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The EIA Is Grossly Overestimating U.S. Shale
The EIA Is Grossly Overestimating U.S. Shale
The prevailing wisdom that sees explosive and long-term potential for U.S. shale may rest on some faulty and overly-optimistic assumptions, according to a new report.
Forecasts from the U.S. Energy Information Administration (EIA), along with those from its Paris-based counterpart, the International Energy Agency (IEA), are often cited as the gold standard for energy outlooks. Businesses and governments often refer to these forecasts for long-term investments and policy planning.
In that context, it is important to know if the figures are accurate, to the extent that anyone can accurately forecast precise figures decades into the future. A new report from the Post Carbon Institute asserts that the EIA’s reference case for production forecasts through 2050 “are extremely optimistic for the most part, and therefore highly unlikely to be realized.”
The U.S. has more than doubled oil production over the past decade, and at roughly 12.5 million barrels per day (mb/d), the U.S is the largest producer in the world. That is largely the result of a massive scaling-up of output in places like the Bakken, the Permian and the Eagle Ford. Conventional wisdom suggests the output will steadily rise for years to come.
It is worth reiterating that after an initial burst of production, shale wells decline rapidly, often 75 to 90 percent within just a few years. Growing output requires constant drilling. Also, the quality of shale reserves vary widely, with the “sweet spots” typically comprising only 20 percent or less of an overall shale play, J. David Hughes writes in the Post Carbon Institute report.
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Drilling Deeper Post Carbon Institute
Drilling Deeper Post Carbon Institute.
Abstract
Drilling Deeper reviews the twelve shale plays that account for 82% of the tight oil production and 88% of the shale gas production in the U.S. Department of Energy’s Energy Information Administration (EIA) reference case forecasts through 2040. It utilizes all available production data for the plays analyzed, and assesses historical production, well- and field-decline rates, available drilling locations, and well-quality trends for each play, as well as counties within plays. Projections of future production rates are then made based on forecast drilling rates (and, by implication, capital expenditures). Tight oil (shale oil) and shale gas production is found to be unsustainable in the medium- and longer-term at the rates forecast by the EIA, which are extremely optimistic.
This report finds that tight oil production from major plays will peak before 2020. Barring major new discoveries on the scale of the Bakken or Eagle Ford, production will be far below the EIA’s forecast by 2040. Tight oil production from the two top plays, the Bakken and Eagle Ford, will underperform the EIA’s reference case oil recovery by 28% from 2013 to 2040, and more of this production will be front-loaded than the EIA estimates. By 2040, production rates from the Bakken and Eagle Ford will be less than a tenth of that projected by the EIA. Tight oil production forecast by the EIA from plays other than the Bakken and Eagle Ford is in most cases highly optimistic and unlikely to be realized at the medium- and long-term rates projected.
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