Tuesday, January 1, 2013

Industry Experts Know Less Than College Professors and Journalists About Shale Gas Economics

A recent article by Ken Maize in Power mistakenly assumes that university professors who have never worked in the oil and gas industry know more about evaluating oil and natural gas well economics than industry professionals who have spent their careers doing this work.

In "Is Shale Gas Shallow or the Real Deal?", Maize cites Dr. Terry Engelder's opinions about shale gas versus ours.  Terry is a friend and colleague who I respect and sometimes participate with in panel discussions about shale gas.  He is a late adopter of oil and gas reserve forecasting after a career in structural geology.

Maize confuses Terry's work on resource assessment with our work on reserve forecasting because he is a journalist and doesn't understand this important distinction.

Resources are the total volume of oil and gas regardless of cost, while reserves are the small fraction of resources that can be produced commercially.

The debate is simple.  Are shale gas wells commercial failures or not?

Rex Tillerson, the CEO of ExxonMobil, stated about shale gas, "We are all losing our shirts today." Mr. Tillerson said in a talk before the Council on Foreign Relations in New York. "We're making no money. It's all in the red."

Independent evaluations of shale gas plays by the United States Geological Survey, the Bureau of Economic Geology (University of Texas at Austin), and the Louisiana State University Center for Energy Studies all corroborate our well reserve estimates for shale gas wells.

There is no debate.  Maize's article is contrived and Engelder is wrong.