By Post Carbon Institute
Post Carbon Institute has released two reports authored by Earth scientist J. David Hughes assessing the U.S. Energy Information Administration’s (EIA) most recent projections for domestic tight (“shale”) oil and shale gas production.
The reports 2016 Tight Oil Reality Check and 2016 Shale Gas Reality Check evaluate the EIA’s increasingly optimistic projections in light of actual production data (through June 2016) and the agency’s own previous estimates. The reports raise critical questions about the veracity and volatility of the EIA’s estimates, questions that are especially important as the Trump Administration sets its domestic energy policy.
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“The EIA kindly provided the play level projections that make up its Annual Energy Outlook reference case forecasts,” said Earth scientist and the reports’ author J. David Hughes. “This allowed a comparison to the administration’s previous projections and my own forecasts, which were based on an analysis of well productivity by subarea within each play and other fundamentals such as the number of available drilling locations and decline rates. I was also able to assess the EIA’s most recent projections in light of actual production data from the field. Simply put, when looked at on a play-level, the EIA’s forecasts are highly unlikely to be realized.”
The Annual Energy Outlook (AEO) published yearly by the U.S. Energy Information Administration is taken by media, policymakers, investors and general public at face value. Yet the EIA’s projections for future energy prices and production are very often wrong (like when it revised its own estimate for the Monterey shale downward by 96 percent after just three years) and tend to show a consistent optimism bias.
For example, AEO 2016 has increased estimates of tight oil production through 2040 by 19 percent over AEO 2015 and 31 percent over AEO 2014, while its estimates for shale gas production have been increased by 31 percent over AEO 2015 and 43 percent over AEO 2014. This despite the fact that U.S. tight oil production is already down 13 percent (as of June 2016) from its peak in March 2015 and shale gas production has declined 5 percent from its peak in early 2016. The EIA does not provide an explanation for why it is so optimistic about future production, especially considering that AEO 2016 anticipates lower drilling rates than in 2014 through 2040, when it projects 31 percent higher oil and gas production, and only modest increases in prices. It also does not account for the year-over-year volatility in its estimates of various plays. For example, Marcellus shale gas production estimates through 2040 are now 76 percent higher than they were in 2014 (accounting for 147 percent of the unproved, technically recoverable resource in the play), while Eagle Ford production has been reduced by 36 percent in that same period of time.
“Forty years ago, the EIA was uniquely granted independence from the rest of the federal government in order to ensure that its data collection and analysis would not be politicized. But with that independence comes great responsibility,” said Asher Miller, executive director of Post Carbon Institute. “Particularly with an incoming presidential administration that is, by all signs, strongly in favor of expanding fossil fuel production,…