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Page added on February 22, 2014
EIA Chief: Boundless Natural Gas, Boundless Opportunities
Despite stockpiles imploding and prices exploding in the short-term, The U.S. Energy Information Administration (EIA) has predicted that natural gas production in the US will continue to grow at an impressive pace. Right now output is close to 70 billion cubic feet a day and is expected to reach over 100 billion cubic feet per day by 2040. The trend is likely to continue without hitting a geologic “peak”, and along with this trend will come new marketing opportunities for America. The following exclusive interview with OilPrice.com answsers some of the bigger questions…
In an exclusive interview with Oilprice.com, EIA Administrator Adam Sieminski discusses:
• What’s at stake in lifting the US crude export ban
• Whether lifting the ban is inevitable
• Why energy-related CO2 emissions will likely climb this year
• What we can expect from US coal output through 2014
• Why US natural gas production will continue to grow strongly
• Where we can expect (unexpectedly) new production to come from
• Why Alaska just might surprise us
• Where the biggest new shale opportunities lie
• How production increases might come from ‘non-shale’ formations
• The potential for Colombian shale
• What to expect from Mexico’s reforms
• What the Panama Canal expansion really means
• Why we will see new marketing opportunities for the US
Interview by James Stafford of Oilprice.com
Oilprice.com: US mainstream media are heralding the debate over lifting the US crude oil export ban as potentially one of the most critical for this year. While most agree this is not likely to happen anytime soon, is it an eventuality?
Adam Sieminski: When I first took office at the EIA, I said that light sweet crude oil production was growing very rapidly, and that it would ultimately have a number of impacts on the energy infrastructure in the US; for instance, that we would see changes in things like movement of oil by rail. We would see changes in refinery configurations designed to deal with light sweet crude. The Gulf Coast refineries in the US over the past decade were upgraded to run heavy sour imports, and so there are issues with the ability of refineries in the US to handle rapid increases in light sweet crude oil production.
I noted at the time that at some point, policymakers were going to be confronted with all of these changes resulting from the enormous shift in thinking about US production growth. Five or 10 years ago, everybody thought that US oil production would just go down, and demand would always go up. Now we have in the EIA’s forecast over the next five years very strong growth in crude oil production and weak growth—if not negative trends—going on in gasoline and liquid fuels demand. This creates an interesting atmosphere.
Is lifting the crude export ban inevitable? I’m not sure that anything is inevitable. Certainly what I’ve learned in the last five years is that the inevitable declines in production and growth in demand didn’t come true.
Oilprice.com: What are the congressional hurdles faced here?
Adam Sieminski: I don’t know that there’s a hurdle. That’s a question that’s going to be dealt with by policymakers. Energy policy issues generally tend to involve environmental concerns, national security concerns, and economic concerns.
The biggest hurdle that congress faces is just having good information on future trends in supply and demand, refinery configurations and pipeline and railroad transportation infrastructure.
Oilprice.com: What would be the consequences of lifting this ban, for the industry, for refiners, for consumers?
Adam Sieminski: Well, that’s going to be part of the debate. I don’t have the answer to that, and I doubt that anybody at this point has the complete answer to that question. What is the economic impact? Does it increase jobs or not? What is the environmental impact of producing, moving and refining the crude oil? What are the national security implications? Is it better to keep the oil here, or to move it into global markets where it might have an ameliorating effect on volatility? There are a lot of questions, so I’m not going to try to pre-judge that debate.
Oilprice.com: The EIA has noted that after two years of declining production, US coal output is expected to increase in 2014, forecast to rise almost 4%, as higher natural gas prices make coal more competitive for power generation. At the same time, there is concern about the EPA’s proposed new carbon emissions standards for power plants, which would make it impossible for new coal-fired plants to be built without the implementation of carbon capture and sequestration technology, or “clean-coal” tech. Is this a feasible strategy in your opinion?
Adam Sieminski: Well, the facts as you laid them out are certainly what the EIA is looking at. Natural gas prices have gone up, so in 2013, we already saw some recovery in coal at electric utilities. As a consequence, energy-related carbon dioxide emissions actually climbed in 2013 and probably are going to do so again in 2014 for the reasons that you stated.
