Great Article About The Shale Boom and Bust

Peter Gorman of The Fort Worth Weekly has written a great article about the Shale Bust. Many of us saw this coming. He brought up some interesting facts and points

We have seen production from local wells drop significantly. They have brought in gas lift compressors to "squeeze the blood out of the turnip".

The wells, especially in “sweet spots” like the Fort Worth section of the Barnett Shale, saw declines in production that no one could have imagined.

But the banks that had lent all that money to the energy companies needed their loans repaid, so energy companies had to keep drilling new wells to maintain production volumes. It looked good on paper and kept stock prices at reasonable levels for a few years, but with a couple of exceptions, nearly all of the gas companies have seen their stocks nosedive in the last year.

 Geologist David Hughes had this to say in the article.

“What you have to remember when looking at a shale play is that drillers head for the sweet spots first, the places with the most accessible quantities of gas,” Hughes said. “When the first few wells come in, a leasing boom follows. But the majority of the wells drilled are not going to be in the sweet spots — maybe only 15 percent will be. So when we look at the drop in the Haynesville play, what we’re seeing is that if the sweet spots are drying up, drillers wind up going after less productive areas in the play. But with the cost of each new well in the Haynesville at about $9 million — and that doesn’t include the leasing rights or costs of pipelines and so forth — and the price of gas at $3.30 per thousand cubic feet, who in their right mind is going to keep drilling?”

“You need to drill 1,500 new wells every year, each of which has the same average first-year production of a 2011 well, to simply keep [total] production flat.”

When they start exporting LNG, and they will, the industry will be looking to drill in every nook and cranny to get natural gas. The oil and gas industry will reap the profits.

The drop in price, however, encouraged a lot of industries, including power companies, to retrofit their plants for natural gas rather than coal or oil. And without an abundant supply of gas over the long haul, that may prove very costly for consumers once the surplus of cheap gas is gone. Add to that a new wrinkle that not many people saw coming — the exportation of natural gas to countries willing to pay a premium for it — and the cost of natural gas in the United States could increase tremendously in the next five to 10 years

Americans get ready to be screwed in every way!

To read the Fort Worth Weekly article Click here