Why the New EIA Forecast Is Unrealistic
The Energy Information Administration (EIA) of the U.S. Department of Energy has just released its Annual Energy Outlook (AEO) 2018, with forecasts for American oil, gas and other forms of energy production through mid-century. As usual, energy journalists and policy makers will probably take the document as gospel.
That’s despite the fact that past AEO reports have regularly delivered forecasts that were seriously flawed, as the EIA itself has acknowledged. Further, there are analysts inside and outside the oil and gas industry who crunch the same data the EIA does, but arrive at very different conclusions.
The last few EIA reports have displayed stunning optimism regarding future U.S. shale gas and tight oil production, helping stoke the notion of U.S. “energy dominance.” No one doubts that fracking has unleashed a gusher of North American oil and gas on world markets in the past decade. But where we go from here is both crucial and controversial.
The most comprehensive critiques of past AEO forecasts have come from earth scientist David Hughes, a Fellow of Post Carbon Institute (note: I, too, am a Post Carbon Institute Fellow). Since 2013, Hughes and PCI have produced annual studies questioning EIA forecasts, based on an analysis of comprehensive play-level well production data. Their latest report, a critical look at AEO2017, is just out.
“Shale Reality Check: Drilling Into the U.S. Government’s Rosy Projections for Shale Gas & Tight Oil Production Through 2050” explores four big questions crucial to the realization of the EIA’s forecasts:
1. How much of the industry’s recent per-well drilling productivity improvement is a result of better technology, and how much is due to high-grading the best-quality parts of individual plays? Over the past few years, industry has shown the ability to extract increased amounts of oil and/or gas from each well.
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