Why the New EIA Forecast Is Unrealistic
The Energy Information Administration (EIA) of the U.S. Department of Energy has just released its Annual Energy Outlook (AEO) 2018, with forecasts for American oil, gas and other forms of energy production through mid-century. As usual, energy journalists and policy makers will probably take the document as gospel.
That's despite the fact that past AEO reports have regularly delivered forecasts that were seriously flawed, as the EIA itself has acknowledged. Further, there are analysts inside and outside the oil and gas industry who crunch the same data the EIA does, but arrive at very different conclusions.
The last few EIA reports have displayed stunning optimism regarding future U.S. shale gas and tight oil production, helping stoke the notion of U.S. "energy dominance." No one doubts that fracking has unleashed a gusher of North American oil and gas on world markets in the past decade. But where we go from here is both crucial and controversial.
The most comprehensive critiques of past AEO forecasts have come from earth scientist David Hughes, a Fellow of Post Carbon Institute (note: I, too, am a Post Carbon Institute Fellow). Since 2013, Hughes and PCI have produced annual studies questioning EIA forecasts, based on an analysis of comprehensive play-level well production data. Their latest report, a critical look at AEO2017, is just out.
"Shale Reality Check: Drilling Into the U.S. Government's Rosy Projections for Shale Gas & Tight Oil Production Through 2050" explores four big questions crucial to the realization of the EIA's forecasts:
1. How much of the industry's recent per-well drilling productivity improvement is a result of better technology, and how much is due to high-grading the best-quality parts of individual plays? Over the past few years, industry has shown the ability to extract increased amounts of oil and/or gas from each well. This has been achieved in part by drilling longer horizontal laterals, tripling the amount of water and proppant (usually sand) used per unit of well length, and increasing the number of fracking stages. It is also in part a result of "high-grading," or focusing drilling on the best-quality parts of each play (termed "sweet spots" or "core areas"). The decline in average well productivity observed in parts of some plays, despite the application of enhanced technology, suggests that sweet spots there are becoming saturated with wells. When this happens, drillers must either move to lower-quality rock outside of sweet spots, or drill wells too close together, which results in well interference or "frac hits" and reduced well production.
2. Can technological advancement in the industry continue to raise productivity indefinitely? If, as the EIA suggests, improved technology will continue to increase well production, then perhaps per-well productivity can continue to grow for some time. However, based on the analysis of recent data, Hughes questions this (as does a team of MIT researchers). Well productivity is already declining in some plays, despite the application of enhanced technology, indicating that technology and high-grading have reached limits. Given uniform reservoir quality, improved technology allows the resource to be extracted more quickly with fewer wells, but it does not necessarily increase the overall amount of resource that can be recovered.
3. What will be the ultimate cumulative production from all U.S. tight oil and shale gas wells? Taking the above points into account, Hughes concludes from a detailed analysis of production data that the EIA is making extremely optimistic assumptions about ultimate production and long-term production rates in most shale plays.
Production over the long term is likely to be fraction of what the EIA is forecasting.
4. What about profitability? So far, overall, the industry has lost money on tight oil production, and shale gas has done little better. That's even with most recent drilling being focused in core areas. The industry and its investors assume that if productivity continues to increase, and oil prices rise, profitability will eventually materialize. But what levels of oil and gas prices would be required to profitably extract fuels in the large non-core areas that the EIA assumes will eventually be tapped after "sweet spots" are drilled and exhausted? The AEO offers little in the way of realistic analysis on this point.
Let's approach this subject another way. If you were an EIA analyst and you wanted to produce the most optimistic estimate possible of future U.S. oil and gas production, how might you go about it? You might do the following:
- Mischaracterize the source of recent productivity improvements (assume it's mostly technology, not high-grading);
- Extrapolate recent well productivity improvements far into the future, even though evidence suggests this is unwise;
- Assume that large areas that are not currently being drilled will be highly productive; and
- Ignore price and profitability.
Check, check, check and check.
Hughes figures, using EIA assumptions, that meeting the agency's projections for shale gas and tight oil through 2050 for the 88 percent of production that would come from major plays would require drilling and fracking over 1 million wells at a cost of $5.7 trillion (the remaining 12 percent would require .68 million wells at a cost of $4.1 trillion). The EIA's own estimate for all oil and gas (conventional, shale and offshore) is 1.3 million wells at a cost of $7.7 trillion. It would also consume countless billions of gallons of water and millions of tons of sand and chemicals. One might question the plausibility of this scale of expenditure of capital and physical resources. But even if the project were practically feasible, would it represent the best use of money in securing our energy future? And would the inevitable near- and long-term health and environmental impacts be somehow justified?
