RE: Natural gas: The fracking fallacy

['Chris de Morsella' via Everything List]

 

 

From: everything-list@googlegroups.com 
[mailto:everything-list@googlegroups.com] 
Sent: Saturday, December 27, 2014 4:42 AM
To: everything-list@googlegroups.com
Subject: Re: Natural gas: The fracking fallacy

 

Understood, but whether its the Huffington Post or the Standard, my question 
is, is it true? 

 

FYI – IMO, the Huffington Post, is looking more and more like a supermarket 
tabloid – and on its “serious” content on occasion I find it’s “liberal” slant 
to be insulting of my intelligence. In other words I don’t read the Huffington 
Post (and if while surfing I hit an article from them usually I will just surf 
on)

The tight oil play has been hugely over sold… IMO, based on the sources of 
information I have access to -- I am plugged in to active energy lists on which 
there are researchers who are looking at this very closely and who are very 
knowledgeable of the technology, geology, and the statistical analysis of 
weekly/monthly raw wellhead data. 

It is not that there is not tight oil there – obviously there is. A lot of it 
in fact. The tight oil sector has in fact masked the (well measured) global 
peak in conventional oil production that occurred some years back. So there is 
a lot of tight oil being pumped from the Bakken and the Eagle Ford.

I am not denying the OBVIOUS!

What I take issue with is the unfounded hyper optimistic assumptions which the 
shale sector boosters make and that are then re-packaged as facts and sold to a 
gullible public in order to create a boom mentality and a gold rush flood of 
capital. This is fact what happened. The whole story has been pumped up and 
overblown.

There is oil trapped in the shale rock, but how much?

The current boom is driven by the drillers having drilled in these large oil 
bearing shale formations sweet spots – and why wouldn’t they; they are smart 
business men who know the business of drilling; they know geology and they know 
how to find oil. 

The EIA and the IEA reserve projections take no account of the micro-geology 
that characterizes these formations and make the unfounded assumption that the 
entire mass of these formations will produce at the same or similar rates as 
these sweet spots have. Based on what evidence? 

Furthermore, by far most of the shale resources sited by boosters of shale and 
the faithful believers in Cornucopeanism like John Clark (who amusingly claims 
not to be religious) ARE NOT RECOVERABLE in a manner that is feasible both 
economically and energetically. I have clearly documented this and WHY. Kerogen 
bearing deposits are very different from oil bearing shale formations. Oil 
bearing shale formations, such as the Bakken or the Eagle Ford can be slant 
drilled then hydraulically fractured to produce oil. The oil is present in 
these formations (mostly in sweet spots), but trapped in the shale matrix. Once 
fracked (plus all those chemicals pumped down there to help make it flow out) 
it can be pumped out form the formation and up to the well head.

Kerogen is NOT oil! Kerogen bearing shale is ROCK! The rock itself needs to be 
cooked at a process temperature of 350 degrees C for an hour in order to cook 
out oil from the wax-like kerogen. For a hundred years now, at various times 
people have tried to produce oil from this massive resource (the first kerogen 
bubble was way back in 1915). Every attempt has failed! Most recently with 
Shell Oil abandoning it’s R&D facility in the Colorado. In 1982 Exxon/Mobile 
threw in the towel after dumping $5 billion and the DOE dumped $10 billion in 
futile attempts to economically produce oil from kerogen.

The only way these kerogen deposits will ever be exploited to any degree 
whatsoever is if wind and solar generation capacity becomes so extensive that 
their surge over-capacity can be used to electrically cook the oil out of the 
kerogen at a energy loss of 1:2.5. Losing huge amounts of energy in the 
process, but – and this is key – it would be negative value electricity from 
wind & solar electric surplus generation that has no matching demand (when the 
wind is blowing in the middle of the night for example) and exceeds the rate at 
which any storage facilities can absorb it. In this very specific scenario 
these temporary surges of surplus power could be used to help extract a 
valuable liquid fuel – in spite of the fact that a lot more energy is going in 
to the process than is being extracted out of the process.

When I hear people – like John Clark – present the Green River Formation (a 
very large kerogen bearing shale formation) claiming that it should be counted 
as a reserve, well that is when I feel the need to disabuse these folks of 
their illusions/delusions. 

It is a fact by far most people do not get the crucial critical difference 
between tight oil bearing shale deposits and kerogen bearing shale deposits and 
they naively treat these as being similar, calling them all, generically, shale 
deposits. 

That is wrong. It is technically wrong; it is geologically mistaken; and the 
processes for extracting a useful product from them are very different.

