Fracking – the hydraulic fracturing of the deep earth and its cousin, horizontal drilling – is the new buzz word in energy today. It has been spread by journalists and correspondents and NGOs to the general public. What is this strange word's impact on our own lives?
A simple, four stage answer would include:
No climate refugees.
No increase in global cyclonic frequency over the past century.
No species extinctions.
The rate of warming between 1998 and 2012 has been “smaller than the rate calculated since 1951.”
The “innate behavior of the climate system imposes limits on the ability to predict its evolution.”
“Vulnerability is rarely due to a single cause.”
Such honesty is welcome. Unfortunately, it is matched with the new economics of income inequality and redistribution demands. Climate resilient development pathways are dictated by inequality and marginalization.
Appears to me that the wealthier we are, the more we can afford to care about the environment. Wealth ensures safe development and income enhancement. The markets are far better at allocating capital than any government. Care for a few shares in Solyndra?
Students across the nation and the world will be the last to hear this, certainly. While they study environmental science and can’t get a job, the few who have degrees in engineering and petroleum geology are getting starting offers at $87,000+. Nice work for a 22-year-old. Too bad about the professors harping on about the end of the world…
Well, at least the IPCC has the courage to admit that CO2 concentrations are not the canary in the coal mine that the hair shirts have feared.
There is hope once again for mankind!
Tags: climate refugees, Climate resilient development pathways, CO2 concentrations, global cyclonic frequency, innate behavior of the climate system, Intergovernmental Panel on Climate Change, IPCC, rate of warming, species extinctions, Vulnerability
As You Sow, a shareholder activist group has announced an agreement with ExxonMobil to release more pertinent data on the firm’s hydraulic fracturing. XOM joins several other firms in attempting to provide more information to an informed public on fracking: EQT, XTO, Noble, EnCana & Anadarko are among the most recent firms to provide more detailed information.
Job well done. The author has been suggesting just such openness since publication of the book last January. Websites sponsored by industry and state regulators already release info on many thousands of wells across America: http://fracfocus.org/.
The largest non-naval vessels ever built will soon take to the sea to drill for natural gas, liquefy it, and load it onto gas tankers. As we said in the book, Fracking, the Prelude is being built in Korea. She is 1,600’ long and 243’ wide and able to produce 3.5M metric tons of gas each year. FLNGs, floating natural gas vessels, allow for quicker and less costly development of an offshore shelf. The first ship will work the coast of Colombia next year, producing more than 500K metric tons of gas annually.
An article in today’s Wall Street Journal demonstrates the jobs creation juggernaut that fracking represents here in the U.S. 250,000+ jobs have been created just since 2010. The average income for a frack worker today is $107,200 a year. Not bad for essentially unskilled labor. The presence of frack sites also contributes significant economic growth to each region in which it works.
Of course, these leads to income inequality for states such as New York and California that ban fracking or make it extremely difficult. Meanwhile, North Dakota leads the nation in employment and unemployment: highest employment and lowest unemployment. compare this to California or New York.
Yes, it’s true. Hydraulic fracturing of the deep shale gas beneath our feet actually reduces water consumption. According to a new study from UT-Austin, 12/13, Texas saved 32 billion gallons of water by using fracked natural gas in place of coal for electricity generation. During the 2011 drought – when there were 100 straight days of 100+ degree heat – power generation by combined cycle gas fired power plants saved 32 billion gallons of water. How? They replaced coal with natural gas. Gas has 30% of the cooling demand of coal in power generation.
Go tell it on the mountain. Fracking saves water — while reducing CO2 emissions. Good luck with convincing the eco-folks of this simple fact!
The first inflection point was the conversion from vertical to horizontal drilling in 2009.
The second was the switch from gas to oil drilling in the U.S. during 2011.
The third is going on as we speak: zipper pad drilling. Pad drilling is using the same drill site for multiple bores. Zipper is doing so in parallel laterals in stair step manner. This allows for increased flow over a longer time period. Better EURs and longer draw downs of the reservoir. Taming the 800# gorilla in every E&P room – the infernal withdrawal rate.
Since 2012, pad drilling has increased to 92% of all drilling in the Fayetteville basin, 80% in the Bakken and Eagle Ford, with the older Permian reluctantly adopting at 20%. The number of wells per pad has increased to 6.6 in the Marcellus and 4.3 in the Eagle Ford. Understand: these technologies are themselves only a few years old. Five years ago they were unheard of; today they are commonplace. Best in class wells are siting 20+ wells per pad. This is occurring in an industry that had done one pad, one well for 100+ years.
