Will the Arrival of Shale Finally End the Peak Oil Debate?

Tim Haïdar

When assessing the potential of shale, there is perhaps no better example to use than the United States.

One of the largest consumers of energy in the world – much of it imported – the country continues to rely heavily on fossil fuels to power its economy, which is still recovering from the global economic downturn that struck in 2008

As a result, it is also one of the countries most concerned about the peak oil debate.

Thirty of the 42 largest oil producing companies in the world have now seen production peak or plateau. The United States itself has seen domestic production decline steadily for the past 40 years, despite the investment being ploughed into exploration and production.

Indeed, estimates from the Association for the Study of Peak Oil and Gas (ASPO) suggest the peak of regular oil production was hit in 2005, with the peak of all liquids due to be reached in 2015.

However, in recent years the discovery of shale gas has provided it with the opportunity to perhaps mitigate some of the consequences caused when production can simply no longer keep up with demand.

Shale Gas

In its latest Annual Energy Outlook, the United States Energy Information Administration (EIA) has more than doubled its estimates for recoverable shale gas resources.

Between 2006 and 2010, shale gas production experienced a 48 per cent average yearly increase, and extraction is expected to continue to grow at significant rates, increasing three-fold between 2009 and 2025.

The figures are indeed all positive on the surface, but the EIA stresses they are liable to change and "the estimates embody many assumptions that might prove to be untrue in the long term."

Estimates included in the outlook are based on the assumption that production is to continue at current levels, although "experience to date has shown that production rates from neighbouring shale gas wells can vary by as much as a factor of three".

Indeed, how long-term production rates from shale gas wells vary is as yet undocumented, as many of the plays were discovered relatively recently.

What's more, production has so far generally been confined to the areas which are known to have the highest rates, and levels are likely to drop when operations move away from these areas.

All this would suggest that while currently it's believed shale gas could meet domestic gas demand in the United States for the next 100 years, this is likely to change.

The Peak Oil Debate

As well as the analysis laid out by the EIA, there are plenty would doubt that shale gas will be such a game changer as many are predicting. There are even fewer who believe it will put an end to the peak oil debate, if reports are to be believed.

Making his keynote address at the ASPO conference, Dr James Schlesinger noted: "Shale gas, which is apparently coming in abundance (but is not, of course, oil) may somewhat alleviate the pressures on liquid fuels.

"But in general we must expect to get along without what has been our critical energy source in expanding the world's economy for more than half a century."

It is essential to remember the economic arguments when considering the peak oil debate.

The majority of industrial nations rely heavily on oil, in particular for fuel, which shale gas will quite simply not be able to replace. However, shale gas can make a significant contribution to the economy in the minds of some.

Speaking at a recently peak oil conference in Denver, Peter Dea, former president of the Colorado Oil and Gas Association, said: "I truly believe that natural gas is the common thread of the economy, the environment and energy security."

The general consensus, however, is that the peak oil debate has not been put to bed with the rise of shale gas.