A word of advice, be suspicious of shale deposit claims; beginning by 
enquiring, whether they are referring to tight oil or to kerogen deposits. 

-Chris

 

Yes, I assume at first pass, everything is propaganda. Then I will try to 
establish, through alternative searches whether there is an confirmation to a 
claim, independent confirmation. Hopefully, independent confirmation, that is. 
EOR may likely work. However, its not something that I am in love with. For 
years, I have wanted cities powered completely by solar, but this is not really 
panning out. It's like the old article, "Wheres my Flying Car Dude?" I have 
seen prototypes for decades, and they always look like small airplanes, even 
Moeller's. Tain't gonna happen apparently, so we do the best we can. 

I don’t look to the Weekly Standard for energy news or opinion  – or any news 
or opinion for that matter. Each to his or her taste I guess.





-----Original Message-----
From: 'Chris de Morsella' via Everything List <everything-list@googlegroups.com>
To: everything-list <everything-list@googlegroups.com>
Sent: Thu, Dec 25, 2014 6:28 pm
Subject: RE: Natural gas: The fracking fallacy

I don’t look to the Weekly Standard for energy news or opinion  – or any news 
or opinion for that matter. Each to his or her taste I guess.

 

From: everything-list@googlegroups.com [mailto:everything-list@googlegroups.com 
<mailto:everything-list@googlegroups.com?> ] 
Sent: Thursday, December 25, 2014 10:28 AM
To: everything-list@googlegroups.com
Subject: Re: Natural gas: The fracking fallacy

 



Sent from AOL Mobile Mail

 

In addition to not being the energy future we all wanted, here, to my mind, is 
the next likely step, by price, by technology, in energy. I don't completely 
trust the author, but his summary is thorough. The author links this source 
even, to co2 remmediation. In a way, its like having George Jetsons' flying 
fliver, powered by gasoline, rather then atoms or photons. The article also 
presages the shale gas revolution, to being something very long in the process 
(decades), to this source. Seeing how 98% of us were paying attention other 
things, it came as a surprise to the vast majority. This will as well.

 

http://m.weeklystandard.com/articles/next-shale-revolution_821866.html?page=3

 

From: 'Chris de Morsella' via Everything List <everything-list@googlegroups.com>
To: everything-list <everything-list@googlegroups.com>
Sent: Thu, Dec 25, 2014 01:37 AM
Subject: RE: Natural gas: The fracking fallacy

 

 

From: everything-list@googlegroups.com [mailto:everything-list@googlegroups.com 
<mailto:everything-list@googlegroups.com?> ] 
Sent: Wednesday, December 24, 2014 9:10 PM
To: everything-list@googlegroups.com
Subject: Re: Natural gas: The fracking fallacy

 



Sent from AOL Mobile Mail

 

It could be just as you suggest, a chemical, toxic, nightmare, to be footed by 
the tax payers. But I am thinking not so much, as the chemicals used have been 
around for decades, with no great problem detected. Notice how cheaper the 
gasoline is now? Notice how russia, iran, and the saudi economy has been 
upended? The idea is a civilization completely powered by the sun. The real is 
fracking. But we can always hope.

In energy matters I prefer to look at five year moving averages for 
understanding price trends; doing so helps eliminate the noise of volatility in 
the market. 

Most of the independent drilling companies that dominate US shale production 
sell futures contracts to show lenders they have locked in an oil price that is 
higher than their cost of production. This is especially true for the many 
independent smaller operators; if they can’t hedge above their cost of 
production, they are dead in the water. The US shale play needs a sustained 
minimum of above $90 on the world oil futures markets in order to be able to 
sell these hedges and use them as the basis on which they can get new capital 
to continue drilling.

There are trillions of dollars of future hedge contracts most of which were 
underwritten by big money center banks whose models did not account for this 
global market plunge. Big money center banks are feeling quite exposed now and 
if this price slump lasts longer than a year they could be in very serious 
trouble again, in a repeat of 2007-2008 when the housing derivatives market 
collapsed. Estimates put the six largest “too big to fail” banks commodity 
derivatives contracts holdings around $3.9 trillion, a majority of which is 
comprised of various flavors of oil future hedges. Most of the drillers in the 
tight oil sector in the US have already locked in future prices for next year 
and up into 2016 at around $90 per barrel. For example, Noble Energy and Devon 
Energy have both hedged over three-quarters of their output for 2015, and 
Pioneer Natural Resources has options covering 67% of its likely production 
through 2016. 

These drillers have locked in price volatility protection for themselves (as 
long as the banks honor their losses), but what about the big banks themselves? 
If global oil spot price stagnates for much longer and these contracts start 
coming due the losses are going to be astronomical. Who will endup covering 
these losses? 

