It is essential for energy professionals to stay well informed with the latest insights in this evolving world. For this reason, Euan Mearns of The Oil Drum, myself and several others, are organizing the first three-day Global Energy Systems conference, which will take place in Edinburgh, United Kingdom from June 26 - 28, 2013. This is the last week for Early Bird Registrations which are only available until April 5th.

The conference is meant to deliver key updates on the most pressing energy issues and challenges facing our energy system, as well as providing a forum for exchange of substantially different viewpoints. It is supported by several universities and research institutes including University of Aberdeen, University of Uppsala, University of Bristol, University of Edinburgh, Oxford Research Group, Chatham House and others. The scope is deliberately very broad, covering most primary energy sources, so that a global view of the current energy system can be presented. Session topics include “the limits to easily accessible fossil fuels”, “frontier fossil fuel technologies and basins”, “the viability of nuclear power”, “the costs and benefits of fossil versus renewable electricity”, and “the economics and policy of energy systems”.

A few of our confirmed speakers include Michael Kumhof (IMF), Tatiana Mitrova (Energy Research Institute Russian Academy of Sciences), Dr. Richard Stainsby, (UK National Nuclear Laboratories), Peter Jackson (IHS CERA), Alex Kemp (University of Aberdeen), David Shropshire (IAEA), Dr. Alexander Naumov (Group Economics BP), Guy de Kort (Shell Vice President GTL), Friedrich Schulte (RWE).

Read below the fold for an overview of the complete conference program.

Our energy system is evolving due to depletion of cheap fossil fuels and the need for carbon emission constraints. Government and business are under pressure to tackle the energy challenges of rising energy costs, energy security, and reducing greenhouse gas emissions. We witness rapid changes across countries as this evolution takes place, steered both by markets (investment decisions) and government (policy decisions).

It is essential for energy professionals to stay well informed with the latest insights in this evolving world. For this reason, Euan Mearns of The Oil Drum, myself and several others, are organizing the first three-day Global Energy Systems conference, which will take place in Edinburgh, United Kingdom from June 26 - 28 2013. The conference is meant to deliver key updates on the most pressing energy issues and challenges facing our energy system, as well as providing a forum for exchange of substantially different viewpoints. It is supported by several universities and research institutes including University of Aberdeen, University of Edinburgh, Oxford Research Group, Chatham House and others.

The scope is deliberately very broad, covering most primary energy sources, so that a global view of the current energy system can be presented. Session topics include “the limits to easily accessible fossil fuels”, “frontier fossil fuel technologies and basins”, “the viability of nuclear power”, “the costs and benefits of fossil versus renewable electricity”, and “the economics and policy of energy systems”. A few of our confirmed speakers include Michael Kumhof (IMF), Sir David King (Oxford University), Arthur Berman (The Oil Drum), Ian Emsley (World Nuclear Association), Lord Ron Oxburgh (House of Lords UK Parliament), Peter Jackson (IHS CERA), and Thomas Ahlbrandt (former USGS WPA, Ahlbrandt Consulting).

Read below the fold for an overview of the conference programme and confirmed speakers to date.

Arthur E. Berman and Lynn F. Pittinger

Lynn Pittinger is a consultant in petroleum engineering with 30 years of industry experience. He managed economic and engineering evaluations for Unocal and Occidental Oil & Gas, and has been an independent consultant since 2008. He has collaborated with Berman on all shale play evaluation projects since 2009.

Introduction

Shale gas has become an important and permanent feature of U.S. energy supply. Daily production has increased from less than 1 billion cubic feet of gas per day (bcfd) in 2003, when the first modern horizontal drilling and fracture stimulation was used, to almost 20 bcfd by mid-2011.

There are, however, two major concerns at the center of the shale gas revolution:

• Despite impressive production growth, it is not yet clear that these plays are commercial at current prices because of the high capital costs of land and drilling and completion.

• Reserves and economics depend on estimated ultimate recoveries based on hyperbolic, or increasingly flattening, decline profiles that predict decades of commercial production. With only a few years of production history in most of these plays, this model has not been shown to be correct, and may be overly optimistic.

These are not purely technical topics for debate among petroleum professionals. The marketing of the shale gas phenomenon has been so effective that important policy and strategic decisions are being made based on as yet unproven assumptions about the abundance and low cost of these plays. The “Pickens Plan” seeks to get congressional approval for natural gas subsidies that might eventually lead to conversion of large parts of our vehicle fleet to run on natural gas. Similarly, companies have gotten permits from the government to transform liquefied natural gas import terminals into export facilities that would commit the U.S. to decades of large, fixed export volumes. This might commit the U.S. to decades of natural gas exports at fixed prices in the face of scarcity and increasing prices in the domestic market. If reserves are less and cost is more than many assume, these could be disastrous decisions.

Executive Summary

Our analysis indicates that industry reserves are over-stated by at least 100 percent based on detailed review of both individual well and group decline profiles for the Barnett, Fayetteville and Haynesville shale plays. The contraction of extensive geographic play regions into relatively small core areas greatly reduces the commercially recoverable reserves of the plays that we have studied.

The Barnett and Fayetteville shale plays have the most complete history of production and thus provide the best available analogues for shale gas plays with less complete histories. We recognize that all shale plays are different but, until more production history is available, the best assumption is that newer plays will develop along similar lines to these older plays. There is now far too much data in Barnett and Fayetteville to continue use of strong hyperbolic flattening decline models with b coefficients greater than 1.0.

Type curves that are commonly used to support strong hyperbolic flattening are misleading because they incorporate survivorship bias and rate increases from re-stimulations that require additional capital investment. Comparison of individual and group decline-curve analysis indicates that group or type-curve methods substantially over-estimate recoverable reserves.

Results to date in the Haynesville Shale play are disappointing, and will substantially underperform industry claims. In fact, it is difficult to understand how companies justify 125 rigs drilling in a play that has not yet demonstrated commercial viability at present reserve projections until gas prices exceed $8.68 per mmBu.

At the most recent ASPO-USA conference, I gave a presentation as part of a panel hosted by The Oil Drum. The subject matter of my post was taken from a recent paper developed by Charles Hall and me on peak oil, net energy, and economic growth. A much abridged version of the paper can be found in this post.

After the conference, Jane Van Ryan from the American Petroleum Institute (API) asked to interview me for her weekly podcast for the Energy Tomorrow blog. You can listen to the interview by clicking below, or alternatively, I have copied the transcript of the interview below the fold. The interview is 15 minutes long for those who would like to listen.

The Oil Drum recognizes that API (and hence Energy Tomorrow) is funded by the oil and gas industry. But the interview here relates to my research, which is not funded by such interests. I think the interview serves a useful purpose, because it makes my work accessible to a wider audience.