Are shale gas current prices real ?

[Mr. H.]

And so here we have a successful enterprising industry in the United States. Oil and natural gas.

The reward?

$40 billion in taxes wrought by Obama himself. True story, bro.

You succeed in this country and you get... hammered.

You fail in this country and you get... rewarded.

Fuck that fucking fucker in charge of you Liberal Fucks.

 

[CultureCitizen]

Trusted in what fashion? Economics? It's always a crap shoot when you drill a hole in the ground. Risk VS reward. But why are you focusing on failure when success has recently far outweighed? It's nationwide, baby. And it's putting people to work, creating energy that drives the economy, and provides exports that bring hard dollars back into the U.S. economy. It's win-win-win. Too bad Obama spells lose-lose-lose for hydrocarbons in this country.

Production looks good enough, the prices seem to be too low, by what I've read a price of $8 per mcf seems to be the price to keep running those wells. And still at that price the shale gas yields more energy per dollar than a barrel of oil ( I found out the 1 barrel of oil equal 5.8 mcf of gas ).

http://www.natgas.info/html/natgasunitscalculator.html

I don't know anything about the gas industry , but that price ($8 per thousand cubic feet) keeps being repeated by several articles including this one :

Shale gas production to fall, Pickens and Stansberry are wrong | Resource Investor

Wouldn't it be healthier for the drilling companies and America's energy sector to have a price which approached the real extraction cost?

Aren't those extremely low prices puting at risk the gas industry ?

The subtitle of the last article "Chesapeake energy the next enron?" is not exactly encouraging.

 

[Mr. H.]

Production looks good enough, the prices seem to be too low, by what I've read a price of $8 per mcf seems to be the price to keep running those wells. And still at that price the shale gas yields more energy per dollar than a barrel of oil ( I found out the 1 barrel of oil equal 5.8 mcf of gas ).

Uses of Natural Gas, Calculation, Natural Gas Units Conversion Tables Value, calorific, Btu, MBtu, MMBtu, MMcfd, tcf, bcmd, bbl, boe - by Vivek Chandra

I don't know anything about the gas industry , but that price ($8 per thousand cubic feet) keeps being repeated by several articles including this one :

Shale gas production to fall, Pickens and Stansberry are wrong | Resource Investor

Wouldn't it be healthier for the drilling companies and America's energy sector to have a price which approached the real extraction cost?

Aren't those extremely low prices puting at risk the gas industry ?

The subtitle of the last article "Chesapeake energy the next enron?" is not exactly encouraging.

Healthier extraction cost? This isn't Agriculture. It's the real world.

Oil and gas aren't afforded floor prices. They aren't afforded "insurance" against natural disaster. They aren't paid to withhold production of commodity. They aren't paid to set-aside lease acres. They get no mailbox money as does agriculture.

It's sink or swim. You're in or you're out.

Risk is a four-letter word that industries such as agriculture know nothing about.

 

[CultureCitizen]

Healthier extraction cost? This isn't Agriculture. It's the real world.

Oil and gas aren't afforded floor prices. They aren't afforded "insurance" against natural disaster. They aren't paid to withhold production of commodity. They aren't paid to set-aside lease acres. They get no mailbox money as does agriculture.

It's sink or swim. You're in or you're out.

Risk is a four-letter word that industries such as agriculture know nothing about.

Fuels and energy in general are strategic resources , and although a free market is necesary to ensure the sector thrives it is also necesary to make sure it doesn't collapse... like the mortgage sector.

You might disagree on the following but I think a regulated industry is better than a broken one: If the "free market" is not yielding the adecuate prices to ensure the continual operation of the industry some sort of regulation must be put in place ( e.g : provide facilities to increment exports or set a production ceiling).

Then of course , if the actual production costs are below $4 and not above $7 as most of the articles I've read state then no further action is necesary.

 

[Mr. H.]

Fuels and energy in general are strategic resources , and although a free market is necesary to ensure the sector thrives it is also necesary to make sure it doesn't collapse... like the mortgage sector.

You might disagree on the following but I think a regulated industry is better than a broken one: If the "free market" is not yielding the adecuate prices to ensure the continual operation of the industry some sort of regulation must be put in place ( e.g : provide facilities to increment exports or set a production ceiling).

Then of course , if the actual production costs are below $4 and not above $7 as most of the articles I've read state then no further action is necesary.

Fuck regulation of markets. And the "free market" does not ensure a thriving market. And it sure as fuck is no assurance that it doesn't collapse.

