NEW QUESTIONS ABOUT NAT GAS BOOM

Insiders Sound an Alarm Amid a Natural Gas Rush
Ian Urbina (w/Robbie Brown), June 25, 2011 (NY Times)

"Natural gas companies have been placing enormous bets on the wells they are drilling, saying they will deliver big profits and provide a vast new source of energy for the United States…But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

"…[E]nergy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves…in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles…"

(from the NY Times - click to enlarge)

"Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted…[T]here are some very active wells…[but] often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth… Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted…making it more difficult for them to turn a profit over the long run…

"…[I]f natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills…There are implications for the environment, too…If shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste…"

(from the NY Times - click to enlarge)

"Although energy companies routinely project that shale gas wells will produce gas at a reasonable rate for anywhere from 20 to 65 years, these companies have been making such predictions based on limited data and a certain amount of guesswork, since shale drilling is a relatively new practice…Gas production data reviewed by The Times suggest that many wells in shale gas fields do not level off the way many companies predict but instead decline steadily…"

[E-mail from official, Schlumberger oil and gas services:] “All about making money…[Well’s performance looks] like crap…but operator will flip it based on ‘potential’ and make some money on it…Always a greater sucker…”