The EIA seems to assume that its audience consists of potential investors in struggling tight oil and shale gas companies, and that it speaks on behalf of those companies. That's not the proper role of a government agency. Taxpayers who fund AEO reports deserve realistic estimates of future production, costs of production and prices needed for profitable production. Otherwise, the agency's pronouncements will continue to resemble those of the Wizard of Oz: Be amazed! Be awed! But pay no attention to the man behind the curtain.
By Victoria Masterson
Using one of the world's problems to solve another is the philosophy behind a Norwegian start-up's mission to develop affordable housing from 100% recycled plastic.
Sustainable Homes<p>UN-Habitat says an <a href="https://unhabitat.org/un-habitat-aims-to-use-plastic-waste-to-support-housing-for-all" target="_blank">estimated 60% of people living in urban areas of Africa are in informal settlements</a>. At the same time, between 1990 and 2017, African countries imported around 230 metric tonnes of plastic, "which mostly ended up in dump sites creating a massive environmental challenge," the agency adds.</p><p>UN-Habitat deputy executive director, Victor Kisob, said the aim of the partnership with Othalo was to "promote adequate, sustainable and affordable housing for all."</p>
Artist's impression of an Othalo community, imagined by architect Julien De Smedt. Othalo<p>Othalo's process involves shredding plastic waste and mixing it with other elements, including non-flammable materials. Components are used to build up to four floors, with a home of 60 square metres using eight tons of recycled plastic. A factory with one production line can produce 2,800 housing units annually.</p><p>Following successful laboratory tests, Othalo's factory in Estonia has started producing components to build three demonstration homes for Kenya's capital, Nairobi; Yaoundé, the capital of Cameroon and Dakar, the capital of Senegal.</p><p>Othalo founder Frank Cato Lahti has been developing and testing the technology since 2016 in partnership with <a href="https://www.sintef.no/en/" target="_blank">SINTEF</a>, a 70-year-old independent research organization in Trondheim, Norway, and experts at Norway's <a href="https://en.uit.no/startsida" target="_blank" rel="noopener noreferrer">University of Tromsø</a>.</p>
Othalo founder Frank Cato Lahti. Othalo<p>Almost <a href="https://www.un.org/development/desa/publications/2018-revision-of-world-urbanization-prospects.html" target="_blank">seven out of every 10 people in the world are expected to live in urban areas by 2050</a>. More than 90% of this growth will take place in Africa, Asia, Latin America, and the Caribbean.</p><p>"In the absence of effective urban planning, the consequences of this rapid urbanization will be dramatic," UN-Habitat warns.</p><p>Lack of proper housing and growth of slums, inadequate and outdated infrastructure, escalating poverty and unemployment, and pollution and health issues, are just some of the effects.</p><p>Mindsets, policies, and approaches towards urbanization need to change for the growth of cities and urban areas to be turned into opportunities that will leave nobody behind, UN-Habitat says.</p>
Pioneers of Change<p>Reimagining cities and communities for greater resilience and sustainability was a key topic at the<a href="https://www.weforum.org/events/pioneers-of-change-summit-2020" target="_blank"> World Economic Forum's Pioneers of Change Summit 2020</a>.</p><p>The digital event brought together innovators and stakeholders from around the world to explore solutions to the challenges facing enterprises, governments and society.</p><p>Opening the summit, <a href="https://www.weforum.org/events/pioneers-of-change-summit-2020/sessions/opening-plenary-8f731cbc65" target="_blank">Stephan Mergenthaler, the Forum's Head of Strategic Intelligence and a member of the Executive Committee</a>, said: "We need to change the way we produce, the way we live and interact in our cities to make this transition to net-zero emissions a reality…</p><p>"And as this year has illustrated so dramatically, we need to make every effort that we keep populations healthy, if we want to avoid jeopardizing all this progress."</p><p><em>Reposted with permission from </em><em><a href="https://www.weforum.org/agenda/2020/11/un-africa-recycled-plastic-housing/" target="_blank">World Economic Forum</a>.</em><a href="https://www.ecowatch.com/r/entryeditor/2649069252#/" target="_self"></a></p>
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By Dolf Gielen and Morgan Bazilian
John Kerry helped bring the world into the Paris climate agreement and expanded America's reputation as a climate leader. That reputation is now in tatters, and President-elect Joe Biden is asking Kerry to rebuild it again – this time as U.S. climate envoy.
