the U.S. is counting on

a long-term abundance of oil & natural gas

But what if the boom is just a bubble?

The Reality

The Reality is that the government’s long-term forecasts — the ones everyone is relying on to guide our energy policy and planning — are extremely optimistic.

This conclusion is based on ongoing analysis of well production data for all major shale gas and tight oil plays in the U.S., using data from Enverus (formerly Drillinginfo), a commercial database of well-level production data which is utilized by the EIA and most major oil and gas companies. This analysis of current and historical production (including well counts by county, well- and field-decline rates, distribution of wells in terms of quality, density of wells in sweet spots, and average productivity of wells since 2012) is then compared to the EIA’s Annual Energy Outlook forecasts.

Based on the reference case forecasts in its Annual Energy Outlook 2019 (AEO2019), the EIA anticipates that tight oil production will be 38% higher in 2050 than in 2018 and shale gas 81% higher, with tight oil providing nearly 70% of all US oil production over the next three decades and shale gas 74% of all gas produced over that same period. This would require over 1.5 million new wells to be drilled at a cost of roughly $11 trillion, and would consume by 2050 most of the proven reserves and unproven resources of tight oil the EIA estimates exist. (Proven reserves have been demonstrated by drilling to be technically and economically recoverable; unproven resources are thought to be technically recoverable but have not been demonstrated to be economically viable – as such they are much less certain than proven reserves.)

One can only assume that the EIA’s optimism is based on technological improvements made over recent years. Technological advances have included longer horizontal laterals, a tripling of water and proppant injection per well, and more fracking stages. But as the data show, these improvements have only led to a faster depletion of oil and gas reserves, not a growth in the total amount of oil and gas that can be produced.

Ultimately, technology can’t overcome core characteristics of shale — steep decline rates (wells decline between 75-90% in the first three years, and field declines without new drilling typically range from 25-50% per year) and variable reservoir quality, with “sweet spots” or “core areas” containing the highest quality reservoir rock typically comprising 20% or less of overall play area. Tight oil and shale gas producers have focused their efforts and technological improvements on targeting these “sweet spots” and in many plays we are already witnessing the point of diminishing returns. But the EIA is counting on — and asking the American people to bank on — technological miracles overcoming physical limits. A sound energy policy, however, should be based on reality.