“THE BARBARIANS ARE AT THE DOOR” - The Power Surge: Energy, Opportunity, and the Battle for America's Future - page 41

to build a plant that produces the equivalent of i t y thousand barrels of
fuel a day, that's a big risk to take.
h ere's also the danger that construction costs will be higher than
expected. Early GTL plants were immensely expensive. In the early
1990s, Shell spent nearly a billion dollars building a plant in Malaysia
that could produce only i t een thousand barrels of fuel a day; this was
equivalent to spending three billion dollars on a i t y-thousand-barrel-
a-day facility. 58 A 1999 report from the Idaho National Engineering and
Environmental Laboratory pegged the cost of a new i t y-thousand-bar-
rel-a-day GTL plant at $1.6 billion (at er adjusting for inl ation through
2012). 59 In 2005, a University of Houston professor named Michael
Economides estimated the capital cost of a similar facility at $1.25 bil-
lion. 60 h e most recent at empt to actually build a major GTL plant—
Shell's Qatar-based Pearl project—came in massively over budget. Only
time will tell whether developers can gain enough coni dence in GTL,
and in oil and natural gas prices, to make GTL a signii cant contributor
to displacing oil. (Several companies have made serious noises about
investing in U.S.-based plants, but this hasn't yet translated into any-
thing on the ground.) And, down the road, governments might step
in to provide incentives. For now, though, prophesying a revolution
in how Americans fuel their cars as a result of the shale gas revolution
requires a premature leap of faith.

m m m

Some analysts would say that even the more modest expectations for
shale gas are greatly overblown. History is lit ered with heralded resource
booms that quickly i zzle out. Why should shale gas be dif erent?
A vanguard of critics argues that it won't be. h eir claims typically
come down to three let ers: EUR. Short for estimated ultimate recov-
ery, EUR is one of the most important quantities in determining the
economic viability of any given shale gas well and, as a result, in inl u-
encing future shale gas production.
When a shale gas well i rst starts operation, its production tends to
be prolii c. Industry experts refer to this as a high initial production, or
IP, rate. But then production falls—ot en quickly. Shale gas wells have