RE: Natural gas: The fracking fallacy

Wed, 24 Dec 2014 22:34:54 -0800 

 

 

From: [email protected] 
[mailto:[email protected]] On Behalf Of John Clark
Sent: Wednesday, December 24, 2014 7:49 PM
To: [email protected]
Subject: Re: Natural gas: The fracking fallacy

 

On Wed, Dec 24, 2014  'Chris de Morsella' via Everything List 
<[email protected]> wrote:

 

> 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

 

I'm sorry Chris but that simply isn't true. Yes the Monterey shale reserve was 
vastly overestimated, at one time they thought it contained 15.4 billion 
barrels of oil but the true figure is less than a billion. However just one oil 
shale deposit in the USA, the Green River Formation, contains 1466 billion 
barrels of oil, nearly 100 times what Monterey was thought to contain even at 
it's peak. So although embarrassing the overestimate doesn't substantially 
change anything. 

 

Yeah… and if you believe those figures I have a bridge to sell you in Brooklyn. 
In fact those very numbers you site are controversial and disputed by many 
petroleum geologists. Just because it is shale does not mean that the 
hydrocarbons trapped in it are recoverable. 

In the Bakken and Eagle Ford the extracted oil, actually exists as oil, but the 
shale does not allow the oil to flow very well. This oil is properly called 
"tight oil", and advances in hydraulic fracturing (fracking) technology have 
allowed some of this oil to be economically produced.

The oil shale in the Green River looks like rock instead.

Unlike the hydrocarbons in the tight oil formations, the oil shale (kerogen) 
consists of very heavy hydrocarbons that are solid. In that way, oil shale more 
resembles coal than oil. Oil shale is essentially oil that Mother Nature did 
not finish cooking, and thus to convert it into oil, heat has to be added. The 
energy requirements -- plus the fact that oil shale production requires a lot 
of water in a very dry environment -- have kept oil shale commercialization out 
of reach for over 100 years.

Ready to buy that bridge in Brooklyn… for you my friend I’ll give you a special 
price.

 

>>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?

 

But today is not not 5 years from now and you have zero monetary, human, legal 
and political resources and yet you claim to know exactly how much gas and oil 
is in the ground in the USA that can be extracted economically; all I want to 
know is how you acquired that information.

 

How about you tell me where you get your facts first John... other than the EIA 
(I can surf over there too and I have poured through a lot of their published 
materials too). I am not going to play this empty parlor game with you; if you 
doubt any of the facts I have stated then mount a specific – preferably fact 
based – challenge. 

 

>The shale play already has gone up John - it has sucked in trillions of dollars

 

Bullshit.

Bullshit on your bullshit John. When you sum up all the river of capital it has 
sucked up and the mountain of derivatives built up around this bubble, it is 
trillions.

 

 

 > and made the insiders billions of dollars.

 

True.

 

> What the hell do you think HAS BEEN happening during the past four years?

 

What I think has happened is that the price of oil has dropped from $147 to 
$60, and that is not a estimate or a opinion or a prediction, that my friend is 
a fact. And you can wave your hands around all you want but it won't change 
that monumentally important facet of reality. 

 

And what gives you the peculiar notion that I am disputing what are well known 
market price points. John, what you are doing in fact is itself empty hand 
waiving. You have said nothing here. Do you have nothing of substance to say?

 

>>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. 

 

You're right, I should have charged you for such valuable advice because if you 
follow it you will became fabulously rich, or at least you will if you really 
are smarter than the collective wisdom of millions of people on this matter, 
that is to say if you really are smarter than the market.  

 

Conceit fits the fool. Your choice to don that outfit; wear it well John.  Your 
belief that markets are not manipulated by the entrenched insider interests, 
such as those controlling the New York Fed is amusing to say the least and it 
goes very well with your over blown conceit.

You paint, quite the picture my man.

 

>>Bullshit, nobody promised endless supplies of anything.

 

> Bullshit -- read the press releases 

 

>>I'd love to read them but I can't seem to find these false press reports you 
>>keep refer to, please show me some

 

If you missed those press releases, glowing media reports, and innumerable ads 
then I question if you actually live in the USA… or perhaps, you have lived 
cutoff from the world like Chance the Gardener, a.k.a. Chauncey Gardiner.

  

> The shale boom was very much presented as being able to supply the US with a 
> secure and almost inexhaustible supply of fossil energy 

 

>>I don't know what "almost inexhaustible" means but we are not going to run 
>>out of shale oil in your lifetime or that of your children. 

 

We won’t run out of shale rock. The crust has lots of shale rock formations. 
What we will run out of and much sooner than you are desperate to believe is 
economically and energetically (with EROI > 6) feasible recoverable 
hydrocarbons – whether gas or oil. In by far most of the world’s shale 
deposits, including your personal fave the Green River formation any 
hydrocarbons present are locked up as kerogen in the rock and cannot be 
recovered with current technology – i.e. John THEY ARE NOT RECOVERABLE 

They cannot be counted as reserves. Reserves represent technologically and 
economically recoverable resources. 

There are millions of tons of gold dissolved in the oceans – should we now be 
counting them in the world’s gold reserves – according to John’s new rules. How 
about all that Iron Nickle at the planet’s core. Hey why not count that as 
well. Where does this foolishness stop John.

