“THE BARBARIANS ARE AT THE DOOR” - The Power Surge: Energy, Opportunity, and the Battle for America's Future - page 42

strikingly high decline rates, the industry term for how quickly pro-
duction drops. h ese two quantities—initial production and decline
rate—combine to tell you how much gas a given well will produce:
its EUR. High EUR means a producer will ultimately have lots of gas
to sell, which makes it more likely a well will be at ractive enough to
drill and maintain in the i rst place. Low EUR means the opposite,
and at some point it makes development and production unat ractive
and unwise.
Critics of shale gas euphoria argue that the industry, investors, and
government analysts are badly overestimating EUR. People have a
good idea of how much gas a well will produce in its i rst few years of
operation. But skeptics point out that industry estimates of total EUR
include decades of expected production from each well (a typical shale
gas well is expected to remain in service for more than twenty years).
h ey charge that industry has exploited the fact that no one has much
experience with aging shale gas wells in order to overestimate how
much natural gas each well will produce as it gets older. 61 Moreover,
they argue that as drillers move beyond “sweet spots” in parts of Texas,
Louisiana, and Pennsylvania where production has been prolii c into
less-at ractive areas, initial production will fall too. If we correct the
estimates—and critics typically point to analyses of shale gas geology
to explain how that should be done—then EURs, and eventually invest-
ment and production, should ultimately come down. In that case, only
one thing would rise: the price of natural gas.
h is debate over geology is unlikely to be fully resolved except
through experience, something that will take years if not decades. Even
absent that, though, there are big reasons to be suspicious of the skep-
tics' more extreme arguments. h e i rst few years of production, rather
than the subsequent few decades, are typically far more important to
the driller's bot om line. Money earned in the i rst few years at er an
investment is made is worth a lot more than money earned ten or twenty
years later, because early earnings can be reinvested. New knowledge
about long-term performance might have smaller consequences than
one might instinctively imagine.
Moreover, when skeptics estimate the impact of weaker well per-
formance on shale gas economics, they typically treat drillers' costs as