This article is packed full of falsehoods that a simple bit of research could correct.
read http://en.wikipedia.org/wiki/Shale As to its main point, all predictions are based on models. Models are never the "real thing". Duh! So some "expert" has a wrong model. Big News! LOL. What is the point of making a big deal about this if not to spread uncertainty and doubt. Good job being an unpaid hack for oil future short sellers. On Thursday, April 3, 2014 3:16:35 PM UTC-4, cdemorsella wrote: > > > This article from Bloomberg delves into some detail on how the > unconventional oil sector is actually based on unreliable numbers -- with > reserve estimates and production curves that have proven to have been > wildly overstated -- to the point of criminal conspiracy to defraud > investors (I would argue) > > > http://www.bloomberg.com/news/2014-04-03/old-math-casts-doubt-on-accuracy-of-oil-reserve-estimates.html > Old Math Casts Doubt on Accuracy of Oil Reserve Estimates > Jan Arps is the most influential oilman you’ve never heard of. > In 1945, Arps, then a 33-year-old petroleum engineer for British-American > Oil Producing Co., published a formula to predict how much crude a well > will produce and when it will run dry. The Arps method has become one of > the most widely used measures in the industry. Companies rely on it to > predict the profitability of drilling, secure loans and report reserves to > regulators. When Representative Ed > Royce<http://search.bloomberg.com/search?q=Ed%20Royce&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>, > > a California Republican, said at a March 26 hearing in Washington that the > U.S. should start exporting its oil to undermine Russian influence, his > forecast of “increasing U.S. energy production” can be traced back to Arps. > The problem is the Arps equation has been twisted to apply to shale > technology, which didn’t exist when Arps died in 1976. John Lee, a > University of Houston engineering professor and an authority on estimating > reserves, said billions of barrels of untapped shale oil in the U.S. are > counted by companies relying on limited drilling history and tweaks to > Arps’s formula that exaggerate future production. That casts doubt on how > close the U.S. will get to energy independence, a goal that’s nearer than > at any time since 1985, according to data from the U.S. Energy Information > Administration. > <http://www.bloomberg.com/photo/oil-/-itgilbEjwUBA.html>Photographer: Ken > James/Bloomberg > To replace the Arps calculation, researchers are testing new formulas with > names worthy... Read > More<http://www.bloomberg.com/news/2014-04-03/old-math-casts-doubt-on-accuracy-of-oil-reserve-estimates.html#> > “Things could turn out more pessimistic than people project,” said Lee. > “The long-term production of some of those oil-rich wells may be > overstated.” > Calculate Reserves > Lee’s criticisms have opened a rift in the industry about how to measure > the stores of crude trapped within rock formations thousands of feet below > the earth’s surface. In a newsletter published this year by Houston-based > Ryder > Scott Co. <http://www.bloomberg.com/quote/0835143D:US>, which helps > drillers calculate reserves, Lee called for an industry conference to > address what he said are inconsistent approaches. The Arps method is > particularly open to abuse, he said. > U.S. oil production has increased 40 percent since the end of 2011 as > drillers target layers of oil-bearing rock such as the Bakken shale in North > Dakota <http://www.bloomberg.com/quote/CROMND:IND>, the Eagle Ford in > Texas <http://www.bloomberg.com/quote/CROMTX:IND>, and the Mississippi > Lime in Kansas andOklahoma <http://www.bloomberg.com/quote/CROMOK:IND>, > according to the EIA. The U.S. is on track to become the world’s largest > oil producer by next year, according to the Paris-based International > Energy Agency. A report from London-based consultants Wood Mackenzie said > that by 2020 the Bakken’s output alone will be 1.7 million barrels a day, > from 1.1 million now. > > <http://www.bloomberg.com/photo/an-oil-drilling-rig-stands-in-north-dakota-/-ih0UDS7y0m40.html>Photographer: > > Matthew Staver/Bloomberg > U.S. oil production has increased 40 percent since the end of 2011 as > drillers target... Read > More<http://www.bloomberg.com/news/2014-04-03/old-math-casts-doubt-on-accuracy-of-oil-reserve-estimates.html#> > U.S. crude benchmark West Texas Intermediate fell 41 cents to $99.21 a > barrel at 10:10 a.m London time in electronic trading on the New York > Mercantile Exchange. It has risen 0.8 percent this year. > Inherently Uncertain > Predicting the future is an inherently uncertain business, and Arps’s > method works as well as any other, said Scott Wilson, a senior vice > president in Ryder Scott’s Denver office. > “No one method does it