If it cannot be recovered it cannot be counted as a reserve. And yet… you 
continue to insist on counting this non-recoverable resource as a reserve. 
Repeating something over and over does not produce truth… only noise.

 

 

The International Energy Agency, which has nothing to do with  the government 
of the USA and is in fact based in Paris, says that there are 4.8 trillion 
barrels of shale oil in the world with 3.7 trillion barrels of it in the USA, 
although only 1 trillion can be economically recoverable with existing 
technology. 

The amount of conventional oil that exists, not just in Saudi Arabia, not just 
in OPEC, but in the entire world is 1.3 trillion barrels. And that's why I say 
Saudi Arabia will run out of oil before the USA runs out of oil.

 

You really do smoke the cornucopian pipe their old man. Some agency prints some 
number and you swallow that number like a fish grabbing bait. 

As I said before all of that shale you speak about – the vast majority of shale 
deposits in the world are kerogen deposits – HAVE NOT BEEN EXPLOITED! Why not?

The tight oil that has actually been produced from the Bakken and Eagle Ford 
principally actually exists as oil trapped in tight deposits within the shale. 
We have probably already gotten many of the sweet spots existing within these 
formations – and agencies like the IEA and the EIA, both naively (or perhaps 
dishonestly) base their projections on a homogenous distribution of these 
deposits throughout the entire mass of the formation – when actual data driven 
reality is showing instead that this is not true. You continue not to get this. 
The projected reserve numbers are off, way off, being based on false premises – 
e.g. that these deposits will produce at the same rate as the sweet spots that 
have been preferentially drilled first (as of course they would be… a driller 
is going after the best producing areas first)

 

 

 

 

 

>>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.

 

 

>>Wikipedia thinks it's between $95 and $25 

Yeah and I went to your wiki quote. Why did you snip this part off your quote 
John that qualified the $25 low end you quoted “although there is no recent 
confirmation of the latter figure“ Seems you like to edit your quotes John.

 

 

 

but I think even under the best circumstances it would be closer to $30. And 
it's true that on average it's about twice that, if it only cost $30 to produce 
a barrel of then OPEC would be forced to sell oil at that price, but on average 
it's closer to $60, and it's not a coincidence that's about what OPEC is 
selling its oil for these days. But as technology improved the price will drop. 

 

Blablabla… sure John… all we require is improved technology to magically 
squeeze more oil out of the earth’s crust at lower and lower prices. An amusing 
retro Jetsons kind of attitude, but seriously you got to be kidding. Do you 
actually believe that all we need is better technology? 

I am not counting out some revolutionary new recovery technology, but, unlike 
you I am not counting on it. I think your faith in the magic technological 
bullet is naïve in fact.

 

 > Sure there is some oil and gas in those shale formations, but not nearly as 
 > much as the grossly unreliable EIA has been reporting.

 

>>How the hell do you know that? 

 

I have told you in this response at length and in some technical detail. 

 

 

And it's not just the EIA, virtually all the oil experts say there is much more 
shale oil on this planet that conventional oil, and most of it is in the USA. 

 

Name them. Give me the names of these “experts”. Do they work for Fox or maybe 
the Heritage Foundation perhaps. 

If by reserve we mean known assayed formations which can be produced with known 
technology at rates that are attractive on the market place then those numbers 
you site are grossly overblown exaggerations. The earth’s crust contains large 
amounts of hydrocarbons locked up into shale deposits as kerogen, which you 
want to believe is producible. 

Well then show me where kerogen is being commercially extracted from shale? 
Shell Oil tried, and abandoned its efforts after dumping millions and millions 
of dollars in – you got it – the Green River Formation. Your fav John.

Well Shell Oil doesn’t seem to think so; in fact they are running away from it, 
joining a long line of predecessors who have tried AND FAILED.

 

Could all the experts be wrong about this? Sure, but it's far more likely that 
you are the one that's wrong.  

 

Again where is this production actually happening. Not tight oil formations 
such as the Bakken but rather the much larger Kerogen deposits you insist on 
counting as reserves.

 

> Saudi Arabia IS the world's low cost producer. The Saudi's CAN afford this 
> price war 

 

If it's a war then Saudi Arabia is a conscientious objector because they are 
NOT the cause of the massive oil price drop, they did NOT increase oil 
production, the USA did.

 

You don’t understand OPEC politics John. The Saudi’s resisted a lot of pressure 
from higher price producers who wanted OPEC to cut its member quotas in order 
to support oil at some market floor. In the face of this considerable OPEC 
pressure the Saudi’s remained adamant, doing their US patrons a favor to help 
punish the Russians over the Ukraine by helping to trigger this large price 
drop. Oil is a highly inelastic commodity – and it is true that the global 
supply had grown more than anticipated – due in part to the Bakken and Eagle 
Ford. The Saudi’s could have – and in the past have in fact often agreed to -- 
OPEC wide cartel price fixing and cut back on their production, producing less 
than their capacity. A Saudi agreement to a cut back would have sent an 
immediate market signal and oil would be closer to $80 or somewhere around 
there. 

-Chris

 

 John K Clark

 

 

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