Dear NPR

March 20, 2020

National Public Radio (NPR) news promotes itself as fact-based and accurate news.  I’ll provide you with one example of why I’m very troubled with NPR news coverage.

Over the last 10-12 years, there have been numerous NPR segments concerning fracking for oil and gas in the U.S.  I can only characterize the segments as cheerleading for the oil and gas industry.  What I heard from the segments is that U.S. shale oil and gas resources are huge, infinite or nearly infinite, and that the industry, and people who worked in the industry, were making tremendous amounts of money.

Even in the early days of the fracking “boom”, there was considerable evidence that the magnitude of the oil and gas resources were being significantly overhyped by U.S. government agencies and industry cheerleaders.

One early voice stating that government projections were greatly exaggerated was David Hughes.  David has had decades of experience estimating oil and gas resources for the Canadian Geological Survey, 32 years, and beyond.  Was he ever on NPR news programs?  I certainly never heard him.  Here is one example of his assessment of shale oil resources in California.

According to the following article, the U.S. government’s estimate of oil resources in the Monterey Shale region was high by 96% and David Hughes’ estimate was accurate.  Did I hear that on NPR news programs?  No.

David provides updated reports on U.S. shale resources essentially every year and he consistently makes the case that U.S. government resource estimates are greatly exaggerated.

An industry insider, Art Berman, has been making the same case since the early days of the fracking “boom”.  Art has decades of experience in the oil industry working for oil majors as well as his own petroleum geology company.  He has been stating for a long time that the shale oil and gas development in the U.S. is a retirement party for petroleum geologists.   Has Art ever been on an NPR news program?  I’ve never heard him on NPR.

U.S. government agencies that assess oil resources and future production have a long history of great exaggeration.  Here is something I wrote years ago.

If you don’t wish to read the article, I’ll just state that U.S. government projections of oil production 11 years out were high by 116% while my projection was off 0.0% for the sum of Norwegian and U.K. North Sea oil production. Does the mainstream media, including NPR, ever question U.S. government assessments of oil and gas resources?  As far as I can determine, it never does.

The exaggerated estimates of shale oil and gas resources by the government and others assumes that a shale play will be homogeneously productive based upon results from the most productive region within the play.  Shale plays have sweet spots where production is high but most of a play is not particularly productive.  In the Bakken play of North Dakota, ~90% of the oil production comes from 4 counties out of 16 in the play.

What has happened in the major U.S. shale plays over the last ~10 years is that fracking companies have rapidly drilled up the sweet spots and at this point have largely saturated the sweet spots with wells.  The rapid drilling of the sweet spots has led to a rapid increase in production but with long-term consequences.

That can best be seen in the Barnett Shale region of Texas, a major gas producing region.  In 2008 there were 194 rigs drilling for gas in the Barnett Shale.  The industry had largely drilled up the region by 2012 when production peaked.

There are essentially no drilling rigs in the region now because there is no place left to drill.  Production has declined every year since 2012 and in 2019, production was less than 50% of the 2012 value.  Has NPR ever covered this?  I haven’t heard about it on NPR.

At this point, it appears that Permian Basin, Bakken and Eagle-Ford regions are saturated with wells or close to saturation.  These are the top 3 shale oil producing regions in the U.S. with the Permian Basin being by far the largest.  Here is an article suggesting an early demise for Permian Basin oil production.

The case for an imminent decline of oil production in the Permian Basin, Bakken and Eagle-Ford regions can be made based upon geological considerations but can also be made on financial considerations as well.

Although it apparently has escaped the attention of NPR news programs, the high level of debt in the fracking industry has been evident for years, with a lot of the debt likely to be lost to investors.  Here is a statement from a recent energy publication:

Shale credit under stress. Roughly $110 billion in shale debt has fallen into the distressed territory, according to the Financial Times. Michael Anderson, a strategist at Citi, told the FT that there is a significant amount of default risk and that “A lot of bonds are in the ‘danger zone.’”

With oil prices around $23/barrel right now (WTI as of March 19), times will get rougher for the industry and many more companies will go bankrupt.

Assuming NPR does have segments about the financial woes of the fracking industry in the future, what I expect is that the problem will be framed as being due to the coronavirus crisis and the oil dispute between Saudi Araba and Russia but the problem goes a lot deeper than that.  It’s about geological limitations and the high cost of drilling fracked wells.

Attributing the industry’s financial problems to the coronavirus and the Saudi Araba/Russia dispute would suggest that once these issues go away, the situation in the fracking industry can be revived to its past glory.  I don’t see that happening.

I believe we will see a fairly rapid decline in the production of shale oil and gas in the U.S. as a large number of fracking companies go bankrupt.  I don’t see investors again being taken in by the promises of industry corporate executives, especially when the best drilling acreage is long gone.  That is not a message I expect to hear on NPR.

Roger Blanchard

Roger Blanchard teaches chemistry at Lake Superior State University and authored the book “The Future of Global Oil Production: Facts, Figures, Trends and Projections by Region,” McFarland & Company (2005).

Tags: oil price, shale bubble