US Government's Latest Tight Oil & Shale Gas Forecasts ‘Highly To Extremely Optimistic' And ‘Unlikely To Be Realized'

In-depth analysis reveals Energy Information Administration’s annual projections of oil & gas production from fracking rely on unsupportable assumptions.

A new report raises critical questions about the plausibility of the U.S. federal government's tight (shale) oil and shale gas supply projections, questions that are especially important as 69% of domestic oil production and 77% of domestic gas production are projected to come from shale plays between 2020 and 2050.

Shale Reality Check 2021—the latest in a series of semi-annual reports by earth scientist and 32-year Geological Survey of Canada veteran J. David Hughes—evaluates the U.S. Energy Information Administration's (EIA) projections for U.S. tight oil and shale gas production from hydraulic fracturing (“fracking”) in light of actual production and exploration data from top shale plays. The 160-plus-page report finds the EIA’s projections “highly to extremely optimistic.”

Among the report's findings:

• In most plays, meeting EIA play-level production forecasts through 2050 would require the recovery of all proven reserves plus a high proportion of the EIA’s estimates of unproven resources.^[1]
  • The total tight oil projection is 4.5 times higher than proven U.S. tight oil reserves and more than triple all proven U.S. crude oil reserves at yearend 2019. The total shale gas projection is 3.6 times higher than proven U.S. shale gas reserves and 63% of proven reserves plus unproven resources.
  • Moreover, in most plays the EIA forecasts exit 2050 at high production levels—often significantly higher than current production rates—implying that vast additional resources would remain after 2050.
• The EIA appears to have overestimated drillable area in most plays, and extrapolated well estimated ultimate recovery (EUR) over wide areas when they are in fact highly variable.
  • As sweet spots become saturated with wells and drilling of necessity moves into lower quality parts of plays where average well production is lower, per-barrel drilling and completion costs will increase to levels significantly higher than the EIA’s optimistic assumptions of less than $30 per barrel for most tight oil plays and less than $15 per barrel of oil equivalent for most shale gas plays
  • Thus, not only will the future supply from tight oil and shale gas plays be less than the EIA estimates, it is likely to be of significantly higher cost as drilling moves into lower quality portions of plays which constitute the bulk of what remains.

The EIA’s projections are published yearly in its Annual Energy Outlook (AEO) and are largely taken at face value by media, policymakers, investors, and the general public. Yet the EIA's projections of future production are commonly over estimated (for example, in 2014 the EIA slashed its estimate for California’s Monterey shale play by 96% following the release of Hughes’ Drilling California report some months earlier) and tend to show a consistent optimism bias.

"Forty years ago, the EIA was uniquely granted independence from the rest of the federal government in order to ensure that its data collection and analysis would not be politicized. But with that independence comes great responsibility," said Asher Miller, Executive Director of Post Carbon Institute, publisher of the report. "The American people need to be certain that U.S. energy policy is based on realistic, independently-sourced and transparent analysis rather than wishful thinking."

"The EIA’s reference case seems to assume that our nation will fail to meaningfully transition away from climate-changing fossil fuels,” added Richard Heinberg, Post Carbon Institute Senior Fellow. “Based on the EIA’s assumptions, more than 700,000 new tight oil and shale gas wells will need to be drilled over the next few decades, at a cost at over $5T—with enormous environmental, infrastructural, and health impacts. The public deserves to know that the U.S. government assumes the energy sector will remain committed to enormous amounts of fossil fuel production, despite its ostensible commitments to addressing the climate crisis.”

Download the full report at postcarbon.org/SRC2021.

Post Carbon Institute is a non-profit organization providing individuals and communities with the resources needed to understand and respond to the interrelated ecological, economic, energy, and equity crises of the 21st century. For more information, visit https://www.postcarbon.org.

J. David Hughes is an earth scientist who has studied the energy resources of Canada for four decades, including 32 years with the Geological Survey of Canada as a scientist and research manager. Over the past decade, Hughes has researched, published and lectured widely on global energy and sustainability issues in North America and internationally. https://www.postcarbon.org/our-people/david-hughes/

^[1] Proven reserves are thought to be both economically and technologically recoverable with a high degree of certainty whereas unproven resources are thought to be technologically recoverable with a lower degree of certainty and economic viability has not been assessed.