According to new information from the U.S. Department of Energy, estimates of shale gas in the country were lower than predicted earlier. The Energy Information Administration (EIA), Energy Department’s collector of data, reported that there were 482 trillion cubic feet (tcf)of available shale gas in the U.S., which is 40 percent lower from the 2011 estimate that maintained 827 tcf. New estimates of shale gas in the Marcellus region, which spans from New York to West Virginia, were at 141 tcf from previous estimates of 410 tcf. Attributing the new projections to the availability of better information, the industry considers its accomplishments a huge step forward for the U.S. energy supply security, despite the latest estimates of lower amount of shale gas, noting how far it has come in the past few years.
While natural gas prices have been record low in recent times, primarily due to the explosion of the shale gas supplies, influx of new producers, economic slowdown and warm winters, it is yet to be seen whether the fresh projections will have any implications on the price. Despite the lowered estimates of shale gas in the U.S., natural gas is likely to bring down electricity prices in the next few years and surpass coal in electricity production. According to EIA, increase in gas output will cut U.S. dependence on energy imports by almost half by 2035. All in all, the role of natural gas will remain important in the U.S. energy mix.
The changes in the estimates of shale gas reserves are not shocking, given that the industry is still relatively brand new. The technology and information collection on it improves with time. As the industry evolves and changes, it is also worth keeping an eye on the rate of return of shale gas wells. As experience shows, there were rapid declines in several fractured shale gas wells from 50 up to 80 percent or more during the first year. Emphasizing my earlier views expressed on shale gas and oil in this blog, the novelty of the industry warrants sufficient experience and time to establish recoverability of reserves, decline rates and production lifespan of shale gas and oil wells.