The future of the U.S. fossil
fuel industry rests largely on fracking, which has brought a surge in oil and
gas production. Energy experts disagree, though, on how long this boom will
last.
Surging
oil and gas production is nudging the nation closer to energy independence. But
new research suggests the boom could peter out long before the United States
reaches this decades-old goal.
Many wells
behind the energy gush are quickly losing productivity, and some areas could
hit peak levels sooner than the U.S. government expects, according to analyses
presented last week at a Geological Society of America meeting in Denver.
"It's
a temporary bonanza," says J. David Hughes, an energy expert at the Post
Carbon Institute, a research group focused on sustainability. He studied two of
the nation's largest shale rock formations, now the source of huge amounts of
oil and gas, and said they could start declining as early as 2016 or 2017.
The
reason: "sweet spots" — small areas with the highest yields. Hughes
says these spots simply don't last long. Unless more wells are drilled, the
Bakken shale of North Dakota and Montana loses 44% of its production after a
year and the Eagle Ford shale of Texas, 34%. Most of the nation's major shale
regions produce both oil and gas.
"You
have to keep drilling more and more just to maintain production," says
Hughes, adding this can become too costly to be profitable. He notes oil
production in the Bakken, which skyrocketed between 2008 and 2012, has already
started to slow down and Eagle's Ford may soon follow. The U.S. Energy
Information Administration (EIA) projects both shale plays will hit their oil
peak in 2020, declining afterward.
Taking a
similarly pessimistic view is Charles Hall, professor at the State University
of New York, Syracuse and author of Energy and the Wealth of Nations.
His analysis of Bakken production, now accounting for nearly a third of all
U.S. oil from shale, found almost all its oil comes from just a few "sweet
spots." He also cited EIA data that show gas production has been falling
since mid-2012 in the Barnett of Texas and the Haynesville of Texas and Louisiana.
Others see
brighter prospects for the U.S. shale boom, which is largely due to the recent
combination of horizontal drilling and hydraulic fracturing or fracking. This
controversial process extracts copious amounts of gas or oil — known as
"tight oil" — from shale rock by blasting it apart with a water
mixture, laced with chemicals, that's pumped underground. It has raised
environmental concerns, because studies have linked it to potential groundwater
contamination, minor earthquakes and other problems.
Fracking
has transformed the U.S. energy industry. It's a major reason why the nation's
total production of crude oil has increased since 2008, reversing a decline
that began in 1986, and lowered petroleum imports from their peak in 2005 when
they covered 60% of U.S. consumption. A September report by Colorado-based
consulting firm IHS said the shale boom has lowered natural gas prices and
created a steadily increasing number of jobs throughout the economy.
The boom
will continue for decades, says William Fleckenstein, a petroleum engineering
professor at the Colorado School of Mines, which receives funding from the
fossil fuel industry. He says major shale regions are performing better than
expected. Though well productivity falls quickly after the first year or two,
he says the initial gush gives investors a quick payback.
"The
technology is going to improve," he says, adding that forecasts based on
shale wells drilled even a few years ago won't be accurate. He points to EIA
data, released in October, that shows how rig productivity has increased over
the last year for new oil wells in the Bakken and Eagle Ford and for gas wells
in the Haynesville and the huge Marcellus shale, which stretches from New York
south to West Virginia.
In the
Eagle Ford shale, the University of Texas at San Antonio reported in March that
fewer wells will be drilled but total production of both oil and gas will rise
considerably by 2022.
New shale
regions are also emerging. In the Permian Basin of Texas and New Mexico, the
production of oil will more than double and that of gas will nearly double by
2025, according to an investor presentation last month by Pioneer Natural
Resources, a Texas-based oil and gas company.
How
accurate are these projections?
"Tight
oil development is still at an early stage, and the outlook is highly
uncertain," says the Department of Energy's EIA in its Annual Energy
Outlook 2013, adding its future will depend on how individual wells perform as
well as their costs and the revenue they generate.
The EIA
also says it cannot "fully ascertain" the likely impact of technology
advances, because many shale wells using the latest technologies have been
operating less than two years.
So there
are a lot of caveats in its 30-year forecasts. In the most likely scenario, it
expects total production of "tight oil" will continue to rise until
2020, then decline. In contrast, it expects shale gas production to increase
113% by 2040, when it will account for half of all natural gas produced.
Even those
who are bullish on shale's prospects say it's not likely to deliver U.S. energy
independence, at least anytime soon.
"We
won't become energy independent, but we'll become less energy dependent,"
says Daniel Yergin, IHS vice chairman and author of The Quest: Energy
Security and the Remaking of the Modern World. He says though petroleum
imports have fallen dramatically in recent years, they still account this year
for 35% of consumption — the same share as 40 years ago.
Hughes
says the shale industry's long-term viability will rest not only on well
productivity and market prices but also on its potential damage to the
environment. He says rising grass-roots opposition to fracking could thwart its
expansion.
As with
any energy source, he says shale has economic and environmental costs, adding:
"There is no free lunch."
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