new york times investigation into fracking

Fracked gas is a boom industry, seen as an environmentally friendly substitute for coal - but there are questions about it's long term financial viability - with some experts suggesting shale gas may become another "toxic asset".

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Hydraulic fracturing or fracking is a boom industry. It's a method of extracting gas not accessible by conventional drilling and has been hailed as one of the energy sources of the future, especially in the USA. The technology is controversial, has caused serious environmental damage in some areas and may be releasing enough methane to make it more carbon unfriendly than coal.

Now, a "must read" major investigation by the New York Times raises serious concerns about the financial viability of shale gas production. Over the last 6 months NYT journalists have reviewed hundreds of e-mails from industry insiders, independent geologists, market analysts and energy executives questioning oil industry predictions about the ease of extracting gas from shale.

Powerful independent financial analysts have likened trading in fracked gas fields to “the dot-com boom” and a “ponzi-scheme”, with some commentators suggesting that oil companies may be “intentionally or even illegally overstating the productivity of wells and the size of their reserves”.

Independent geologists dispute predictions of production over a 20 to 60 year span. Many wells show a year on year decline in gas output from year one and some believe projections have been made on the output of the very best wells in an area rather than overall output.

Whilst gas and oil companies present a bullish view of shale gas prospects other commentators are more pessimistic. One geologist said “no well is really economic right now”... … “they are all losing a little bit of money or only making a little bit of money”. There are concerns that a fall in gas prices could cause financial havoc – the 2008 collapse in gas prices has already had serious economic fall out for landowners in the Fort Worth area of Texas.

If they prove to be true, the issues raised by the NYT, investors hoping to reap big dividends from GAG (golden age of gas) won't be amused - but it could be good news for low carbon energy. There are real fears that a gas bonanza will affect the drive for investment in low carbon technology - a collapse of confidence in fracked gas could be a boost for wind and solar.