Newsmonger: Symphony woes, Eagle Ford reserves questioned, Money laundering probe
Published: September 12, 2012
The SPE report, titled "Eagle Ford Shale – An Early Look at Ultimate Recovery," indicates that lifetime well productivity touted by companies in the Eagle Ford, known as estimated ultimate recovery (EUR), is shaking up to be well below what drillers have claimed.
The SPE report notes that companies in the Eagle Ford have quoted lifetime well production levels as high as 850,000 barrels of oil or oil equivalent – estimates based on data companies rarely make available to the public, the report notes. SPE's analysis of more than 1,000 Eagle Ford wells shows an average EUR of about 206,000 barrels, some four times below that high operator estimate.
"We're seeing a repeat pattern, a substantial overestimation of reserves," insisted Rogers. From an investor's point of view, she claims, over-hyped estimates are problematic because shale-heavy companies borrow money based on those reserve estimates. "If reserves prove to be as much as four times less than what operators claim, companies may be borrowing money on assets that aren't proven, or that may not even exist," she said.
The well-decline profile suggested by the SPE report echoes analysis by Texas-based petroleum geologist Arthur Berman. Berman, who sits on the board of directors for the Association for the Study of Peak Oil and Gas, has spent years studying shale plays, and says promises of sustained, multi-decade production out of shale wells should be viewed skeptically.
Most shale-heavy companies have claimed for years that well production drops sharply after the first several months, but then quickly levels off, providing steady long-term returns. Berman's analysis shows a different picture. For a 2011 study Berman and a colleague looked back to 2003 to study North Texas' Barnett Shale, finding average recovery per-well there proved to be about half what companies had claimed. He found similar results in the Fayetteville and Haynesville shales.
Berman says he's tracked some 200 wells drilled in the Eagle Ford in 2008 and has seen "astonishing" decline rates. He said SPE's new Eagle Ford estimates are consistent with his own.
"It is important to understand that high decline rates are a mixed blessing," Berman said in an email to the Current. While companies may make money quickly, he said, they have to drill at a rapid pace (a high capital expenditure) just to keep production trucking.
As for now, production is certainly booming in the Eagle Ford. Texas Railroad Commission data says oil production in the shale reached 36.6 million barrels in 2011. New well starts increased 110 percent from January to March 2012, compared to the same period in 2011, leading UTSA Center for Community and Business Research director Thomas Tunstall to predict that 2012 could see almost double the oil production out of the Eagle Ford.
But as Berman puts it, the debate over how fast these wells decline isn't just a technical spat for petroleum engineers and policy wonks. He and Rogers worry the marketing of shale gas has been so powerful that public policy is being driven by yet-unproven assumptions of the over-abundance and low cost of shale.