Energy Is at the Center of the Climate Challenge<p>The <a href="https://science2017.globalchange.gov/chapter/1/" target="_blank">effects of climate change</a> are already evident across the globe, from <a href="https://theconversation.com/100-degrees-in-siberia-5-ways-the-extreme-arctic-heat-wave-follows-a-disturbing-pattern-141442" target="_blank">extreme heat waves</a> to <a href="https://science2017.globalchange.gov/chapter/12/" target="_blank">sea level rise</a>. But while the challenge is daunting, there is hope. Solar and wind power have become the <a href="https://www.irena.org/publications/2020/Jun/Renewable-Power-Costs-in-2019" target="_blank">cheapest forms of power generation globally</a>, and technology progress and innovation continue apace to support a transition to clean energy.</p><p>In the U.S. under a Biden administration, long-term national climate legislation will depend on who controls the Senate, and that won't be clear until after two run-off elections in Georgia in January.</p><p>But there is no shortage of <a href="https://www.bloomberg.com/features/2020-biden-climate-change-advice/" target="_blank">ideas for ways Biden</a> could still take action even if his proposals are blocked in Congress. For example, he could use executive orders and direct government agencies to tighten regulations on greenhouse gas emissions; increase research and development in clean energy technologies; and empower states to exceed national standards, <a href="https://www.reuters.com/article/us-autos-emissions-california/defying-trump-california-locks-in-vehicle-emission-deals-with-major-automakers-idUSKCN25D2CH" target="_blank" rel="noopener noreferrer">as California did in the past with auto emission standards</a>. A focus on a just and equitable transition for communities and people affected by the decline of fossil fuels will also be key to creating a sustainable transition.</p><p>The U.S. position as the world's largest oil and gas producer and consumer creates political challenges for any administration. U.S. forays into European energy security are often treated with suspicion. Recently, France blocked <a href="https://www.wsj.com/articles/frances-engie-backs-out-of-u-s-lng-deal-11604435609" target="_blank">a multi-billion dollar contract</a> to buy U.S. liquefied natural gas because of concerns about limited emissions regulations in Texas.</p><p>Strengthening cooperation and partnerships with like-minded countries will be critical to bring about a transition to cleaner energy as well as sustainability in agriculture, forestry, water and other sectors of the global economy.</p>
Creating a Global Sustainable Transition<p>How the world recovers from COVID-19's economic damage could help drive a lasting shift in the global energy mix.</p><p>Nearly one-third of Europe's US$2 trillion economic relief package <a href="https://www.bloomberg.com/news/articles/2020-07-21/eu-approves-biggest-green-stimulus-in-history-with-572-billion-plan" target="_blank" rel="noopener noreferrer">involves investments that are also good for the climate</a>. The European Union is also strengthening its 2030 climate targets, though each country's energy and climate plans will be critical for successfully implementing them. The <a href="https://joebiden.com/clean-energy/" target="_blank" rel="noopener noreferrer">Biden plan</a> – including a $2 trillion commitment to developing sustainable energy and infrastructure – is aligned with a global energy transition, but its implementation is also uncertain.</p><p>Once Biden takes office, Kerry will be joining ongoing <a href="https://www.un.org/en/conferences/energy2021/about#:%7E:text=The%20overarching%20goal%20of%20the,2030%20Agenda%20for%20Sustainable%20Development.&text=Accelerate%20delivery%20of%20United%20Nations,related%20issues%20at%20all%20levels." target="_blank" rel="noopener noreferrer">high-level discussions on the energy transition</a> at the U.N. General Assembly and other gatherings of international leaders. With the U.S. no longer obstructing work on climate issues, the G-7 and G-20 have more potential for progress on energy and climate.</p><p>Lots of technical details still need to be worked out, including international trade frameworks and standards that can help countries lower greenhouse gas emissions enough to keep global warming in check. <a href="https://www.carbonpricingleadership.org/what" target="_blank" rel="noopener noreferrer">Carbon pricing</a> and <a href="https://www.csis.org/analysis/how-can-europe-get-carbon-border-adjustment-right" target="_blank" rel="noopener noreferrer">carbon border adjustment taxes</a>, which create incentive for companies to reduce emissions, may be part of it. A consistent and comprehensive set of national energy transition plans will also be needed.</p><p>The global shift to <a href="https://www.irena.org/publications/2019/Jan/A-New-World-The-Geopolitics-of-the-Energy-Transformation" target="_blank">clean energy will also have geopolitical implications for countries and regions</a>, and this will have a profound impact on wider international relations. Kerry, with his experience as secretary of state in the Obama administration, and Biden's plan to make the climate envoy position part of the National Security Council, may help mend these relations. In doing so, the U.S. may again join the wider community of countries willing to lead.</p>
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By Maria Caffrey
As we approach the holidays I, like most people, have been reflecting on everything 2020 has given us (or taken away) while starting to look ahead to 2021.