Report: US EIA shale oil & gas forecasts highly to extremely optimistic
11 December 2021
A new analysis from earth scientist David Hughes examines the data behind the US Energy Information Administration’s (EIA) latest forecasts for US shale oil and gas output and concludes that the EIA long-term outlook is biased.
The report—Shale Reality Check 2021, written for the Post Carbon Institute—assesses the viability of shale forecasts in the EIA Annual Energy Outlook 2021, which are widely used by policymakers, industry, and investors to make long-term plans. The detailed analysis finds that the EIA’s forecasts of tight oil and shale gas production through 2050 are “highly to extremely optimistic” and therefore unlikely to be realized.
In its 2021 outlook, the EIA predicted that tight oil production would increase by 12% through 2050, while shale gas output would increase by 27%. In the agency’s view, the US fracking boom is poised to continue for decades to come. In his report, Hughes rigorously examined the EIA’s forecasts, comparing the agency’s assumptions against the real-world drilling and production data that showed faltering productivity and fast declines from many shale wells.
Most oil and gas plays are already past peak, according to the report. Of the 13 major plays, Hughes rates the EIA’s production forecast for three as “extremely optimistic,” five as “highly optimistic,” and five as “moderately optimistic.”
Some of the key findings of the report are:
- In most plays, meeting EIA production forecasts through 2050 would require the recovery of all proven reserves and a high proportion of the EIA’s estimates of unproven resources. The total tight oil projection is 4.5 times higher than proven US tight oil reserves and more than triple all proven US crude oil reserves at year end 2019. The total shale gas projection is 3.6 times higher than proven US shale gas reserves and 63% of proven reserves plus unproven resources.
- The EIA appears to have overestimated drillable area in most plays, and also extrapolated well estimated ultimate recovery over wide areas when they are in fact highly variable. As ‘sweet spots’ become saturated, wells and drilling moves into lower quality parts of plays where average well production is lower and per-barrel drilling and completion costs higher. Thus, not only will the future supply from tight oil and shale gas plays be less than the EIA estimates, it is likely to be of significantly higher cost.
- Based on the EIA’s assumptions, its reference case forecast would require 643,105 new wells at an estimated cost of $4.36 trillion dollars over 2020-2050. This expenditure, along with its environmental implications, must be placed in context with other energy security and environmental priorities.
- Six of the seven tight oil plays analyzed in the report have peaked, and five of these were producing at 15% to 41% below peak levels as of July, 2021. This is a result both of depletion and a reduction in drilling rates due to the Covid-19 pandemic. Production may rebound in some of these plays as drilling rates increase, but whether production will ever exceed peak rates remains to be seen.
- Five of the six shale gas plays analyzed in the report have peaked and were producing at 12% to 66% below peak levels as of August, 2021. Two of these, the Barnett and Fayetteville, peaked in 2011 and 2012, respectively, and are in terminal decline with very little new drilling. Notably, the Barnett shale gas play—where high-volume fracking was first developed and applied in the 1990s—is now producing at 62.3% below peak. Whether the other three, where production is down 12% to 20%, can exceed their peak production rates with more drilling remains to be seen.
David Hughes warns about the implications of his findings for the US energy policy: “The ‘shale revolution’ has provided a reprieve from what just 15 years ago was thought to be a terminal decline in US oil and gas production. This reprieve, however, is likely temporary, and the US would be well advised to plan for much-reduced shale oil and gas production in the long term based on play fundamentals, even without considering the need to reduce greenhouse gas emissions. New US policies aimed at reducing greenhouse gas emissions in 2030 by 50-52% from 2005 levels will very likely further constrain US tight oil and shale gas production.”
Source: Post Carbon Institute