Longer term, even without changes by the Environmental Protection Agency, there’ll be coal retirements, and the amount of coal being burned in the US will eventually come below the amount of electricity being generated by natural gas. So sometime after the year 2030, we will have more electricity in the US being produced from natural gas than from coal.
Oilprice.com: What can we expect from US onshore natural gas production over the next two years; over the next five years? And where will production increases offset declines?
Adam Sieminski: Well, the EIA has been pretty clear on this in our Annual Energy Outlook Reference case for 2014, which we published in mid-December. We reiterated what we said the previous year: natural gas production in the US is going to continue to grow very strongly. We are close to 70 billion cubic feet a day of output now. That number will be over 100 billion cubic feet a day by 2040. Shale gas will be easily 50% or more of production by 2040.
We also see increases in natural gas production from geologic formations that we don’t consider to be shale gas. We think that there might also be some production, believe it or not, from Alaska, because the economics ultimately will favor construction of an LNG facility in Alaska that would allow production from the associated gas in the North Slope of Alaska.
Just in the last five years, we’ve seen natural gas production in the US from shale go from about five billion cubic feet a day to nearly 30 billion cubic feet a day–a huge increase. A lot of that is coming from places like the Haynesville—and more recently the Marcellus in Pennsylvania and West Virginia. In our view, those production trends are going to continue without the likelihood of running into a plateau from a geologic standpoint.
Oilprice.com: How do you see future extraction, development and commercialization of oil and gas resources in the Americas playing out over the next 5-10 years?
Adam Sieminski: Well, the big new opportunities, I think–certainly in the US and Canada–lie in the development of shale resources. There are oil and gas shale resources in places like Argentina, Mexico, Columbia, and elsewhere across the Americas. Whether or not the very rapid development of shale resources in the US can be duplicated in a lot of other countries—even in the Americas—remains to be seen. Certainly there has been some interesting progress in developing shale resources in Canada and Argentina.
I’ve been hearing from many people that they’re quite hopeful there will be developments in shale in Colombia, and given the constitutional changes that have now been agreed in Mexico, that opens up an opportunity for Mexico to step into this area.
One of the things that is happening is the increase in oil production in the US and the fact that we have very sophisticated refineries with very strong technology, while relatively low natural gas prices are allowing us to run our refineries at higher utilization rates and dispose of surplus products—by exporting petroleum products like gasoline and diesel fuel—into Latin America and Canada.
In a sense, this creates a manufacturing opportunity for the US to take a raw material, process it, and sell it abroad. It also fits in pretty well with the fact that a number of countries in Latin America have had difficulty in building and upgrading their own refineries. So it’s opened up a marketing opportunity for the United States to take advantage of.
Oilprice.com: What can we expect from Mexico’s recently adopted energy reforms and what regional effect could this have?
Adam Sieminski: Well the Mexican government and Pemex, the state oil company, are very excited about the opportunities they see for Mexico to increase its production and to take advantage of some of the new technologies that are available through cooperation with non-Mexican companies. They believe that it is going to be instrumental in reversing some of the difficulties they’ve had in oil production and natural gas production.
It certainly looks to the EIA as something that we’re going to have to watch very carefully when considering the longer-term outlook for Mexican energy production.
We actually bumped up the Mexican numbers because of the opportunities we think will be created by constitutional reform there. If the implementation of that proceeds along the lines that the Mexicans are considering, I think we’ll probably have to look at it again.
Oilprice.com: In its latest report, the EIA notes that the Americas accounted for 20% of global natural gas trade, and while 80% of that was via pipeline, the rest was traded as LNG. How do you see this proportion changing over the next 5-10 years?
Adam Sieminski: Well, I suspect that we’re going to see more of both. Our longer-term outlook shows US pipeline exports of natural gas to Mexico going up, and we also see LNG exports from the United States increasing. We’re not responsible for permitting. What we try to do is look at the economics. We run our national energy modeling system to basically say, “What would the economics do if you let them run?” And that shows we’re likely to see increases in exports of both LNG and pipeline gas.