The converse of regulated markets isn't "broken markets". Free markets may yield profit, they may yield failure. That's the nature of the beast.

Fuck you and your regulatory hypothesis.

 

[Mr. H.]

Fuels and energy in general are strategic resources , and although a free market is necesary to ensure the sector thrives it is also necesary to make sure it doesn't collapse... like the mortgage sector.

You might disagree on the following but I think a regulated industry is better than a broken one: If the "free market" is not yielding the adecuate prices to ensure the continual operation of the industry some sort of regulation must be put in place ( e.g : provide facilities to increment exports or set a production ceiling).

Then of course , if the actual production costs are below $4 and not above $7 as most of the articles I've read state then no further action is necesary.

The oil and gas industries have never been "broken". They have been beaten into submission, but never broken. Witness their resurgence today. That is the beauty of the market, the beauty of business, and the beauty of the individual spirit.

 

[RGR]

Are you being genuinely inquisitive, or genuinely stupid?

Genuinely inquisitive... but then of course the chances of finding someone who actually works in the shale gas industry are slim.

I was working on the cable tool rigs drilling them in the 70's. I was producing and operating fracked shale wells in the 80's. I was fracking them as the engineer in charge of the jobs in the 90's. Then I spent 15 years as a scientist studying them across the country. Now I am responsible for being a subject matter expert/analyst for everything shale and unconventional on the planet. Plus I did some other stuff along the way.

You must be a lucky guy!

From the last link :

“Always a greater sucker,”

... so honestly I don't really know if this shale gas bonanza can be trusted.

Trusted...for what? You plan on investing in it somehow?

 

[Mr. H.]

Sorry for the tirade, CC.
I've sobered up.

 

[CultureCitizen]

Are you being genuinely inquisitive, or genuinely stupid?

Genuinely inquisitive... but then of course the chances of finding someone who actually works in the shale gas industry are slim.

I was working on the cable tool rigs drilling them in the 70's. I was producing and operating fracked shale wells in the 80's. I was fracking them as the engineer in charge of the jobs in the 90's. Then I spent 15 years as a scientist studying them across the country. Now I am responsible for being a subject matter expert/analyst for everything shale and unconventional on the planet. Plus I did some other stuff along the way.

You must be a lucky guy!

From the last link :

“Always a greater sucker,”

... so honestly I don't really know if this shale gas bonanza can be trusted.

Trusted...for what? You plan on investing in it somehow?

Not directly . But do you think switching to a gas car might be a good investment in the mid term (4-5 years ) ?
As far as investing in a shale gas company ... I'm not doing that after looking at the Ehesapeak Energy ticker and reading the previous articles.
Do you think the drilling costs for the shale gas are really bellow the $4 per thousand cubic feet?

Chesapeake Energy Corporation C Stock Chart | CHK Interactive Chart - Yahoo! Finance

 

[RGR]

... so honestly I don't really know if this shale gas bonanza can be trusted.

Trusted...for what? You plan on investing in it somehow?

Not directly . But do you think switching to a gas car might be a good investment in the mid term (4-5 years ) ?

You currently have a diesel or EV and want to switch to a gasser? Or do you mean CNG and something like a Honda Civic GX?

Do you think the drilling costs for the shale gas are really bellow the $4 per thousand cubic feet?

I think it depends on so many variables you would be better giving H the pieces he wants and let him tell you. But shale was certainly being developed at $2/mcf back before 2000, and was being developed for 0.25/mcf 90 years ago, and was being used nearly a century before that as well. Worrying about a particular price point on a commodity that has been going strong for nearly 200 years now in the US might not really be warranted. Just my opinion of course.

 

[CultureCitizen]

Trusted...for what? You plan on investing in it somehow?

Not directly . But do you think switching to a gas car might be a good investment in the mid term (4-5 years ) ?

You currently have a diesel or EV and want to switch to a gasser? Or do you mean CNG and something like a Honda Civic GX?

Do you think the drilling costs for the shale gas are really bellow the $4 per thousand cubic feet?

I think it depends on so many variables you would be better giving H the pieces he wants and let him tell you. But shale was certainly being developed at $2/mcf back before 2000, and was being developed for 0.25/mcf 90 years ago, and was being used nearly a century before that as well. Worrying about a particular price point on a commodity that has been going strong for nearly 200 years now in the US might not really be warranted. Just my opinion of course.

