In the latest installment (stories published yesterday and today), the Times questions the value of our country?s vast shale gas resources with little more than anonymous sourcing, two-year-old emails and analysis unsupported by fact. Ironically, author Ian Urbina did not call ExxonMobil, the largest natural gas producer in the United States, for comment. You would think an investigative journalist for one of the world?s great newspapers would have been curious to know why the world?s largest publicly traded energy company has invested billions of dollars in a so-called ?Ponzi scheme.? Of course we?re doing no such thing, no matter how hard the article works to imply otherwise.
What does the Times have against an industry that supports more than 2.8 million American jobs and contributes $385 billion annually to the U.S. economy? In Pennsylvania alone, more than
48,000 jobs were created in 2010 because of the development of the Marcellus Shale resources there. U.S. natural gas production in 2010 was at its highest level since 1973 thanks to industry breakthroughs in shale gas production ? facts which the Times fails to mention.Though he did not bother talking to us, the writer did seem to put a lot of weight on the word of a retired geologist who just two years ago wrote that it was ?difficult to imagine? that the ?Haynesville Shale can become commercial.? Ironically, the Haynesville Shale is now the largest gas producer in the United States.
The writer also invokes the Federal Reserve to try to lend credibility to his premise that the shale gas revolution is a flash in the pan like the dot-com bubble and built upon misleading or even illegal accounting practices ? in this case reserves reporting ? like the Enron scandal.
A closer read and a quick Google search shows that the person he is quoting from the Fed was appointed to the Dallas Fed?s advisory committee and is a long-time shale gas opponent. The writer conveniently omits a report issued last year by economists who actually work for the Dallas Fed that notes that ?the Texas experiment in the Barnett Shale proved the technical feasibility of shale gas development and brought costs within bounds that promise to give shale gas an important role in global energy supplies for decades to come.?
The current low price of natural gas, which may indeed make certain wells for some companies uneconomic to drill at this time, is in part a result of increased supply on the market. And that?s a function of the industry?s ingenuity in applying technology to tap resources that had been uneconomic to develop before. These increased supplies of domestic natural gas enhance U.S. energy security and economic competitiveness.
Risks are inherent in the oil and natural gas business. There is no guarantee that oil and gas will be found in quantities that will make it economic to produce. There is always uncertainty in predicting ultimate recoveries, particularly in the early stages of development. The U.S. oil and gas industry is experienced in reducing this uncertainty through studies and the integration of production histories and other data. For example, in the Bakken Formation of North Dakota and Montana, the U.S. Geological Survey now says 3 billion to 4 billion barrels of undiscovered oil are available ? 25 times more than the original estimate made in 1995.
If the writer had bothered to call us, we would have told him that ExxonMobil?s investment approach is disciplined and based on a long-term view of global market conditions. We invest through market cycles and are not driven to hasty decisions because of day-to-day commodity market volatility. It was this long-term vision that led to the acquisition of XTO and subsequent shale gas ventures. Today, we are the largest producer of natural gas in the United States, and we are positioned to double our U.S. unconventional production over the next decade with an inventory of approximately 50,000 drillable well locations. We have strong positions in the Barnett, the Woodford, the Haynesville, the Fayetteville, the Eagle Ford, Marcellus and the Bakken Shales.
Technology development and application are and will remain key elements in maximizing the full value of these large, long-life resources. Here are some examples: Unconventional production from Haynesville increased four-fold in 2010, while production in Fayetteville doubled in 2010. The Barnett Shale, where we currently have gross production of approximately 900 million cubic feet per day of gas, is another good example of value creation through technology. We have been able to maximize long- term ultimate recovery with longer lateral lengths and improved drilling and completion efficiency. And our net unit development cost in this shale play is about $1 per thousand cubic feet equivalent, a 50 percent improvement in the last five years, which is yielding attractive drilling program returns. Our confidence in per-well recoveries in the Barnett is underpinned by a decade of production history of early vertical wells drilled in the play ? hardly a flash in the pan.
On the Enron allegation, reserve filings with the Securities and Exchange Commission are taken very seriously by the oil and gas industry and come with serious consequences for misreporting. ExxonMobil takes a rigorous and methodical approach to booking proved reserves. All reserve additions are subject to a long- standing, thorough management review process regarding the reasonable certainty of recovery, which is the standard set by the SEC.
It is unfortunate that the words ?rigorous? and ?methodical? can?t be applied to the New York Times? recent articles. Understanding the facts surrounding the potential for development of our nation?s energy resources is every American?s business. Our economic recovery, environmental progress and energy security depends in part on a sound, stable and sensible policy and regulatory framework informed by honest, fact-filled debate. The Times? current campaign undermines this debate and is a disservice to its readers.