Interestingly, the model also says that there’s plenty of production to do that and still allow demand in the US to go up considerably. We’re seeing demand increases in natural gas use by refineries; it’s a big refinery fuel. And in the industrial sector, we see significant gains in natural gas consumption occurring in areas like bulk chemicals, food processing, and elsewhere. And then the biggest increases in natural gas may come from electric utilities, which will likely be using more natural gas relative to coal to provide electricity growth in the United States.
Oilprice.com: Is the US Department of Energy moving too quickly or too slowly to approve LNG exports to non-FTA countries?
Adam Sieminski: I think that the Department of Energy’s Department of Fossil Energy, which is responsible for permits, is moving exactly the way it should under the law to make the kinds of findings necessary from a legal standpoint. I wouldn’t characterize it as too fast or too slow. I would say that from what I can see, it’s just right given the legal framework.
Oilprice.com: When could we expect the US to become a net gas exporter?
Adam Sieminski: The EIA’s forecast is that the US will become a net exporter of natural gas before the end of this decade.
We’re already a net exporter of coal. In terms of electricity, most of our trade is with Canada, and that never really seems to have been much of an issue. The US is also a net exporter of petroleum products, so we now export more gasoline and diesel fuel than we import. We import a lot of oil products, particularly into the East and West Coasts. But we are a big exporter, mostly from the Gulf Coast, with the increase in refinery utilization down there. The overall picture now is one in which the US trade deficit is being reduced by growing oil and petroleum product exports.
The only big outstanding question is: could the US potentially be a net exporter of crude oil? In the EIA’s Reference case forecast, that doesn’t seem likely. Despite the fact that our production is rising while demand is falling, we’re still importing about five million barrels a day net of of crude oil and products. It doesn’t seem likely that net importsd are going to go to zero–at least not given the facts as we currently see them. It’s possible, in a high petroleum resources case combined with a technology and policy-driven low demand case, but not probable.
One thing you want to keep in mind is what it would mean, exactly, if the US were completely self-sufficient in energy. Some people like to use the phrase, “energy independence.” We would still be part of a global trading system in energy, and particularly petroleum products and crude oil. And if oil prices go up globally, they’re going to go up in the United States. If there’s a geopolitical problem somewhere or a weather problem somewhere—anything—the US would be impacted just as it has always been. The US has a lot of interest in what’s going on around the world, in the Middle East and elsewhere, regardless of whether it is independent or self-sufficient in fuels. Those political and economic interests will remain whether we become an exporter or not.
Oilprice.com: What role will the expansion of the Panama Canal play in this?
Adam Sieminski: What they’re doing is widening the Panama Canal. They’ll make the Canal itself wider and the locks longer, and the net result will be the potential to save in transportation costs through the use of larger oil tankers and LNG tankers. This offers an opportunity to reduce the costs associated with global trade. It is something that I know Panama and all of the customers who use the Panama Canal are very interested in seeing happen. There have been some cost and labor issues, but I’m sure those will be resolved and this expansion will eventually be completed. When that happens, it’s going to reduce the cost of moving goods back and forth between the Atlantic and the Pacific, and that’s going to apply particularly to things like liquefied natural gas and oil.
27 Comments on "EIA Chief: Boundless Natural Gas, Boundless Opportunities"
rockman on Sat, 22nd Feb 2014 3:17 pm
“Right now output is close to 70 billion cubic feet a day and is expected to reach over 100 billion cubic feet per day by 2040.” Once again a meaningless prediction IMHO that can’t be evaluated because no price assumption is presented. Is that 100 bcf @ $4.50/mcf or $10+/mcf as it reached at the peak of shale gas drilling in ’08?
westexas on Sat, 22nd Feb 2014 3:26 pm
Regarding 70 BCF/day, this is marketed gas production, before all of the liquids have been extracted, so it’s a little bit of double counting to claim 70 BCF/day of gas production and to also count NGL’s as part of total liquids production.
A better measure of actual gas delivered to end user pipelines is the dry gas metric, and US processed dry natural gas production has been on a undulating plateau of about 66 BCF/day since late 2011.
