EIA responds to NYT article questioning shale gas estimates

The EIA has responded to a recent The New York Times article "Behind veneer, doubt on future of natural gas," which said that the agency's optimistic estimates of future shale gas production and price are skewing current energy policy. Based on emails exchanged between staffers of EIA, the NYT article contended that optimistic assessments of shale gas reserves were based on high yield in one or two wells being extrapolated to future wells. Also, the article had said that promotional material of companies and their statements to the market were considered in the EIA assessment which therefore was not accurate. The EIA responded that it has a proven method to build forecasts and it applies that method in every case, be it shale gas or any other energy source. The EIA press release pointed to the appropriate section in the latest Annual Energy Outlook that gives two different "High/Low" estimates of future shale gas production volumes and prices. The EIA believes that it has considered several possibilities in its outlook.

The latest annual energy outlook lists the following uncertainties in shale gas production.

"Most shale gas wells are only a few years old, and their long-term productivity is untested. Consequently, reliable data on long-term production profiles and ultimate gas recovery rates for shale gas wells are lacking.

In emerging shale formations, gas production has been confined largely to "sweet spots" that have the highest known production rates for the formation. When the production rates for the sweet spot are used to infer the productive potential of an entire formation, its resource potential may be overestimated.

Many shale formations (particularly, the Marcellus shale) are so large that only a portion of the formation has been extensively production tested.

Technical advances can lead to more productive and less costly well drilling and completion.

Currently untested shale formations, such as thin seam formations, or untested portions of existing formations, could prove to be highly productive."

Due to the uncertainties, the outlook presents a "high" scenario where production is assumed to be 50% higher than the reference case and a "low" scenario where production is assumed to be 50% lower than the reference case. As a result, the Henry Hub price projections also vary between $9.20 to $5.35.