Wednesday, June 3, 2009

More on Matt Simmons and Shale

I'm spending the week at my in-laws (with terrible internet access) so I'm catching up on a few months of magazines. I came across a February 2009 interview in Forbes with Matt Simmons, entitled "Crude Cassandra." The article was mostly background stuff about peak oil and the man himself.

Towards the end of the article he was asked about the technology that enables shale gas exploration. His quote: "Technology is fabulous, but it does exactly the opposite of what people thought it was going to do--it accelerates decline rates...The simple analogy is you're having a Slurpee-slugging contest. You have a normal vertical straw and someone comes along with a multilateral straw. You're not getting more out, just getting it out faster."

He is dismissive of shale-enabling technology, but I think he is missing the point. True, the new technology does expedite the removal of the gas and lead to steeper decline rates. It’s not going to change the total amount of gas in the reservoir. But what Mr. Simmons fails to acknowledge is that the technology has made accessing vast amounts of shale gas economical feasible. That’s the game changer. The technology also makes more of the gas in the reservoir accessible.

Mr. Simmons’s basic thesis is that the overall fossil fuel resource supply is limited and man has accessed most available supplies in the world. But the new shale enabling technology changes some of the supply fundamentals. It creates new potential supply that was inaccessible just a few years ago. It doesn’t change the fact that fossil fuels are finite resources. Geologists have known about shale gas for years, but without the technology it might have well been located on the moon.

I’m not sure if Mr. Simmons is dismissive of the technology because he is pessimistic or if he is drawing the conclusion to fit his thesis. I’m not a zealot about peak oil, but I believe that production using existing technology has peaked, but I think he might be trying to squeeze a square peg in a round hole.

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