The USGS Reconsiders The Marcellus Shale

Source: Decline of the Empire

It is hard for the general public to figure out what just happened to America’s “100 years of natural gas” from shale. The United States Geological Survey (USGS) just issued a report estimating that the Marcellus Shale contains undiscovered gas resources of about 84,198 billion cubic feet of gas, which is about 84 trillion cubic feet (TCF) according to the usual unit of measurement. This text is from the USGS summary—

This USGS assessment is an estimate of continuous gas and natural gas liquid accumulations in the Middle Devonian Marcellus Shale of the Appalachian Basin. The estimate of undiscovered natural gas ranges from 43.0 to 144.1 TCF (95 percent to 5 percent probability, respectively), and the estimate of natural gas liquids ranges from 1.6 to 6.2 billion barrels (95 percent to 5 percent probability, respectively). There are no conventional petroleum resources assessed in the Marcellus Shale of the Appalachian Basin.

These new estimates are for technically recoverable oil and gas resources, which are those quantities of oil and gas producible using currently available technology and industry practices, regardless of economic or accessibility considerations. As such, these estimates include resources beneath both onshore and offshore areas (such as Lake Erie) and beneath areas where accessibility may be limited by policy and regulations imposed by land managers and regulatory agencies.

The Marcellus Shale assessment covered areas in Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.

The 84 trillion cubic feet is the USGS mean estimate of how much gas might eventually be recovered from the Marcellus under the assumptions just stated. The USGS had previously (in 2002) said that the Marcellus about contained 2 trillion cubic feet (mean estimate) of undiscovered natural gas. With the advent of horizontal drilling and fracking, the amount of technically recoverable gas has increased considerably. Thus the USGS raised their estimate of gas we might get from the Marcellus.

That seems like good news, but the Energy Information Agency (EIA) had previously said in their Annual Energy Outlook 2011 that the United States had 827 trillion cubic feet of recoverable shale gas, and of that about 400 trillion cubic feet is in the Marcellus shale. Bloomberg reported on the conflicting assessments in U.S. to Slash Marcellus Shale Gas Estimate 80%.

The U.S. will slash its estimate of undiscovered Marcellus Shale natural gas by as much as 80 percent after a updated assessment by government geologists.

The formation, which stretches from New York to Tennessee, contains about 84 trillion cubic feet of gas, the U.S. Geological Survey said today in its first update in nine years. That supersedes an Energy Department projection of 410 400 trillion cubic feet, said Philip Budzik, an operations research analyst with the Energy Information Administration.

Advances in the technology used to recover shale gas led the Energy Department to more than double its estimate of recoverable shale resources, to 827 trillion cubic feet, in an April report and to project that the nation has enough natural gas to heat homes and run power stations for 110 years. Shale gas is recovered by fracturing, a technique in which millions of gallons of chemically treated water are forced underground to break up rock and allow gas to flow.

“One fifth of a big number is still a big number,” Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy analysis firm, said today in an interview. “It shouldn’t tell you anything about your conclusions. It should tell you what you need to know about estimates. They get revised.”

To be fair, the EIA hedged their April estimate, saying that “although more information has become available as a result of increased drilling activity in developing shale gas plays, estimates of technically recoverable resources and well productivity remain highly uncertain.” 

Now, one-fifth of a big number is still a big number, but needless to say one-fifth of a big number is, when all is said and done, only one-fifth of the original number. If we are taking about years of supply, we can use America’s current natural gas consumption to figure out what we’ve got. (This is called the R/P ratio, where you divide proved reserves by yearly usage, although we are not talking about proved reserves here.) The U.S. currently consumes about 23 trillion cubic feet of natural gas each year. Dividing that into the EIA’s original estimate, we get about 36 years of supply from shale gas. Dividing 23 into 400, we get about 17.4 years of supply from the Marcellus shale.

Using the USGS estimate, if we divide 23 into 84, we get 3.6 years of supply from the Marcellus shale. Subtracting, we find that we have suddenly lost 13.8 years of supply, and the EIA has said it will adopt the USGS estimate, so it’s official. Now we are left with only 22.2 years of natural gas from all shale gas sources (the Fayetteville, the Haynesville, etc.).

I have gone through this admittedly silly exercise to expose and ridicule the hype behind shale gas supply & production in the United States. The phrase “100 years of natural gas” got loose in the public mind, which sounded pretty good to everybody. But now, combining the EIA and USGS estimates, we are down to 22.2 years of gas from shale, which doesn’t sound nearly as good. The number “100″ has a nice ring to it. It’s a nice round number, with a couple of zeros, and it pushes out a potential problem that many years, which is a long time on the human time scale. But when you stop to think about it, it’s not a very big number, is it? And now we have a number much closer 20, which is one-fifth of 100.

One-fifth of a big number is still a big number, as Kevin Book said. But one-fifth of a small number is a much smaller number. That’s your take-away message today.

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