I conceed the industry has been devolping for a long time... not sure about the prices ( are you considering inflation ?). There's just something awkward. I don't like how Chesapeak actions have gone down , gives me a bad gut feeling ... but maybe I'm just being a bit paranoid after the mortgage crisis. I just hope the whole shale operation is sustainable in the long run ( 20+ years ). It has been helping the American economy and I hope it continues to do so.

I have a normal oil vehicle that yields 28 mpg. For my next purchase I would like to know the better option :
A hybrid
Diesel vehicle
A gasser.

I tend to use my vehicles for a long time (8 years) .

 

[RGR]

Worrying about a particular price point on a commodity that has been going strong for nearly 200 years now in the US might not really be warranted. Just my opinion of course.

I conceed the industry has been devolping for a long time... not sure about the prices ( are you considering inflation ?).

The prices I listed were nominal.

There's just something awkward. I don't like how Chesapeak actions have gone down , gives me a bad gut feeling ... but maybe I'm just being a bit paranoid after the mortgage crisis.

Any single company can tank. Be run poorly. Be leveraged to the hilt and bankrupted because the owner/CEO feels like it. H is correct that the industry as a whole has done pretty well for the past 2 centuries, and will continue doing well into the foreseeable future.

I just hope the whole shale operation is sustainable in the long run ( 20+ years ). It has been helping the American economy and I hope it continues to do so.

Shale gas production has been around for about 190 years or so now. Of course it will be here for another 20, the wells I recompleted into the shale back in the 90's are still producing 20 years later, and will be producing yet another 20.

I have a normal oil vehicle that yields 28 mpg. For my next purchase I would like to know the better option :
A hybrid
Diesel vehicle
A gasser.

A diesel.

But you didn't mention under what conditions you would be using this thing. I have a Volt for around town commuting, an econobox for long distance commuting (cross country road trips), a sports car for when I'm feeling a frisky and a 6000# V8 powered SUV capable of towing 5 tons should I desire to tow any two of the others anywhere I'd like.

Plus a motorcycle and 2 scooters. And 5 bicycles.

For 8 months of the year I ride the scooter mostly.

My opinion on what to buy might not be suited for your uses.

 

[CultureCitizen]

A diesel.

But you didn't mention under what conditions you would be using this thing. I have a Volt for around town commuting, an econobox for long distance commuting (cross country road trips), a sports car for when I'm feeling a frisky and a 6000# V8 powered SUV capable of towing 5 tons should I desire to tow any two of the others anywhere I'd like.

Plus a motorcycle and 2 scooters. And 5 bicycles.

For 8 months of the year I ride the scooter mostly.

My opinion on what to buy might not be suited for your uses.

Thanks ,
Most of the time I'm the only passenger. I travel some 20-30 miles per day without any heavy loads ( just my laptop and an ocasional printer as I work as a systems consultant).

Looking at the gas prices I was pondering on the convenience of a gasser, though I've seen firsthand that diesel gives a good mileage ( a friend of mine actually recomended me to go for a diesel car ).

I understand your viewpoint on shale though to be fair shale wasn't a mayor player until the last 15 years. ( then again , you are the expert , so correct me if I'm wrong ).

 

[RGR]

I understand your viewpoint on shale though to be fair shale wasn't a mayor player until the last 15 years. ( then again , you are the expert , so correct me if I'm wrong ).

Shale was the original gas player, in the US. In the 1920's shale gas in Kentucky was the largest known accumulation of natural gas of ALL kinds on the planet. That particular field is in the top 20 in the US even today, if I recall my natural gas field sizes in the US correctly, and based on size of the ultimate recovery.

So yes, shale has been a major player, for longer than most people are aware. Just because more people have become aware of the shales in the past 15 years does not change the history of their development in the US, or value.

It, and the industry, certainly aren't going anywhere.

 

[Auteur]

It seems to me that there is a wildcard here that will perhaps be the largest determinant of gas (and oil) prices. That is the rise of incomes, and consumption, in the rapidly industrializing countries, such as China and India. If, as seems likely at this point, such areas are succesful in creating a relatively large middle class, that has the means to buy cars, refrigerators, air travel, etc., then demand for fossil fuels will soar beyond what we have seen to date. Consumption in the west, which has already scaled back due to enviromental reasons, will be dwafed by this coming wave.

Producing the product is not difficult- new technologies have made things hyper-efficient. But there is a limit to everything, and when limits seem to appear on the horizon, we can bet that prices with take off. Some in the industry have suggested that we need something like another 4-6 Saudi Arabia's worth of fossil fuels to met the demands of the next half century. I'm not up on the latest figures, but my understanding is that the new windfall of gas and oil from fracking is quite a bit less than this.

