Oil Companies Wildly Overestimate Amounts of Recoverable Shale Oil
Oil Companies Wildly Overestimate Amounts of Recoverable Shale Oil
By Ashley Eady/Lubbock Avalanche-Journal / lubbockonline.com
May 22, 2014

The current US oil boom, from hydraulic fracturing of permeable shale formations, may soon be over, while the accompanying environmental damage will be around for years to come: "

"The curve of shale drilling is another big problem, Smith said. Shale play reserves are typically very thin in comparison to conventional wells, with layers of oil tightly sandwiched between layers of shale formation. Horizontal drilling of a shale play means the operator is going after the oil deposit from the side, which quickly draws the reserve away from the recovery point. The result is what Smith calls “an extremely dramatic decline curve.” Operators ultimately end up chasing the deposit sideways constantly, and the cost of drilling horizontally in pursuit of the ever-retreating reserve quickly surpasses the recovered oil return. “Eventually horizontal drilling is suspended because operators reach a point where they are just burning cash.” Smith said.

The Eagle Ford Shale, which is currently 85 percent declined, is a perfect example of the limitations associated with horizontal drilling, Smith said. On the long end, projections promoted by oil companies, Permian shale plays are expected to last 10 to 15 years, conservatively. Smith and his colleagues in the geology field expect drilling on the Cline shale to last no more than 18 months."

Of course, the longer the projected lifetime of the asset is, the higher dollar value there is for investors and the sales price of the asset is naturally higher as well.

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Oil Companies Wildly Overestimate Amounts of Recoverable Shale Oil