From: John Clark <[email protected]>
To: [email protected]
Sent: Wednesday, December 24, 2014 10:53 AM
Subject: Re: Natural gas: The fracking fallacy
On Wed, Dec 24, 2014 'Chris de Morsella' via Everything List
<[email protected]> wrote:
> the very same EIA that got it so wrong with the Monterey shale deposit
reserve projections it made in 2011
>>Yes they got it wrong with Monterey, estimating reserves isn't easy and is
>>more a art than a science, but given that as far as anybody knows they got it
>>right with the Bakken and Eagle Ford formation and they alone account for 70%
>>of reserves so it's not a major consideration. Could they be wrong again?
>>Sure. Could you also be wrong about reserves? No way!
Wrong!. Utterly wrong in fact, the Bakken did not account for 70% of the
reserve picture presented by the EIA between 2011 and the middle of 2014 when
they finally downgraded the Monterey shale reserve projections. The Monterey
reserves as stated by the EIA in their very highly visible projections they
made in 2011 accounted for well over 60% of the TOTAL tight oil reserves in the
USA INCLUDING the Bakken, Marcelus and Eagle Ford formations. In other words
the Bakken, the Marcelus and the Eagle Ford lumped together accounted for less
than 40% of the reserve figures touted by the EIA AND used to blow up this
massive bubble that is no bursting. The Monterey shale was the big daddy of
them all, according to the EIA. This announcement was highly cited by the
boosters of this bubble in order to whip up the mania of "The US becoming the
Saudi Arabia of shale". Only after the hoopla had served its intended purpose
(convincing investors that this was absolutely huge) were these non-existent
reserves quietly downgraded -- in a non media event "quiet" announcement -- and
by a whopping 94%!
> The EIA, IMO, is complicit in this fraud. And as evidence I produced the
> grossly overstated reserve numbers it produced for the Monterey shale
> deposits in 2011
>>If you don't like the way they do it please describe the far superior method
>>that you have developed for estimating how much oil and gas in the ground can
>>be economically extracted. I'm all ears.
I am not the one calling myself "The Energy Information Agency of the United
States of America" now am I. You give me the same monetary, human, legal and
political resources as the EIA and in five years I will give you numbers. Deal?
> I am describing a huge financial bubble,
>>The first financial bubble in the history of the planet that went down not up.
You really don't get bubbles do you? Bubbles go down when they blow up silly
man. When the housing bubble blew to pieces in 2007-2008 did housing prices
continue to rise? The shale play already has gone up John - it has sucked in
trillions of dollars and made the insiders billions of dollars. What the hell
do you think HAS BEEN happening during the past four years?This mania is now
bursting.
> tied to tight oil sector energy derivatives that is bursting as we speak, yes.
>>Since the value of a energy derivative is a function of the value of the oil
>>(or gas) in the ground, and since the value of a barrel of oil is less than
>>half what it was just a few years ago then of course the value of those
>>energy derivatives are going to go down too. But you need to put your money
>>where your mouth is, you think the drop in the cost of oil is a very
>>temporary thing, therefore you should be buying those energy derivatives as
>>fast as you can. And you should be buying them on margin to give yourself
>>leverage, of course if you're wrong then the leverage works against you but
>>I'm sure there is no possibility you're wrong.
You should not be giving others free advice John.
> I am describing this investment and perception mania that was manufactured
> on promises of endless supplies of new shale deposits.
>>Bullshit, nobody promised endless supplies of anything.
Bullshit -- read the press releases and the perception management that flooded
the media and was produced by think tank after think tank tied to these
interests. The shale boom was very much presented as being able to supply the
US with a secure and almost inexhaustible supply of fossil energy for a period
of four or more decades. I argued with some of these boosters during the ramp
up to this buble in 2009-2011 -- to hear them tell it the Bakken formation
extended down all the way to China -- I jest, but that is the essence of their
position. This boom has been sold as being able to secure America's energy
needs for many decades and in fact it was supposed to turn America into a major
supplier of gas and even oil to the the EU for example.
You do not seem to grasp the concept of low cost producers being able to put
the squeeze on the high cost producers
>>It's only right and just that low cost producers put high cost producers of
>>oil or of anything else out of business, so if OPEC wishes to keep the shale
>>people out of the oil business they're going to have to keep their production
>>high enough that oil costs less than what the shale people cam make it for.
>>Currently it costs between $95 and $30 to produce a barrel of oil from shale
>>depending on the particulars of the geology, and as technology improves the
>>cost will go down. That explains why $147 for a barrel of oil as it was at
>>its peak in 2008 is not sustainable however much OPEC may wish it were, and
>>Saudi Arabia will run out of oil before the USA runs out of shale.
You have bought into the line presented by the cornucopean press releases hook
line and sinker. SHale oil does not cost $30 a barrel to produce. To pretend
that this is the low end of the typical cost curve is akin to pretending that
smoking crack is not damaging for your health. Given the very high depletion
rate and the need to "re-frack" existing wells within just a few years because
the fracking induced micro fractures tend to seal up quite rapidly -- even with
all those injected poppants -- a massive number (and massively expensive) of
drilling and fracking operations need to be sustained. This has proven
unsustainable -- and in fact the major oil companies of the world agree with
me, and have been getting out of the tight oil sector.Sure there is some oil
and gas in those shale formations, but not nearly as much as the grossly
unreliable EIA has been reporting. It is getting that kerogen and gas out of
the rock that is hard to do. You try squeezing oil out of rock. It is not easy
AND it is not cheap either. Saudi Arabia IS the world's low cost producer. The
Saudi's CAN afford this price war -- for the time being at least -- the US
tight oil sector CANNOT. Oil at under $60 is driving them bankrupt.-Chris
John K Clark
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