APPGOPO on Shale Gas

[RGR]

[quote="Blue Peter"][

[biffvernon]

Shale gas article in New York Times:
http://www.nytimes.com/2011/02/27/us/27gas.html

[fifthcolumn]

I, of course, can't judge. But, to make things simple, Berman seems to reckon a beak-even gas price for shale gas as

This is the problem with extrapolating across the whole industry and by extension our nice little hubbert curve for the globe: concentrations of hydrocarbons aren't uniform: they're lumpily distributed in easier and harder formations.

The worst doomers point to the "fact" that there are only 2000 billion barrels in the ground of which we have already produced some 1000 billion barrels. Actually there is much more than that. There are only 1000 billion barrels that can be produced with conventional technology. This is the reason why the size of the (producable) reserves keeps on growing.

The problems arise in how these hydrocarbons are distributed. Some of them are very difficult to get out (or impossible with current technology - like oil shale). Others are merely hard to get out (like shale oil) or oil sands or venezuelan super heavy. What this means is that any collapse (if it were to come and totally ignoring all the substitutes we have to ease any depletion rate such as walking, cycling, shifting to more efficient transport method - rail vs truck, sea vs rail, electrified vehicles etc etc etc) would be unevenly distributed, with some areas not collapsing at all and others even doing well.

For oil it really comes down to depletion rate. How fast do we deplete and
how much can we replace of the depletion?

Often you hear the doomers say "but that's only one month of global supplies" as if to dismiss a find or a technology improvement.

Well yes, but it's shoring up the depletion rate, making things a lot easier.

We don't go overnight from 90 some million barrels per day to zero barrels per day and have a need to replace the entire 90 million barrels. We only need to replace the barrels of lost production. That can be done by new production or else by substitution as above.

As for shale gas: this is also unevenly distributed. Some of the sources are prolific, others much less so. Some can be produced with the latest tech, others need more work.

Pricewise I can say that *we* make money at $3.50. Now bear in mind that's not just cost of production, that also includes overheads.

Other players may still be making money and yet others may be losing money.

Again: it's important to realise that the price at which a company is profitable isn't the price of production: it also includes all the rest of the crap that is needed midstream and downstream too and there are efficiencies to be had.

Some examples are buying the land at too high a price during the boom. It doesn't matter if your production costs are $1.25 if your fixed costs due to land prices are $4. You're still bleeding money.

I also find it interesting that some of the doomers think it's a problem that prices are so low and ALSO think it will be a problem if prices rise.

Make your minds up.

[kenneal - lagger]

..........

I also find it interesting that some of the doomers think it's a problem that prices are so low and ALSO think it will be a problem if prices rise.

Make your minds up.

It's a problem for two separate reasons. Too low a price and the companies are losing money and the gas won't be produced. Too high a price and the economy can't afford it so it won't be produced, or produced enough to sustain economic growth.