Oil Guru Destroys All Of The Hype About America's Energy Boom

arthur berman

Photo: Arthur Berman

Not everyone believes the U.S. is capable of becoming energy independent thanks to its shale oil and gas reserves, as the International Energy Association suggested recently.The maths just doesn’t work out, they say — America consumes too much. 

But some are even more sceptical than that.

Arthur Berman, an oil analyst with Labyrinth Consulting Services, says the promise of America’s shale reserves have been vastly overstated.

His main argument: Shale is too expensive to drill, and shale wells usually don’t last longer than a couple of years.

Last year, he laid out his case at a gathering of the Association for the Study of Peak Oil and Gas in Austin Texas.

With his permission, we’ve reproduced it here.

There tends to be a huge gap between the estimated amount recoverable and what actually ends up getting recovered.

Shale is the most expensive and most complicated source of energy.

The amount of product shale has contributed to overall consumption has been relatively minuscule.

Berman focuses on the Bakken oil play in North Dakota. As of last summer it had 236 rigs, second highest in the nation.

He says Bakken oil production has increased to 573,000 barrels per day from 4874 producing wells. The average well is 118 barrels of oil per day, and each well costs $11.5 million.

But the Bakken has a 38 per cent decline rate, according to Berman — meaning if you stopped drilling now, you'd lose 38% of your production after a year.

The Bakken is already going at a breakneck rate — there's now very little production coming from wells older than a few years.

We can see the same phenomenon occurring in other shale plays like the Eagle Ford in Texas.

The number of currently viable wells in the Bakken has dwindled.

In conclusion: America's gains from shale will be short-lived, and certainly won't be our bridge to independence.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.