Natural gas industry hits back at 'biased' shale media coverage

According to a recent study, shale gas production in the US and Canada is expected to increase from 13 billion cubic feet per day in 2010 to 52 billion cubic feet per day in 2035.

The New York Times recently published an article about the burgeoning shale natural gas drilling, development and production in the US -- claiming that companies have been exaggerating production numbers and questioning the commercial viability of development.

Various energy veterans have publicly condemned the article, backing the development of an abundant source of domestic clean energy in numerous shale formations across the country.

From Aubrey McClendon, CEO of Chesapeake Energy, a major natural gas producer and committed shale developer in the US:

“The Times story was obviously motivated by an anti-natural gas agenda. It is telling that the reporter chose not to interview a single reliable source and instead selectively quoted emails from unnamed sources or well-known industry critics dating back to as early as 2007 to invent a series of inaccurate and misleading allegations. If the Times was interested in reporting the facts and advancing the debate about the prospective benefits of natural gas usage to energy consumers, it could easily have contacted respected independent reservoir evaluation and consulting firms that annually provide reserve certifications to the US Securities and Exchange Commission or contacted experts at the US Energy Information Administration, the Colorado School of Mines’ Potential Gas Committee, the Massachusetts Institute of Technology, Navigant Consulting and others who would gladly have gone on record to confirm the abundant resources that have been made available thanks to the horizontal drilling and hydraulic fracturing techniques that Chesapeake and other industry peers have pioneered in deep shale formations across the US.

"By analyzing our own and industry peer well performance, we know that the initial productivity of a majority of the industry’s shale gas wells have been steadily improving, both in initial production rates and the expected ultimate recoveries of natural gas. We fully expect that the majority of these wells will be productive for 30-50 years, or even longer. In fact, Chesapeake and the industry are currently producing from vertical Devonian Shale natural gas wells in Appalachia that were drilled more than 100 years ago, and new horizontal wells that interface with a significantly greater amount of shale that may produce that long as well. In fact, Chesapeake operates or has an interest in nearly 8,000 wells that are more than 30 years old and we believe there is ample evidence that shale gas wells can produce for as long as other gas wells have been able to produce.

"The Times questioned the economic merits of shale gas production in complete disregard and/or ignorance of supply and demand fundamentals as well as recent and forward market natural gas prices. No one would argue that with today's natural gas prices the economics of dry gas projects have lower rates of return than they do at prices of $5.00-$6.00 per thousand cubic feet (mcf), which we believe will ultimately be the prevailing price when higher natural gas demand arrives in the years ahead from the utility and transportation sectors. The primary focus of our current drilling program – as we’ve said on numerous occasions through our various press releases and conference calls – has been on identifying and developing new natural gas plays in the U.S. wherein natural gas liquids and oil will add significantly to the overall project economics. Nevertheless, we and others in the industry continue to have learning-curve benefits that make U.S. shale gas projects attractive to the global energy industry.

"In addition to Chesapeake, the list of large companies now active in shale gas development in the US includes such world class energy companies as Anadarko, BG, BHP, BP, Chevron, CNOOC, Conoco, Devon, EnCana, ENI, EOG, ExxonMobil, KNOC, Marathon, Mitsubishi, Mitsui, PetroChina, Reliance, Shell, Statoil, Talisman, and Total, among others. Consider whether it could really be possible that all of these well-respected energy leaders, with a combined market cap of almost $2 trillion, know less about the economics of shale gas production than a single New York Times reporter, a few environmental activists and a handful of shale gas doubters?

"It is also absurd to conclude that shale gas wells are underperforming while America is awash in natural gas and benefiting from natural gas prices less than half of what they averaged in 2008. I also note that Chesapeake and other shale gas producers are routinely beating natural gas production forecasts. In fact, in 2009, thanks to shale gas, the US passed Russia as the largest natural gas producer in the world. Today shale gas production represents approximately 25% of total US natural gas production. How can shale gas wells be underperforming if shale gas companies are beating their production forecasts, natural gas prices remain low and US natural gas demand is at a record high?"

America's Natural Gas Alliance called the story "deeply flawed, inaccurate and misleading," adding:

"This selective use of facts implies a clear bias and continues the reporter's demonstrated pattern of telling one-sided stories without providing readers with any sense of context, nuance or balance.

"Earlier faulty reporting on water contamination has been contradicted by sampling of water supplies in the state of Pennsylvania. And the more recent claims questioning the natural gas industry's ability to tap into our vast potential natural gas resource are challenged by the world's leading geoscientists, and by numerous independent analysts, and academic and industry data, not to mention the federal government. All of this information was provided to the paper, but ignored in the articles.

"The fact is that we are now producing vast supplies of natural gas, and as demand grows there will be ample clean, American natural gas to meet future needs. Advances in horizontal drilling technology just in the last two years allow us to reach sources of natural gas that before were not accessible."

Louisiana Oil & Gas Association President Don Briggs added:

"Recent estimates show that the U.S. holds nearly 1,000 trillion cubic feet of recoverable natural gas in its shale gas deposits.  In fact, the federal government’s own Energy Information Agency attests to these reserve numbers and agrees that they will play a significant role in our nation’s energy portfolio. Currently, the U.S. produces nearly 30 trillion cubic feet of natural gas per year.  That is the most annual natural gas production in U.S. history.


"It is also a fact that shale gas wells are becoming less profitable and taking longer periods of time to payout due to sluggish natural gas prices.  But, the declining price and economics are a result of substantial supply increases of natural gas that these shale developments have produced.

"The New York Times reporter points to a decrease in production in the Barnett Shale region.  However, production and rig activity reports do not seem to support this claim.  Today, the Barnett Shale produces 5.6 billion cubic feet of gas per day.  Two years ago, the Barnett was producing 5.3 billion cubic feet per day.  With over half of the rigs that were in operation a year ago now gone, the statement that production is declining is simply not true.

"The assertion that the Haynesville Shale has not lived up to its expectations is a bold and outlandish statement.  Since its development began in 2008, the Haynesville Shale has resulted in the injection of over $22 billion into the local and state economy in Louisiana, just in fiscal years 2008 & 2009 alone.  In fact, while other states have lost jobs and revenue, the Haynesville Shale development has shielded our state from the economic recession.

"As has been the case since the first shale gas well was drilled, advancements in natural gas drilling technology will continue to drive down the costs associated with developing these reservoirs.  Companies are finding new and innovative ways to positively impact their bottom line, while also drilling more safely and efficiently.  Some of these measures include utilizing drilling rigs that run on natural gas and advancements in the hydraulic fracturing and drilling process.

"The article also makes claim that the hydraulic fracturing process is a threat to the environment.  Contrary to the reporter's claims, hydraulic fracturing is essential to the development and production of shale gas resources.  The process is well-regulated by the states and conducted safely, with a proven track record. The oil and natural gas produced thanks to this technology helps fuel our nation's economy by providing jobs, and the energy needed to heat our homes, fill-up our cars, generate electricity and create the basic materials for such things as fertilizer and plastics of every variety.

"Hydraulic fracturing is an environmentally responsible way to make the most of our American energy resources. Without it, wells that would have run dry years ago, or would never have been drilled at all, are made viable. Experts believe 60 to 80 percent of all wells drilled in the United States in the next ten years will require fracturing to remain profitable and operating."

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.