In any case, Citi Research puts the decline rate from existing US natural gas production at about 24%/year. This would be the decline in US natural gas production from 2013 to 2014, if no new wells were completed in 2014. In order to maintain a processed dry natural gas production rate of 66 BCF/day, a 24%/year decline rate would require the industry to replace 100% of current natural gas production in about four years.
Based on the Citi Research report, to maintain 66 BCF/day for 10 years, the industry would have to put on line the productive equivalent of the peak production rate from about 28 Barnett Shale Plays over a 10 year period.
Nony on Sat, 22nd Feb 2014 3:33 pm
I give you the bookies line, at least. 😉
http://www.cmegroup.com/trading/energy/natural-gas/natural-gas.html
What’s interesting about 2008-2012 is that volume grew as price fell. Yeah, there was a temporary glut and price went all the way down to 2.00. And people stopped drilling to let that clear up.
Gas is interesting with how it is seasonal and not easily stored, etc. But still, volume seems to be able to grow at the 4.50-5.00 range. It seems like it is easier to frack from shale than oil (or just is more common). Utica seems like it is turning into a gas play. EF has it’s gassy side.
Oil development has had some beneficial price impact for gas. Price of oil is essentially global and gas is regional. Given the renewed oil development in the US, some gas is just the result of oil production. Even the Bakken which is very “oily” still produces gas as almost a byproduct (and that drives gas price lower…in the Persian Gulf this effect makes it almost free). But I think even without this impact, there is just a lot of gas especially in the Marcellus/Utica.
P.s. I just read The Frackers by Zuckerman. (Yeah, I know it’s a popular book not a USGS survey or a well log, but still good way to get up to speed on George Mitchell and all that.)
Nony on Sat, 22nd Feb 2014 3:38 pm
WTI:
Good point on the liquids. Given the difficulties with transport, the more relevant metric really is price, not production. It takes time for new demand to grow (e.g. by switching). So higher supply is likely to be much more felt in price than volume. [Conversely for oil, price impact is much more minimal and instead supply growth is the relevant metric to look at, since prices are global.]
I’m not so worried about the “need to find another Barnett”. This has always been the case in oil and gas. Every field declines. So what. Go find it. Marcellus may be a better gas field than the Barnett anyway.
westexas on Sat, 22nd Feb 2014 4:10 pm
Re: Nony
Based on the Citi Research report, we would need the productive equivalent of the 2013 production from the Marcellus*, times 20, over the next 10 years, in order to maintain a processed dry natural gas production rate of 66 BCF/day for 10 years.
In any case, if–as you assert–every field declines, is it your assertion that the finite sum of discrete sources of oil and gas that peak and decline will show a perpetual increase in production?
*Assuming that the Marcellus averaged about 8 BCF/day in 2013 (peak production from Barnett was about 5.6 BCF/day)
Nony on Sat, 22nd Feb 2014 4:50 pm
Nothing lasts forever WTI. But the reason rigs moved out of gas drilling was not “no more gas to be extracted” but price too low since there was a glut on the market.
Northwest Resident on Sat, 22nd Feb 2014 5:20 pm
Nony — Excuse me for asking, but why do I get the impression that you never worked a day of your life in the oil business, and that all of your very optimistic POV’s on natural gas are derived from reading (and believing — as in, hook line and sinker) all of the stock market futures and other investment literature on NG? You never seem to have an answer for the hard facts regarding NG, just more optimistic blah-blah that rarely addresses the question at hand.
Question: Given this statement: “Based on the Citi Research report, we would need the productive equivalent of the 2013 production from the Marcellus*, times 20, over the next 10 years, in order to maintain a processed dry natural gas production rate of 66 BCF/day for 10 years.”
How does your “Nothing lasts forever WTI” response even come close to addressing the point that WT made? Answer: It doesn’t. Nony, you can’t deal with the facts. Face it.