Interesting side note: Harold Hamm, the Oklahoma oil billionaire (heavily 
invested in the Bakken) has bet a big chunk of his fortune that oil prices will 
rise soon; cashing in on almost 40 million barrels worth of future hedges, 
reaping a current profit of over $433 million for this quarter, but exposing 
his firm to price volatility if oil spot prices should stagnate or even decline 
further. 

-Chris

 




-----Original Message-----
From: 'Chris de Morsella' via Everything List <everything-list@googlegroups.com>
To: everything-list <everything-list@googlegroups.com>
Sent: Wed, Dec 24, 2014 03:31 PM
Subject: Re: Natural gas: The fracking fallacy

 

  _____  

From: spudboy100 via Everything List <everything-list@googlegroups.com>
To: everything-list@googlegroups.com 
Sent: Wednesday, December 24, 2014 12:22 PM
Subject: Re: Natural gas: The fracking fallacy

 

>>It could be a bubble but its not. Nothing has paid off like shale gas. 
>>Nothing else in the world has paid off like this.  

 

Wait till the taxpayer gets dumped on with all those underwater derivatives the 
big money center banks have just made sure we are liable for. You have no idea 
of the mountain of debt that is about to avalanche down on the US financial 
system. 

 

 

Even a report I saw today on energy policy encouraged more expansion into solar 
so that it will acquire 10% of the US electricity market. If this is correct, 
then solar will be marginal unless there's a vast improvement in production and 
storage, like we all hoped for. It's like all the wonders dreamed of over the 
last several decades keep fading into the future, further and further. Probably 
solar or fusion will never be marginal, this century, and the next energy 
source after shale will be methane hydrates, and we all know what the fear of 
AGW is focused on, as well as Siberia.  I guess we play the hand we're dealt, 
even though its not what we wanted. 

  

Ho Ho Ho 

Merry Scrooge Day 

  

and be in all the earlier tomorrow! 

  

  

 

-----Original Message----- 
From: 'Chris de Morsella' via Everything List 
<everything-list@googlegroups.com> 
To: everything-list <everything-list@googlegroups.com> 
Sent: Wed, Dec 24, 2014 2:36 pm 
Subject: Re: Natural gas: The fracking fallacy 

 

  _____  

From: John Clark <johnkcl...@gmail.com>
To: everything-list@googlegroups.com 
Sent: Wednesday, December 24, 2014 10:53 AM
Subject: Re: Natural gas: The fracking fallacy

 

On Wed, Dec 24, 2014 'Chris de Morsella' via Everything List 
<everything-list@googlegroups.com> wrote: 

 > the very same EIA that got it so wrong with the Monterey shale deposit 
 > reserve projections it made in 2011 

 

>>Yes they got it wrong with Monterey, estimating reserves isn't easy and is 
>>more a art than a science, but given that as far as anybody knows they got it 
>>right with the Bakken and Eagle Ford formation and they alone account for 70% 
>>of reserves so it's not a major consideration. Could they be wrong again? 
>>Sure. Could you also be wrong about reserves? No way! 

 

Wrong!. Utterly wrong in fact, the Bakken did not account for 70% of the 
reserve picture presented by the EIA between 2011 and the middle of 2014 when 
they finally downgraded the Monterey shale reserve projections. The Monterey 
reserves as stated by the EIA in their very highly visible projections they 
made in 2011 accounted for well over 60% of the TOTAL tight oil reserves in the 
USA INCLUDING the Bakken, Marcelus and Eagle Ford formations. In other words 
the Bakken, the Marcelus and the Eagle Ford lumped together accounted for less 
than 40% of the reserve figures touted by the EIA AND used to blow up this 
massive bubble that is no bursting. The Monterey shale was the big daddy of 
them all, according to the EIA. This announcement was highly cited by the 
boosters of this bubble in order to whip up the mania of "The US becoming the 
Saudi Arabia of shale". Only after the hoopla had served its intended purpose 
(convincing investors that this was absolutely huge) were these non-existent 
reserves quietly downgraded -- in a non media event "quiet" announcement -- and 
by a whopping 94%! 

 

> The EIA, IMO, is complicit in this fraud. And as evidence I produced the 
> grossly overstated reserve numbers it produced for the Monterey shale 
> deposits in 2011 

 

>>If you don't like the way they do it please describe the far superior method 
>>that you have developed for estimating how much oil and gas in the ground can 
>>be economically extracted.  I'm all ears. 

