SOS may give us in a rich FM radio voice, dressed in a white frock and wearing extra-antibacterial gloves, we don’t think fracking water is potable. This is a case where recycling is bad.

BillT on Wed, 24th Oct 2012 1:13 am 



SOS is an oil pimp. He would sell his mother for another buck. Too bad he is eventually going to lose his shirt and his lifestyle to reality. Petroholcs are all going to end up like any other addict, either dead or in great pain when their fix is cut off, which will be soon. End fraking of all kinds now!

Arthur on Wed, 24th Oct 2012 9:04 am 



Here is the Gasland movie. The link also includes the Dutch Tegenlicht documentary (with lots of spoken english) as to why fracking is rejected in Europe:

http://deepresource.wordpress.com/2012/04/23/gasland/

To please SOS, the link also includes criticism about Gasland, which I have yet to see.

SOS on Wed, 24th Oct 2012 6:55 pm 



Europe is certainly no example for the USA to be following unless you want to have huge, dependent populations, unaffordable energy and environmental hysteria. They are not an example a free, prosperous people want to follow if they want to stay that way.

The oil is what it is. Some of you may be able to ignore the reality of our wealth of resources, which makes moot much of the discussion here premised on energy shortages, but that wont make them go away. In order to make them go away propaganda must be employed to fan the flames of irrationality and hysteria.

Even if you end fracking of all kinds now, lol, it wont hurt me. Your vindictive edge will be blunted and dulled by the fact that I will continue to manage the four factors of production to favor myself and our family. It will all be the same. Even in a society with out gas and oil I will still be prosperous.

I do understand however that forces much greater than hysterical political/enviromental agendas are at work and the overwhelming needs of the human race both here and around the world will be met and our huge reserves of oil/gas will play an important role, into the future, to make sure this is the reality.

PS. a proper term would have been water slurry. Over half of a typical fracking slurry is sand or ceramic particles needed to exhert pressure on the rock. It is not potable as is most water used in industrial applications until it has been properly treated for reuse or EPA approved disposal.

Facking operations are very precise. They are very controlled. A simple google of fracking methods should provide you with the information you need to understand just what fracking is. Stay away from the lawyers and political group websites though. They are just trying to accumulate power or money or both and wont offer you any constructive information regarding the fracking process.

The idea fracking causes earthquakes is laughable. Any type of common sense tells you there is nowhere near enough energy in any fracking operation to cause any disturbance. If underground nuclear explosions dont destabilize the earth fracking isnt going to.

As explained in an earlier post the idea ground water is contaminated by fracking also defys common sense.

SOS on Wed, 24th Oct 2012 7:02 pm 



Pss. Fracking is so precise and so controlled you could call it a surgical operation.

Arthur on Wed, 24th Oct 2012 11:48 pm 



http://www.youtube.com/watch?v=dEB_Wwe-uBM

“Fracking Hell: The Untold Story”

17 minutes.

Marcellus Shale –> 400,000 wells or 14 lousy years of US NG consumption. Result: poisoned ground water on a continental scale.

Arthur on Thu, 25th Oct 2012 10:31 am 



Very high quality animation about fracking. Very instructive, 7 minutes of your time well spent:

http://www.youtube.com/watch?v=fFUxq9UolN4

Makes clear why you can expect to set your tap water on fire, as shown in Gasland documentary.