Nony on Sat, 22nd Feb 2014 5:25 pm
1. I have never worked a day of my life in the oil business.
2. My info is from casual reading. But that is not the only source of insight–I have an analytical bent.
3. I definitely have an analytical bent and can face facts.
4. I did not intend to blow off WTI, but can’t you also see that his question to me was also a strawman “are you saying that we will never run out”?
ghung on Sat, 22nd Feb 2014 5:37 pm
Yeah, NR, it’s like our neighbour down the road who insisted that the new wind turbine they ordered is going to produce all of their electricity and then some. He simply wouldn’t listen to the RE guy up the road (me) who’s done the math and told him that his sight is an awful candidate for wind power, and that PV would give them a much better ROI. Indeed, our home site, which is 300 feet higher and more in the clear of trees and such is a poor choice for wind. I even showed him the wind data (several years worth) from our weather station; did the basic math for him.
He’s going to have a very expensive lawn ornament in a few weeks; a typical case of where magical thinking trumps the data, math and experience others bring to a problem. Maybe he plans to put a big fan up to drive his wind turbine. That should work.
Northwest Resident on Sat, 22nd Feb 2014 6:09 pm
ghung — I can see it now — at some point in the future, your neighbor will have to bite the bullet and buy a bunch of PV to power the industrial-scale fan that will drive his wind turbine to produce his electricity. Human genius at work!
Northwest Resident on Sat, 22nd Feb 2014 6:15 pm
Nony — WT’s strawman “are you saying that we will never run out” is exactly the point that at least deserves a serious attempt at an answer. Excuse me for being so blunt. But I read your posts and it does seem that you have an optimistic view of NG and NG futures, and the impression I get is that you downplay the peak oil consequences because you believe that NG is going to be the answer to all those problems. When a clear point is made that all the optimistic forecasts for NG production and distribution is just a bunch of hooey, you don’t seem to accept that point, and you don’t attempt to disprove it with facts of your own, you simply resort to quips and one-liners that might be coming directly from some NG investment literature. To me, that is not dealing with the facts. If you’re going to constantly argue in favor of NG being the answer to all our peak oil problems, then you ought to be able to back that argument up with some solid fact.
ghung on Sat, 22nd Feb 2014 6:23 pm
The confirmation bias is strong with this one, Obi-Wan.
Nony on Sat, 22nd Feb 2014 6:29 pm
1. the futures market is not pricing in a gas price rise.
2. the recent article on the old BP fellow (with a little bit of peak oil bent) said that ‘tight gas has legs’.
3. Proved reserves amount and growth:
http://www.eia.gov/dnav/ng/hist/rngr11nus_1a.htm
Davy, Hermann, MO on Sat, 22nd Feb 2014 7:04 pm
Right now output is close to 70 billion cubic feet a day and is expected to reach over 100 billion cubic feet per day by 2040.
World debt is currently $223.3 trillion: The total indebtedness of the world, including all parts of the public and private sectors, amounting to 313% of global gross domestic product. (The figures exclude China’s shadow finance and off-balance-sheet financing.) World debt increase 2.5 times in 10 years so in 30 more years we have a debt of 3,484 trillion dollars or something. Any of you math wizzzess tell me what number that is?
The point here is I loath linear projections in a nonlinear world.
westexas on Sat, 22nd Feb 2014 7:31 pm
As Northwest Resident noted, my key point is that given high, and probably rising, decline rates from existing production, I think that we are going to have a great deal of difficulty in just maintaining current production for the next 10 years or so.
ghung on Sat, 22nd Feb 2014 7:46 pm
Roughly $3.5 quadrillion, Davy, which will be entirely meaningless before then. The implosion is well underway. I agree with those who posit that peak oil will be financially driven before it’s geological or technical. The good news is that future societies won’t have the where-with-all or capacity to get at much of what’s left. They’ll be making other arrangements.
Nony on Sat, 22nd Feb 2014 8:54 pm
@Rockman: (“Once again a meaningless prediction IMHO that can’t be evaluated because no price assumption is presented. Is that 100 bcf @ $4.50/mcf or $10+/mcf as it reached at the peak of shale gas drilling in ’08?”)
EIA natural gas price assumption: http://static4.businessinsider.com/image/4f1da63c6bb3f7b801000051-1200/given-weak-natural-gas-prices-the-annual-energy-outlook-2012s-projection-is-for-natural-gas-prices-to-trend-lower-than-previously-expected.jpg
Nony on Sat, 22nd Feb 2014 8:59 pm
“my key point is that given high, and probably rising, decline rates from existing production, I think that we are going to have a great deal of difficulty in just maintaining current production for the next 10 years or so.”