 

[RGR]

Some in the industry have suggested that we need something like another 4-6 Saudi Arabia's worth of fossil fuels to met the demands of the next half century. I'm not up on the latest figures, but my understanding is that the new windfall of gas and oil from fracking is quite a bit less than this.

Perhaps we should just ask the scientists who add these things up?

500+ billion barrels in yet to be discovered fields.

USGS Fact Sheet 2012?3042: An Estimate of Undiscovered Conventional Oil and Gas Resources of the World, 2012

500+ billion barrels in the reserves yet to be developed in the Orinoco.

USGS Fact Sheet 2009-3028: An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela

500+ billion barrels in reserves yet to be developed in other existing fields.

USGS Release: USGS Releases Global Oil & Gas Reserve Growth Estimates (6/18/2012 11:42:10 AM)

Oil certainly shouldn't be a problem for a few years yet. And there is more natural gas around than oil I might add.

 

[CultureCitizen]

Some in the industry have suggested that we need something like another 4-6 Saudi Arabia's worth of fossil fuels to met the demands of the next half century. I'm not up on the latest figures, but my understanding is that the new windfall of gas and oil from fracking is quite a bit less than this.

Perhaps we should just ask the scientists who add these things up?

500+ billion barrels in yet to be discovered fields.

USGS Fact Sheet 2012?3042: An Estimate of Undiscovered Conventional Oil and Gas Resources of the World, 2012

500+ billion barrels in the reserves yet to be developed in the Orinoco.

USGS Fact Sheet 2009-3028: An Estimate of Recoverable Heavy Oil Resources of the Orinoco Oil Belt, Venezuela

500+ billion barrels in reserves yet to be developed in other existing fields.

USGS Release: USGS Releases Global Oil & Gas Reserve Growth Estimates (6/18/2012 11:42:10 AM)

Oil certainly shouldn't be a problem for a few years yet. And there is more natural gas around than oil I might add.

My opinion is that shale gas and oil should be used only temporarily.

I'm still optimistic that fusion will be achieved within the next 30 years.

I still think the gas prices are too low and might stabilize in the 7-8 dollar range , which is still a nice price which makes it cheaper than oil. ( yes , I still have my qualms on the current prices and I hope they don't play against this strategic energy resource ).

Granted, there are still lots of usable oil fields, what I am certain is that cheap oil fields are almost gone. We might have to get used to oil prices above $80 per barrel.
China will soon ( 10 years or so ) become the largest oil consumer and this will surely increase that price ( in that sense shale gas is a real blessing for the near future ).

Solar still has to get cheaper and some affordable solution has to be found for storing the energy produced by solar cells( better bateries or hydrolisis maybe ? ) .

 

[RGR]

My opinion is that shale gas and oil should be used only temporarily.

A bit difficult considering they have been around longer than oil has been produced in Texas.

Granted, there are still lots of usable oil fields, what I am certain is that cheap oil fields are almost gone. We might have to get used to oil prices above $80 per barrel.
China will soon ( 10 years or so ) become the largest oil consumer and this will surely increase that price ( in that sense shale gas is a real blessing for the near future ).

$80/bbl sounds pretty cheap to me.

Solar still has to get cheaper and some affordable solution has to be found for storing the energy produced by solar cells( better bateries or hydrolisis maybe ? ) .

Solar isn't ll that bad right now, something like $1/watt?

 

[Auteur]

Some in the industry have suggested that we need something like another 4-6 Saudi Arabia's worth of fossil fuels to met the demands of the next half century. I'm not up on the latest figures, but my understanding is that the new windfall of gas and oil from fracking is quite a bit less than this.

Perhaps we should just ask the scientists who add these things up?

500+ billion barrels in yet to be discovered fields.

500+ billion barrels in the reserves yet to be developed in the Orinoco.


500+ billion barrels in reserves yet to be developed in other existing fields.


Oil certainly shouldn't be a problem for a few years yet. And there is more natural gas around than oil I might add.

I take your point that new discoveries, and new technologies, are being made continually, and we are not facing doom tomorrow. My guess is though that our children are going to have to face a tough reckoning in their time, one that they won't thank us for if we do not use more foresight.

There are a couple of issues with the figures stated. One is that much of the world's oil reserves still reside in OPEC countries, and a number of qualified observers have suggested that their figures are inflated, perhaps grossly so, as allowed oil sales within that organization are based on reserves- more reserves reported means, essentially, more money. This is a strong incentive to fiddle with the figures, especially since these states do not allow outside auditing. Saudi Arabia, for example, insistes that reserves have not declined at all, not one barrel, in 20 years despite massive extraction and sales.