 

I am not the one calling myself "The Energy Information Agency of the United 
States of America" now am I. You give me the same monetary, human, legal and 
political resources as the EIA and in five years I will give you numbers. Deal? 

 

 

 > I am describing a huge financial bubble, 

>>The first financial bubble in the history of the planet that went down not 
>>up. 

 

You really don't get bubbles do you? Bubbles go down when they blow up silly 
man. When the housing bubble blew to pieces in 2007-2008 did housing prices 
continue to rise? The shale play already has gone up John - it has sucked in 
trillions of dollars and made the insiders billions of dollars. What the hell 
do you think HAS BEEN happening during the past four years? 

This mania is now bursting. 

 

 

> tied to tight oil sector energy derivatives that is bursting as we speak, 
> yes. 

>>Since the value of a energy derivative is a function of the value of the oil 
>>(or gas) in the ground, and since the value of a barrel of oil is less than 
>>half what it was just a few years ago then of course the value of those 
>>energy derivatives are going to go down too. But you need to put your money 
>>where your mouth is, you think the drop in the cost of oil is a very 
>>temporary thing, therefore you should be buying those energy derivatives as 
>>fast as you can.  And you should be buying them on margin to give yourself 
>>leverage, of course if you're wrong then the leverage works against you but 
>>I'm sure there is no possibility you're wrong. 

 

You should not be giving others free advice John.  

 

  

> I am describing this investment and perception mania that was manufactured on 
> promises of endless supplies of new shale deposits. 

>>Bullshit, nobody promised endless supplies of anything. 

 

Bullshit -- read the press releases and the perception management that flooded 
the media and was produced by think tank after think tank tied to these 
interests. The shale boom was very much presented as being able to supply the 
US with a secure and almost inexhaustible supply of fossil energy for a period 
of four or more decades. I argued with some of these boosters during the ramp 
up to this buble in 2009-2011 -- to hear them tell it the Bakken formation 
extended down all the way to China -- I jest, but that is the essence of their 
position. This boom has been sold as being able to secure America's energy 
needs for many decades and in fact it was supposed to turn America into a major 
supplier of gas and even oil to the the EU for example. 

 

You do not seem to grasp the concept of low cost producers being able to put 
the squeeze on the high cost producers 

 

>>It's only right and just that low cost producers put high cost producers of 
>>oil or of anything else out of business, so if OPEC wishes to keep the shale 
>>people out of the oil business they're going to have to keep their production 
>>high enough that oil costs less than what the shale people cam make it for. 
>>Currently it costs between $95 and $30 to produce a barrel of oil from shale 
>>depending on the particulars of the geology, and as technology improves the 
>>cost will go down. That explains why $147 for a barrel of oil as it was at 
>>its peak in 2008 is not sustainable however much OPEC may wish it were, and 
>>Saudi Arabia will run out of oil before the USA runs out of shale.  

 

You have bought into the line presented by the cornucopean press releases hook 
line and sinker. SHale oil does not cost $30 a barrel to produce. To pretend 
that this is the low end of the typical cost curve is akin to pretending that 
smoking crack is not damaging for your health. Given the very high depletion 
rate and the need to "re-frack" existing wells within just a few years because 
the fracking induced micro fractures tend to seal up quite rapidly -- even with 
all those injected poppants --  a massive number (and massively expensive) of 
drilling and fracking operations need to be sustained. This has proven 
unsustainable -- and in fact the major oil companies of the world agree with 
me, and have been getting out of the tight oil sector. 

Sure there is some oil and gas in those shale formations, but not nearly as 
much as the grossly unreliable EIA has been reporting. It is getting that 
kerogen and gas out of the rock that is hard to do. You try squeezing oil out 
of rock. It is not easy AND it is not cheap either.  

Saudi Arabia IS the world's low cost producer. The Saudi's CAN afford this 
price war -- for the time being at least -- the US tight oil sector CANNOT. Oil 
at under $60 is driving them bankrupt. 

-Chris 

 

 


  

 

 

  John K Clark 







 




  

  <https://ssl.gstatic.com/ui/v1/icons/mail/images/cleardot.gif> 







  


  

 
<http://www.reuters.com/article/2014/11/27/us-opec-meeting-idUSKCN0JA0O320141127>
 image

  

  

  

  

  


VIENNA (Reuters) - Saudi Arabia blocked calls on Thursday from poorer members 
of the OPEC oil exporter group for production cuts to arrest a slide in global 
prices,... 

        


 
<http://www.reuters.com/article/2014/11/27/us-opec-meeting-idUSKCN0JA0O320141127>
 View on www.reuters.com 

Preview by Yahoo 

        
                                                                

  

 

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