The US Department of Energy has slashed its estimate for the recoverable reserves of natural gas in the Marcellus Shale, a field at the centre of the American gas boom.

In its annual outlook, the department’s Energy Information Administration lowered its estimate for unproved, technically discoverable gas reserves in the Marcellus Shale, which is centred in Pennsylvania, from 410tn cu ft to 141tn cu ft.

That also led the department to cut its estimate for total US shale gas reserves by 41 per cent, to 482tn cu ft.

However, the EIA raised its estimate of future gas production from last year, predicting that gas production over the 25 years to 2035 would be 7 per cent higher than it forecast a year ago.

It also expressed confidence that gas prices would remain below $5 per thousand cubic feet on average over the next 10 years; well below their 2008 peak of over $13, although twice today’s price of about $2.50.

Low gas prices have forced Chesapeake Energy to cut gas production by 8 per cent and sharply reduce the number of rigs drilling for gas. Following the company’s announcement of the move on Monday, February gas futures rose 7.8 per cent to $2.525 per million British thermal units.

The EIA is predicting stronger growth in US oil production, with crude output rising from 5.5m barrels per day in 2010 to 6.7m b/d in 2020 in its “reference case” projection, mostly because of onshore “tight oil”.

The new lower EIA estimate for Marcellus reserves remains 58 per cent higher than a number produced by the US Geological Survey in August, which was based on field surveys.

The EIA said recent production data explained the difference, but the discrepancy between the two government bodies highlights the difficulty of accurately forecasting reserves in the fast-growing shale industry.

“Reserve estimates are inherently imprecise and have an enormous error bar around them,” said Bill Herbert, head of research at Simmons, a Houston-based energy investment bank. “This latest estimate on the part of the US government just reinforces the difficulty in ascertaining shale reserves with precision.”

The development of horizontal drilling and hydraulic fracturing, or “fracking”, technologies, which have made it possible to extract gas and oil trapped within rock formations from which it does not flow easily, have revolutionised the US energy sector.

US shale gas production has increased 17-fold since 2000, and now comprises about 30 per cent of total US dry gas production, according to the EIA. Significant production only began in the Marcellus in 2008, but more than 60bn cubic meters of dry gas were extracted from the formation last year, the EIA said.

The energy industry estimates shale gas reserves are sufficient to supply US energy needs for 100 years at current rates. But those estimates are based on the assumption on further big finds, ever-improving technology, and also buoyant natural gas prices.

Based on the EIA’s latest figure, shale gas reserves could only supply about 20 years of US consumption at current levels.

Low gas prices have forced US exploration and production companies to focus investment on oil-rich shale formations.

However energy analysts argue that the overall trend for increased shale extraction remains in place

“The new EIA figures reflect, to some extent, the more conservative view of the USGS. But it will not discourage further exploration, because the companies involved do not believe any estimates reflect what will eventually be recoverable as technology improves,” said Adam Sieminski, chief energy economist at Deutsche Bank.

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