If the decline rate doubles, but the availability (e.g. ability to drill readily) doubles also, then it nets out. There is always a decline. You have to balance decline with ability to drill new capacity. “This is mining coal.” and “We don’t drill dry holes.”
Again, you could even be right that gas will peak very soon and we’ll be at 15$ gas. I donno. But it’s not a mathematical consequence of high decline rate. Really, it’s not.
Newfie on Sat, 22nd Feb 2014 11:39 pm
“natural gas production in the US will continue to grow …. without hitting a geologic peak”.
Ha ha ha ha. Hilarious. ROTFLMAO. The gas reserves are infinite. Who would have imagined ?
Mark Ziegler on Sun, 23rd Feb 2014 12:18 am
Oilprice.com: When could we expect the US to become a net gas exporter?
Adam Sieminski: The EIA’s forecast is that the US will become a net exporter of natural gas before the end of this decade.
Perhaps it would be better if the US owned 100% of the natural resource and paid into a general fund. Lord knows which foreign company may profit from America’s natural resources and squander our energy resources for their own profit.
Nony on Sun, 23rd Feb 2014 12:26 am
Supply curve for oil (or gas) is volume versus price. At higher prices, more supply is available. (Like every supply curve in any industry.) If price crashes, less supply is economical to produce.
I read something that was really cool though: ‘Depletion drives the curve to the right (less volume for a given price, low cost supply preferentially used up first), but knowledge drives it to the right.
What peakers here seem to do is dwell on the first…and act as if it’s some revelation that no one has ever thought of (despite Hoteling almost winning a Nobel Prize for the price theory of depletion). And, that doesn’t mean knowledge always wins or wins in the end (for one thing demand curves can change and take pressure off depletion. But both effects are in play. For sure, you can see that in shale gas.
See here:
http://web.mit.edu/ceepr/www/publications/workingpapers/98008.pdf
And here:
http://www.jstor.org/discover/10.2307/3146466?uid=3739936&uid=2&uid=4&uid=3739256&sid=21103557527003
And here:
web.cenet.org.cn/upfile/99282.pdf
Northwest Resident on Sun, 23rd Feb 2014 2:53 am
Nony — Looks like the reason you’re optimistic that NG will save us from peak oil effects and consequences is because you are counting on “knowledge” to drive the depletion curve to the right in terms of NG extraction and delivery capabilities. Or as the M.I.T. pdf you posted puts it, “technology has outrun gas depletion”, assumption being that technology will always outrun gas depletion. Is this what you believe?
Nony on Sun, 23rd Feb 2014 4:31 am
Good summary, yes. for instance, the knowledge could be conversion of the 100 years of unproved reserves into proved reserves as needed (as the 10 year proved runs low.)
I don’t think NG will nesc “save” from peak oil. Right now they are pretty disconnected with US gas prices at historic real lows and oil at historic real highs.
Davy, Hermann, MO on Sun, 23rd Feb 2014 11:40 am
@n/r – “Nony — Looks like the reason you’re optimistic that NG will save us from peak oil effects and consequences is because you are counting on “knowledge” to drive the depletion curve to the right in terms of NG extraction and delivery capabilities.”
I agree with your caution here N/R. Any complex large scale undertaking in the next few years is going to come under tremendous strain on multiple fronts. We will see a generalized loss of capabilities near term when we have a capex squeeze from a financial correction. I am saying correction because that is all it will take to disrupt the technological exuberance we see in the NatG markets. It is more likely a “contraction of 30%<” this is an industry killer. The fossil N&G industry is very vulnerable to the financial health of the global economy. I am sure no one here would argue that. I am sure no one will argue that the world economy is stable and healthy. The technology will be there, the people, the equipment, and product in the ground. What may not be there is the means to deliver these resources in a fashion to maintain or grow the NatG supply. Most projections I see do not take into account the financial side of the equation. We are talking more than price here. Which is OK if you want to strictly look at the geology side with all things remaining the same. The financial system is nearing the end of a business cycle in these new normal times. The command control nature of the central banks cannot transcend this. They can force the system for some time but eventually even a financial system in a new normal environment does its own cycles. They may differ from traditional cycles but ALL systems cycle period. Cycles are a law in a finite world! Any projections of gas production out more than 3 years is geologically driven. It is not Peak Dynamics driven. The economy probably will not recover from a contraction but may recover from a correction. Yet a recovery from a correction will not be easy or short. There are just too many distortion and dysfunctions in the economy today.
