Sacramento, California (Platts)--23Sep2008

If the world oil production is to decline within the next decade, as
advocates of the peak oil theory espouse, don't count on the natural gas
reserves at US shale plays to fill the supply gap, participants at a peak oil
conference said Tuesday.
Led by the prolific Barnett Shale in Texas, shale plays throughout the US
-- the Bakken in North Dakota and Montana, the Marcellus in Appalachia, and
the Haynesville in Louisiana -- are being touted as a tremendous source of
supplies.
For example, Aubrey McClendon, the CEO of Chesapeake Energy, in July told
the US House of Representatives committee on energy that shale gas will drive
up US gas production over the next 10 years and that shale reserves and
production are consistently unreported by other agencies because they have
come on line so quickly.
But those not sharing that optimism at the annual conference of the
Association for the Study of Peak Oil & Gas-USA in Sacramento, California,
say these plays are too short-lived and sometimes too uneconomic to rely upon.
"What's happened is the technology has become more effective," Andy
Weissman, an energy consultant editor and publisher of Energy Business Watch
told the conference.
"With the Barnett Shale, the industry has been improving technology for
horizontal drilling and fracing [hydraulic fracturing]," Weissman said. "You
can move in and extract large amounts of gas in the first 3-6 months, but the
production decline rates happen very quickly."
While Chesapeake's McClendon has said he expected production there to peak
in 2012, Weissman said two other producers -- Devon Energy and EOG Resources
-- "are of the view the Barnett Shale production may peak as early as next
year."
David Summers, a professor of mining engineering at the Missouri
University of Science and Technology and a speaker at the conference, said
shale gas production is a quick, but not long-term solution.
"They could be drilling it today and next year you are in high production
and the year after that we're declining and the year after that it's almost
all gone," Summers said on the sidelines of the conference. "We've gone from
gas fields that last a long time to having gas fields that produce almost in
real-time," he said.

UNIQUE AMONG SHALE PLAYS
Jim Buckee, for 14 years until 2007 the president and CEO of large
Canadian producer Talisman Energy, said he has always been a skeptic on the
economics of producing large volumes of gas from much of the shale plays.
"If you have to burn a whole lot of oil to get a little bit of gas, it
makes no sense," Buckee, an honoree at the conference, said on the sidelines.
"On the other hand, there is a lot of gas," Buckee acknowledged. "Fracing
techniques are advancing and may improve the economics. Certainly, thousands
of small wells add up to quite a lot of gas. But whether you are changing the
whole energy picture is a different question."
While the Barnett Shale has been a prolific producer, it may be unique
among the shale plays, Buckee said.
"The Barnett Shale is like glass, it shatters," he said. "Fracing there
has been very extensive. People have experimented for many years and made it
work."
Buckee, however, said that this has not yet been the case with the
Marcellus Shale, where producers over the last couple of years have been
passing out larger and larger checks to small landowners who were delighted to
allow drilling.
"Horizontal wells with multiple fracs may improve deliverability, but the
Marcellus is deeper than the Barnett and of course that makes it more
expensive," Buckee said. "So, in my mind it's still fairly experimental."
And while the Bakken looks "potentially quite exciting" and has been
profitable for producers, Buckee said he didn't know if it would a prolific
enough producer.
"It might reduce imports a little bit, but it doesn't change the big
picture," he said.
--Richard Rubin, richard_rubin@platts.com