By Malini Hariharan
The blog has been reading with interest a recent report about the Energy Information Administration (EIA) cutting its estimate of the Marcellus shale gas reserves by 80% following a recent study by the US Geological Survey (USGS).
The USGS has estimated that the Marcellus field, which stretches from New York to Virginia, contains only about 84 trillion cubic feet (tcf) of gas, significantly lower than an EIA projection of 410 tcf that was made in April this year.
Differing methodologies are probably responsible for the widely divergent numbers by two government agencies
The EIA focused on reserves and relied on future projections, including technology improvements that would allow more gas to be produced. On the other hand, the USGS study focused on resource estimates (the amount of gas that is in the ground and can be extracted) but did not look at how high gas prices prices will have to rise justify drilling.
Both methodologies have their limitations but the EIA's decision to revise its assessment suggests that its numbers were inflated. Therefore questions must also be asked about estimates made by the EIA on other fields in the US, which have prompted every major US petrochemical producer to plan new ethane cracker projects. In its April study the EIA has estimated that the US has 1,744 tcf of technically recoverable gas of which 550 tcf is shale gas.
Shale gas supporters have not been discouraged by the recent development and have argued that the USGS number is higher than its estimate made in 2002. And even at 84tcf the Marcellus field is still much bigger than other fields in the US.
But in the overhyped world of US shale gas where large sums of money are being made on promises of immense riches deep under the ground, the USGS report confirms that there is a great deal of risk associated with the business.