Tuesday, October 8, 2019

US Natural Gas Production -- The Shale Revolution -- A New USGS App -- October 8, 2019

Updates

Later, 9:34 p.m. CT: see comments. A reader mentioned that lifting costs in the desert were a whole lot less than those in the Bakken. This is as good a time as any to re-post "break-even" costs in the Bakken:

 
$8 / bbl in Mountrail County. $12 statewide.

Original Post

From a reader:
I didn't see much news on this, but the USGS has new a new application for US natural gas assessments.

The USGS shows a marginal increase in the Marcellus from 84 to 97 TCF.

In addition, there's an (initial?) assessment of the Utica at 117 TCF.

 This is showing the normal pattern of the USGS increases over time that we've seen in other plays (Bakken, Permian, etc.)

Also, while big, the USGS numbers are still quite lower than the Potential Gas Committee (PGC) estimates (which also tend to get bigger over time): http://potentialgas.org/press-release.
In round numbers, then, about 100 TCF for both the Marcellus and the Utica; the estimates will increase over time.

To put these numbers in perspective, see this post.

The "117 TCF" is well under what others have estimated:
From that linked source:
According to the new study’s estimates, the total Utica Shale play could hold technically recoverable volumes of 782 trillion cubic feet of natural gas and nearly 2 billion barrels of oil.
The estimates from a research partnership organized by West Virginia University represent the average of a wider range of possibly recoverable amounts of oil and gas in the Utica, which stretches beneath parts of Ohio, West Virginia, Pennsylvania and other states and includes neighboring oil- and gas-bearing geologic layers.
A 2012 U.S. Geological Survey assessment of the Utica Shale and underlying Point Pleasant formation pegged the technically recoverable undiscovered resources at 38 trillion cubic feet of gas, 940 million barrels of oil and 208 million barrels of natural gas liquids such as ethane, butane and propane.
 Regardless of the various estimates, the bottom line: the US remains "king of natural gas." From the USGS press release, September 11, 2019:
The Potential Gas Committee (PGC) today released the results of its latest biennial assessment of the nation’s natural gas resources, which indicates that the United States possesses a total mean technically recoverable resource base of 3,374 trillion cubic feet (Tcf) as of year-end 2018.
This is the highest resource evaluation in the Committee’s 54-year history, exceeding the previous high assessment (from year-end 2016) by 557 Tcf (increase of about 20%).
This is also the largest two-year increase in absolute resources between evaluations in the PGC history.
The increase resulted from reassessments of shale gas resources in the Atlantic and Mid-Continent areas and conventional and tight gas in the Mid-Continent and Rocky Mountain areas.

9 comments:

  1. 1. Did a little more research. The 117 TCF Utica assessment is not intial--is up from 38 TCF a few years ago.

    https://www.usgs.gov/news/usgs-estimates-214-trillion-cubic-feet-natural-gas-appalachian-basin-formations

    2. The WV study you cited seems similar to the PGC work in overall magnitude. PGC has entire east at 1300 TCF. WV has Utica alone at 780.

    I'm curious what the big difference is between USGS and WV/PGC. Wonder why. Perhaps it is because USGS uses production data and the others use a more geological hydrocarbon in place approach? Not arguing which is right/wrong, but it would be nice to analyze.

    3. I have seen some of the peak oilers (David Hughes, Dennis Coyne) criticize EIA AEO projections because EIA has more total long term production than is possible from the USGS assessments. However, if you look at the history, we've definitely seen how these asessments get revised up over time.

    Appears the USGS methodology is conservative--so not really appropriate for long term production assessments. You end up having the same mistake Hubbert made (and other peakers before/after him). Of underestimating the total resource size.

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    1. Agree completely -- how conservative the USGS methodology is. They seem the very opposite of how far to the other end of the continuum NOAA / NASA are with projections of global warming. Pretty interesting.

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  2. By the way, it was strange how little news the USGS and PGC revisions up got. It's like we're just used to having massive amounts of gas. And having the massiveness revised up over time.

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    1. Something tells me the only ones outside of US producers paying attention are Qatar and few other Mideast countries.

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    2. I think the Saudis realize how massive US tight oil is. That's why prices are not going to get much higher. The Saudis are also sitting on a massive amount of oil (~100 years at current pumping rate). They have much lower cost of production (maybe $5+/bo, including drilling). The problem is that if prices creep into the $60s (WTI) or $70s (Brent), US oil explodes in growth. But with 'TI down in the mid 50s, US has stopped growing.

      So this is a sustainable spot for the Saudis. Still getting way more than their oil costs to produce. Yeah, they'd love $100. But it's impossible to do, given the shale threat. Still much higher than prices were from 86-04 (averaged about $30 in current dollars).

      The Qataris sort of see the same thing in natural gas and LNG. They also have a cost advantage. Life was nice for a while for them, but that's over with US LNG on the scene. They can still win any market war. But they will take a medium strategy. Not total war, not shorting the market.

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    3. It would be interesting to see how long Saudi Arabia "survives" on $10 oil -- it would still be making 100% profit.

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    4. As good a time as any to re-post the break-evens in the Bakken. See graphic added to the post above.

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  3. The PGC (which shows over 3000 TCF nationwide) is the one that basically drove the "hundred years of natural gas" talk from several years ago. That even Obama bought into.

    Unfortunately on the tight oil side, we don't have anything like the PGC to contrast USGS with. I guess, you have things like CLR or PXD or Rystad or banks with various estimates, usually higher than USGS.

    Right now, USGS has total tight oil at 100 BBO (about 70-10-10-10 in Permian, Williston, Eagle Ford, other). Current national use of refined products is about 14 MM bopd or about 5 BBO/year. Total refinery draw is more like 17 MM bopd, but we are a net exporter of refined products. This means tight oil would give us about 20 years (100/5) years of refined product supplies or about 16 years of supply to our refining complex.

    If you look at the gas side, there's about a 6-7 fold difference of USGS and PGC or WV. I'm not arguing this is valid, but just as a thought experiment, if you applied the same ratio to the oil side, this would mean the tight oil is ~600 BBO, not 100. And would imply over 100 years of oil (not just gas).

    Of course there's no reason for the 6:1 conservatism ratio to be the same for oil as for gas. But it seems like something should be done to adjust the USGS number up. Rystad looks at all US oil (tight and conventional) and sees 300 BBO URR. (this includes proved reserves, for Rystad). In any case, that's 50 years of supply.

    https://www.rystadenergy.com/newsevents/news/press-releases/United-States-cements-its-position-as-world-leader-in-oil-reserves/

    Oh...and didn't Jimmy Carter say the whole world would be out of oil by 2000? Gotta mine coal and synfuels!

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  4. Thank you. That's a lot to absorb. The only way I can "absorb" it and make sure I actually understand it, is to re-post the last few comments as one long stand-alone post trying to put all this together. I will do that later this evening. Off to soccer with Sophia right now.

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