POWER November 2011 - 89

THE FUTURE OF NATURAL GAS
Global Gas Glut: An Update
In our September article about the global profusion of natural gas, we
based a portion of our discussion on the latest, vastly increased natural
gas reserve estimates reported by the U.S. Energy Information
Administration (EIA). Since our article was published, the EIA has adjusted
its estimates downward. We want you to be aware of those
lower recoverable reserve estimates. We also want you to know that
the conclusions reached in that article do not change with the new
estimates of natural gas reserves.
By Dr. Robert Peltier, PE and Kennedy Maize
W
hen we wrote " Global Gas Glut "
for the September issue, we used
the best available estimates for
recoverable natural gas reserves. Those estimates,
published by the U.S. Department
of Energy's Energy Information Administration
(EIA), were based on " Review of
Emerging Resources: U.S. Shale Gas and
Shale Oil Plays, " released in July 2011.
The estimate published in this report was
410 trillion cubic feet of recoverable natural
gas from the Marcellus Shale, a region
stretching from New York to Virginia. The
report noted that there is " considerable
uncertainty regarding the ultimate size of
technically recoverable shale gas " thanks
to a long list of estimate assumptions
and caveats. This estimate of natural gas
reserves had also been used in the EIA's
Annual Energy Outlook 2011, released
December 16, 2010.
The EIA estimates had been under intense
scrutiny for some months. A New
York Times article published on June 27,
2011, " Behind Veneer, Doubt on Future
of Natural Gas, " called into question industry-biased
sources and a failure to consider
intra-agency disagreements over the
estimates. The article prompted an EIA
press release the same day that reiterated
the veracity of the process used to prepare
the EIA's shale gas reserve estimates. In its
response, the EIA outlined the process of
collecting data and estimates " from a wide
range of academic and industry experts "
and " contractors to supply critical expertise
in resource assessment. "
A Wildly Different Estimate
As the September issue of POWER was
shipping, the U.S. Department of the Interior's
U.S. Geological Survey (USGS)
released its estimate of natural gas reserves.
In a report released on August 23,
the USGS said that the " Marcellus Shale
November 2011 | POWER
contains about 84 trillion cubic feet of undiscovered,
technically recoverable natural
gas and 3.4 billion barrels of undiscovered,
technically recoverable natural gas liquids. "
The USGS report notes that this esof
onshore lands and offshore state waters "
is undisputed.
Headlines on the Internet illustrated
how polarizing the issue of shale gas can
be. Forbes ran the headline " USGS Boosts
" How Much U.S. Shale Gas Is
There, Really? "
-MIT Technology Review
timate is significantly larger than its 2002
assessment of 2 trillion cubic feet of natural
gas. Yet the USGS estimates are 80%
lower than the EIA estimates contained in
a report released a month earlier!
The EIA estimates " technically recoverable
shale gas resources " partially based
on extrapolation of current gas production
rates for current wells in the same gas play
areas. Those estimates are then corrected
based on the local geology and other criteria.
In fairness to the EIA, its estimating
process relies heavily on contractors that
provide well production data and other " on
the ground " estimating data.
Reconciling the Differences
Credit the EIA with knowing when to fold
its cards. In an August 23 interview with
Bloomberg, an EIA spokesman stated, " We
consider the USGS to be the experts in this
matter. They're geologists, we're not. We're
going to be taking this number and using it
in our model. " Future turf wars are unlikely.
The claim that " USGS is the only provider of
publicly available estimates of undiscovered
technically recoverable oil and gas resources
www.powermag.com
Amount of Marcellus Shale Gas Reserves, "
while the New York Times ran with " Geologists
Sharply Cut Estimate of Shale Gas. "
In reality, the EIA cut its estimate. The geologists
increased their earlier estimate by
a factor of 40. Perhaps the most fairly stated
headline was from NGI's Shale Daily:
" USGS Clarifies Marcellus Gas Estimate. "
More importantly, an EIA spokesman
said the agency will set its estimate once the
USGS provides more information about its
assessment to understand where the agencies
diverge. " We will not be able to be more precise
until that work is completed. "
We are encouraged when a federal
agency not only offers its mea culpa when
better-quality data is presented but also
is willing to autopsy its work to improve
future work products. Perhaps then the nation
will be able to answer the question
posed by the August 30 MIT Technology
Review headline, " How Much U.S. Shale
Gas Is There, Really? " ■
- Dr. Robert Peltier, PE is POWER's editor-in-chief.
Kennedy Maize is a POWER
contributing editor and executive editor of
MANAGING POWER.
89
http://www.powermag.com
POWER November 2011

Table of Contents for the Digital Edition of POWER November 2011
