Wednesday, February 20, 2013

Groundbreaking Reports Show Fracking is a Risky Short-Term Bubble – EcoWatch: Uniting the Voice of the Grassroots Environmental Movement

Groundbreaking Reports Show Fracking is a Risky Short-Term Bubble – EcoWatch: Uniting the Voice of the Grassroots Environmental Movement:

What emerges from the data:
  • Overall field decline rates are so steep that 30-50 percent of shale gas production and 40 percent of shale oil production must be replaced annually to offset declines.
  • High productivity shale plays are not ubiquitous. Just six plays account for 88 percent of shale gas production and two plays account for 80 percent of shale oil production. Furthermore the most productive areas constitute relatively small sweet spots within these plays.
  • Maintaining production requires high rates of high-cost drilling—8,600 new wells annually for shale gas and oil. This will increase as sweet spots are drilled off.
  • High drilling rates require extremely high rates of investment—$48 billion a year to maintain shale gas and oil production considering drilling costs alone—much more if full cycle costs are included. These costs will increase dramatically as plays age.
  • Wall Street promoted the shale gas drilling frenzy, which resulted in prices lower than the cost of production and thereby profited [enormously] from mergers & acquisitions and other transactional fees.
  • Shale gas has become one of the largest profit centers in some investment banks, in direct parallel with the decline of natural gas prices.
  • Due to extreme levels of debt, stated proved undeveloped reserves (PUDs) may have been out of compliance with SEC rules at some shale companies because of the threat of collateral default for some operators.
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