From an environmental view, there are controversies over the wisdom of fracking and fossil fuel use in general. A few dramatic weather or other environmental events may lead to restricitons on the use of fossil fuels, so some extent.

But, let's take a fairly opimistic figure of 2 trillion barrel equivents of oil and gas in the world. Given current world demand of about 35 billion barrels a day, and adding on a modest 3% per year increase to account for developing nations, we have a ballpark figure of 34 years left. Let's say that, more optimistically, growth in consumption is robust, but also new finds are significant- 3% growth in reserves per year, and a 4% growth in consumption. We now have 46 years left.

Long before this time of course, prices will begin to spike, and we will start to move to a different paradigm, one that includes much more conservation, and changes in lifestyle. Gradual would be better than sudden in this case.

 

[RGR]

I take your point that new discoveries, and new technologies, are being made continually, and we are not facing doom tomorrow. My guess is though that our children are going to have to face a tough reckoning in their time, one that they won't thank us for if we do not use more foresight.

We are already there. You see, those who were parents in the late-60's thought the same thing, that their children might have it rough.

One of my favorites from way back.

“By…[1975] some experts feel that food shortages will have escalated the present level of world hunger and starvation into famines of unbelievable proportions. Other experts, more optimistic, think the ultimate food-population collision will not occur until the decade of the 1980s.”
• Paul Ehrlich, Stanford University biologist

There are a couple of issues with the figures stated. One is that much of the world's oil reserves still reside in OPEC countries, and a number of qualified observers have suggested that their figures are inflated, perhaps grossly so, as allowed oil sales within that organization are based on reserves- more reserves reported means, essentially, more money.

One of those USGS estimates, covering 1/3 of the volumes I referenced, is in Venezuela. The error bar on that estimate is big enough to nearly park the entire middle east in. Certainly above ground issues matter, which is why the transition already started in terms of power production is good thing!

This is a strong incentive to fiddle with the figures, especially since these states do not allow outside auditing. Saudi Arabia, for example, insistes that reserves have not declined at all, not one barrel, in 20 years despite massive extraction and sales.

Fortunately, the scientists of the USGS don't use political reserve numbers, they are calculating remaining resources from a geologic perspective, not the sort of claimed political perspective you are referring to.

But, let's take a fairly opimistic figure of 2 trillion barrel equivents of oil and gas in the world.

Sorry, but you can't. The USGS alone has quantified 1.5 trillion BARRELS (not BOE, which is a ridiculous measure in an economic world) of resource, current reserve estimates are approximately the same size, for a total of 3 trillion BARRELS, and if you want to add natural gas to that (you wouldn't need BOE otherwise), the best estimate I can whip out without checking runs about 10,000 TCF, each TCF equalling approximately 100 billion barrels of equivalent, so the known reserves plus USGS estimates (3 trillion barrels) plus the oil equivalent of natural gas ( 1 trillion more barrels) for a total of 4 trillion BOE. And I am excluding the tar sands (another 1 trillion perhaps) the oil shale of Colorado (another 1 trillion) and the GTL process on hydrates ( another 0 to 1 trillion barrels) and the USGS estimates of undiscovered natural gas (which are themselves substantial).

2 trillion is not optimistic, it is unbelievable from a resource available perspective.

For reference to similar sized numbers I recommend the IEA cost curve from 2008, and the JPT article quantifying the total available by Saleri.

http://www.spe.org/jpt/print/archives/2006/04/JPT2006_04_tech_tomorrow.pdf

Given current world demand of about 35 billion barrels a day, and adding on a modest 3% per year increase to account for developing nations, we have a ballpark figure of 34 years left. Let's say that, more optimistically, growth in consumption is robust, but also new finds are significant- 3% growth in reserves per year, and a 4% growth in consumption. We now have 46 years left.

Long before this time of course, prices will begin to spike, and we will start to move to a different paradigm, one that includes much more conservation, and changes in lifestyle. Gradual would be better than sudden in this case.

We are already moving towards a new paradigm, and have started a transition for those who worry about these things. My entire career has been involved in working in the oil field, studying the physical world of the oil field, or reporting it accurately to others. I have solar panels on the garage roof, drive a Chevy Volt so I don't have to contribute to fossil fuel use when commuting around town, and believe oil is obsolete, even if the rest of the world hasn't figured it out yet.