Natural Gas: The Fracking Fallacy

President Obama is fond of touting America's vast trove of natural gas—and the energy (read: economic growth) it can provide—as a reason to support fracking.  "Our 100-year supply of natural gas is a big factor in drawing jobs back to our shores," he told a gathering at Northwestern University in October.
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Companies are betting big on forecasts of cheap, plentiful natural gas.  Over the next 20 years, US industry and electricity producers are expected to invest hundreds of billions of dollars in new plants that rely on natural gas.  And billions more dollars are pouring into the construction of export facilities that will enable the United States to ship liquefied natural gas to Europe, Asia and South America.

All of those investments are based on the expectation that US gas production will climb for decades, in line with the official forecasts by the US Energy Information Administration (EIA).  As agency director Adam Sieminski put it last year:  “For natural gas, the EIA has no doubt at all that production can continue to grow all the way out to 2040.”

But a careful examination of the assumptions behind such bullish forecasts suggests that they may be overly optimistic, in part because the government's predictions rely on coarse-grained studies of major shale formations, or plays.  Now, researchers are analyzing those formations in much greater detail and are issuing more-conservative forecasts.  They calculate that such formations have relatively small 'sweet spots' where it will be profitable to extract gas.

The results are “bad news”, says Tad Patzek, head of the University of Texas at Austin's department of petroleum and geosystems engineering, and a member of the team that is conducting the in-depth analyses.  With companies trying to extract shale gas as fast as possible and export significant quantities, he argues, “we're setting ourselves up for a major fiasco”.

That could have repercussions well beyond the United States.  If US natural-gas production falls, plans to export large amounts overseas could fizzle.  And nations hoping to tap their own shale formations may reconsider.  “If it begins to look as if it's going to end in tears in the United States, that would certainly have an impact on the enthusiasm in different parts of the world,” says economist Paul Stevens of Chatham House, a London-based think tank.

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