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Is The EIA Overestimating The U.S. Shale Boom?

Is The EIA Overestimating The U.S. Shale Boom?

Permian

The American shale boom may be overstated by the U.S. Energy Department, according to a new MIT study that suggests the agency may be over-attributing a rise in shale drilling to technological advances.

“The EIA is assuming that productivity of individual wells will continue to rise as a result of improvements in technology,” MIT researcher Justin B. Montgomery told World Oil. “This compounds year after year, like interest, so the further out in the future the wells are drilled, the more that they are being overestimated.”

Instead, lukewarm oil prices have forced oil majors to drill only in easy-to-access areas, located mostly in the Eagle Ford and Permian basins in Texas, and the Bakken formation in North Dakota. This has led to an exaggerated increase in the number of active wells, and a hyperbolized narrative of growth in the shale industry, the study says.

“The same forecasting methods are used in other plays in the U.S., and the same dynamic is likely to be present,” Montgomery added.

Margaret Coleman, the Energy Information Administration’s chief of oil, gas and biofuels exploration and production analysis, said the “study raised valid points” and offered insights for more accurate analysis of domestic fossil fuel forecasting. Part of the blame can be attributed to an information gap in data available to the EIA team, she added.

Many shale wells lack key pieces of data tracked down by the MIT team, meaning EIA projections over-emphasized geological and capital assumptions as well as technological developments to estimate the shale industry’s growth. Of course, there have been some advances in drill head technology, mapping software, and hydraulic fracking, but that is just one part of the puzzle.

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