rockman on Sun, 23rd Feb 2014 6:56 pm
“The technology will be there, the people, the equipment, and product in the ground”. As pointed out before all those factors that have allowed us to increase domestic oil production were, for the most part, available 15 years ago. What wasn’t present was the high oil price. Future technology? Absolutely meaningless term IMHO. Describe the tech. Here’s an easier task: when was the current tech that’s helping us today developed. Frac’ng: developed over 50 years. Horizontal drilling: over 20 years ago. 3d seismic: over 25 years ago. Drilling/Producing oil/NG from water depths too great for fixed platforms: over 30 years ago. Knowledge of oil/NG present in unconventional reservoirs: over 40 years ago. Even the tech I’m currently using to recover a little bit of the 4.5 billion bbls of residual oil from a 50 year old trend in Texas isn’t new: I first used the tech 20 years ago. The reason I get to try it today is $100/bbl oil. I knew where the oil was and how to get it out a decade ago. “New tech” isn’t allowing me to do this…high oil prices are.
There certainly have been improvements in all of the above. But nothing approaching a step change of any significance. But assuming a major change in technology in future? Based on what? The need? We have the need today big time. I’m aware of all the tech being worked on today. And I know of nothing on the horizon that has the potential to bring about a “revolution” in oil/NG production. In fact much of our current great tech becomes meaningless without sufficient price support. The shale gas rig count didn’t drop 75% after ’08 because we suddenly forgot how to horizontally drill and frac shale formations. It was due to NG prices falling 80%. Even with a 100%+ increases in those prices today we don’t see a mad rush back to the existing “tech that will save us”.
Nony on Mon, 24th Feb 2014 6:19 pm
Makes sense.
I go back a little to wondering about a new shelf, price ceiling, etc. Yes, new tech will not sprout out because we like it to. And high price required for tight oil (and somewhat for gas).
But it still seems (especially for gas) that the feasibility of exploiting these resources can help the post peak, be not so bad. I don’t remember any peak oil prediction charts showing 3 MM bpd of US tight oil. If it was really so predictable and obvious, why not predicted? [And why were the leases not bought up earlier.]
Tight oil will never bring us 30/bbl oil (you can’t produce it below something like 60). But it can help to keep the 100/bbl from becoming 150/bbl. Shale gas has even much more substantial promise to limit price rises.
geolaw61 on Mon, 24th Feb 2014 10:01 pm
rockman and WTI are on point.
After 28 years in the E&P side of the business, (TX & LA primarily NG), the only thing I’d bet on regarding NG Prices/Supply is that whenever the collective herd thinks they know whats going to happen, they are usually wrong.
Look up the forecasts after deregulation in the 80s and 90s when everyone knew that prices would never go above $4.00.
Review the price spikes in 2000, 2003, 2005, and 2008. And, read a few of the “Experts” Articles in 2008 who said we would need to spent Billions on Import Facilities just to meet demand. Billions were spent on Sabine Pass based upon those opinions, and now Billions more are being spent so that it can Export.
Point being the Experts have a habit of getting it wrong.
And, as for “Proven Reserves”, the reports Nony refers to above, are based upon those the Public E&Ps file annually with the SEC. If you owned Oil and/or NG Production and wanted to borrow against it (PP, BP, PUDs, your lender will demand a reserve report with a much different criteria.
Lastly, the basis for the current Supply/Pricing scenario is the Marcellus and while it is undoubtedly prolific, we have only a few years of production to look at. And, as Hubert foretold it to will peak then decline, probably sooner than later. What then? Most likely a new supply/pricing paradigm.
The US does have significant NG reserves remaining, but, most of them will require a $6.00-$10.00 wellhead price to be produced profitably.