right every time,” Wilson said. “Arps is just a > tool. If you blame Arps because a forecast turns out to be wrong, that’s > like blaming the gun for shooting somebody. As far as Arps being old, the > wheel was invented a long time ago too but it still comes in handy.” > Rising reserve estimates gives the U.S. a false sense of security, said Tad > Patzek<http://search.bloomberg.com/search?q=Tad%20Patzek&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>, > > chairman of the Department of Petroleum and Geosystems Engineering at the > University of Texas at Austin. > “We have deceived ourselves into thinking that since we have an infinite > resource, we don’t need to worry,” Patzek said. “We are stumbling like > blind people into a future which is not as pretty as we think.” > The Arps formula is only as good as the assumptions a company puts into > it, Patzek said. Estimates can be inflated when Arps is based on limited > drilling history for data or on a few high-performing wells to predict > performance across a wide swath of acreage. Forecasts can also be skewed > higher by assuming slower production declines than Arps observed. > Reserves Cut > In November 2012, SandRidge Energy Inc.<http://www.bloomberg.com/quote/SD:US> > cut > its reserve predictions to the equivalent of 422,000 barrels per well from > 456,000. Five months later, the estimate was cut again, to 369,000 barrels, > company records show. Oklahoma City-based > SandRidge<http://www.bloomberg.com/quote/SD:US> has > since made an adjustment upward to 380,000 barrels per well. > The early, more optimistic forecasts were based on a small number of > high-performing wells, which led the company to overestimate performance > for its other acreage, said Duane > Grubert<http://search.bloomberg.com/search?q=Duane%20Grubert&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>, > > SandRidge’s executive vice president for investor relations and strategy. > The company now has more than 1,100 wells and has improved its drilling. It > is confident that current estimates are reliable, Grubert said. > “Nobody knew that until we actually ground-truthed the field by drilling > it,” Grubert said. “What we came up was, hmm, that initial estimate was a > little high.” > Future Production > SM Energy Co. <http://www.bloomberg.com/quote/SM:US>, a Denver-based > producer, suffered a similar setback this year when its wells in the Eagle > Ford shale in Texas fell short of forecasts. The company on Feb. 18 cut its > prediction in one area to the equivalent of 475,000 barrels per well from > 602,000. Estimating future production from early data is a challenge for > the industry, said Brent > Collins<http://search.bloomberg.com/search?q=Brent%20Collins&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja>, > > a spokesman for SM Energy. > “This is especially true when you are trying to estimate an average from a > limited number of wells,” Collins said. > Both SandRidge and SM Energy use variations of the Arps method, company > records show. > Tapping shale formations differs from the drilling in Arps’ day, said Dean > Rietz, an executive vice president in charge of reservoir simulation at > Ryder Scott. The first commercial shale well was drilled in 2004, 59 years > after Arps published his method. > Gas Pockets > In 1945, oil production <http://www.bloomberg.com/quote/DOETCRUD:IND> meant > drilling straight down to hit pockets of oil and gas that had become > trapped after migrating upward from deep layers of rock. Today’s drilling > targets those deep layers, boring through thousands of feet of the earth’s > crust, then turning sideways to chew for a mile or more through layers that > are harder and less porous than a granite countertop. The rock is shattered > by a high-pressure jet of water, sand, and chemicals to create a network of > small cracks to allow the oil and gas to escape. The largest fissures are > narrower than the width of a paper clip. The smallest are thousands of > times thinner than a human hair. > On a graph, these fractured wells appear to follow a different trajectory > of decline than the conventional wells Arps studied, said Lee. > To replace the Arps calculation, researchers are testing new formulas with > names worthy of indie bands: Stretched Exponential, which Lee helped > develop; the Duong Method, devised by Anh Duong, principal reservoir > engineer for ConocoPhillips; and Simple Scaling Theory, which the > University of Texas’s Patzek worked on. > Rietz has made a well simulation model to predict production. > “Come back to me in 10 years, and I’ll tell you how reliable it was,” he > said. > > > -- You received this message because you are subscribed to the Google Groups "Everything List" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. 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