Shale Gas Boom or Bust? Estimating US and Global Economically Recoverable Resources

One of the most disruptive energy system technological developments of the past few decades is the rapid expansion of shale gas production in the United States. Because the changes have been so rapid there are great uncertainties as to the impacts of shale production for medium- and long-term energy and climate change mitigation policies. A necessary starting point for incorporating shale resources into modeling efforts is to understand the size of the resource, how much is technically recoverable (TRR), and finally, how much is economically recoverable (ERR) at a given cost.

To assess production costs of shale gas, we combine top-down data with detailed bottom-up information. Studies solely based on top-down approaches do not adequately account for the heterogeneity of shale gas deposits and are unlikely to appropriately estimate extraction costs. We design an expedient bottom-up method based on publicly available US data to compute the levelized costs of shale gas extraction. Our results indicate the existence of economically attractive areas but also reveal a dramatic cost increase as lower-quality reservoirs are exploited.

Extrapolating results for the US to the global level, our best estimate suggests that, at a cost of 6 US$/GJ, only 39% of the technically recoverable resources reported in top-down studies should be considered economically recoverable. This estimate increases to about 77% when considering optimistic TRR and estimated ultimate recovery parameters but could be lower than 12% for more pessimistic parameters. The current lack of information on the heterogeneity of shale gas deposits as well as on the development of future production technologies leads to significant uncertainties regarding recovery rates and production costs. Much of this uncertainty may be inherent, but for energy system planning purposes, with or without climate change mitigation policies, it is crucial to recognize the full ranges of recoverable quantities and costs.