Technology developments are being applied at break neck speed across the shale fields of America. The following are state of the art field applications:
proppant mixes to each well site
laterals designed to each pad
This technology application in the field is plateauing during 2014. The most advanced tech today involves stacked laterals. This is the ultimate in pad multiples. The well strings are being sent down to different stacks on the same vertical line. Imagine an elevator that stops at several floors. These hydrocarbon elevators will soon stop at each formation and send out multiple arrays to advantage the drawn down from every one.
Incredible technology application.
Meanwhile, our friends in the NGO camp and the federal government continue to worry about “what if the ground water is contaminated?!”
What if the sky is falling…?
Do your children play monster under the bed? Do they scare themselves into shouts of silly fear about imagined creatures under the bed?
The ecoleft reminds us that children’s fears can continue into adult life. Here are a few bedbugs:
Fracking damages local water. Despite statements from a wide range of sources – including the EPA – that fracking poses no danger to local watersheds, the stories abound of gas in the water.
Earthquakes are caused by fracking. They are not caused by fracking. Injection wells can be a cause of micro quakes and have done so in Oklahoma and Ohio. This is entirely different.
Carcinogens in fracking chemicals kill. Chemical usage in fracking is nominal, controlled, and diluted. Storage, use, and disposal is controlled.
Fracking is causing global climate change. True. The climate may change as CO2 emissions continue to drop from the second largest emitter in the world – the U.S. – down 500M tons now.
We need to be reminded of the significant benefits of fracking:
More jobs, tax revenues
Fewer crude imports and greenhouse gas emissions
New opportunities in manufacturing: $5B/yr in capital development and 68,000 new jobs each year for a decade – at least.
Dow, Exxon, Phillips, Sasol and others will spend $125B+ for petrochemical plants making plastics, resins, and metals to be processed into a wide variety of consumer products.
More jobs will result for construction, processing, engineering, design and plant workers.
If you have family members returning from Afghanistan or Iraq who seek work, consider www.rigzone.com.
If you have family members graduating from college, know that environmental science, engineering of all kinds, and math degrees are commanding six figure salaries.
Exports of LNG will begin next November from the Cheniere plant in Louisiana: http://cheniere.com/sabine_liquefaction/frequently_asked_questions.shtml.
If the DOE were to move in a timely manner, the two dozen applicants for more export terminals would be able to proceed. Only four have been approved for construction. 18 await.
Meanwhile, oil flows from the Bakken, the Eagle Ford, and the Permian basins at ever increasing rates. Pipelines continue to be added. Processing plants are being built.
Frack on, America.
Tags: Carcinogens in fracking chemicals kill, children's fears, Earthquakes are caused by fracking, ecoleft, fewer greenhouse gas emissions, Frack on America!, fracking causes global climate change, Fracking damages local water, fracking jobs, fracking tax revenues, monster under the bed, Rigzone.com, the benefits of fracking
We wanted to alert you to a wonderful resource on natural gas: America’s Natural Gas Alliance at http://anga.us/blog. Here is a look at their most recent blog posts.
You can return to this page at any time to view updates to their blog or, of course, you can go directly to their blog.
Note: This page features a weekly update of energy news from the U.S. Energy Information Administration. Check back on Wednesday every week for the latest news from EIA.
The HIS Ceres conference each year brings out the royals and the rapscallions. From Nigerian oil diplomats to Chinese front men, from the Bigs to the Indies, they are all here.
Interesting how the Bigs are whining about massive capital costs for their projects: 35+ multi-billion dollar capital projects across the globe, from Kazakhstan to Namibia. The cost overruns result from labor and materials price increases beyond their budgets. Wonder why…they have been announcing these projects for a decade now. The service fellows listen, build, supply, and price according to demand. No secrets here. Vertically integrated decision making slows the time line down. Decade long projects get away from these mid-level folks who are often just trying to make a mortgage.
Meanwhile, the Indies are doing quite well, thank you. Spend $4-10M for a well in PA, ND, OK, TX or LA and you can see the return on capital flow in a few months, rather than a few decades. Slow and steady wins the race. Even BP has spun off its U.S. operations, acknowledging that the decision making and capital assignment process is different for small projects. While E&P may slow in 2014 as the U.S. industry catches its breath after six straight years of extraordinary capital growth and hydrocarbon flows, the midstream continues apace, connecting the dots of thousands of wells across America.
Refiners are reconfiguring their fractionators for the shale oil. Easier and cheaper to rework an existing operation than face the EPA with a new project. Another 400,000 bbls/d of refining capacity is being added this year. This is the output of a massive new refinery. The sweet, ultra light crude from the Eagle Ford is rich. Its fractionation is different than the heavies from abroad. Cheaper too, in the long run. Somewhat better for the environment as well (as if the enviros care). Splitters do a partial refine, then ship the product overseas for finishing.
Refiners along the Gulf and Atlantic coasts as well as in Kentucky and Illinois are adding capacity to accept our own crude. By the end of the decade, more than 1M bbls of new capacity will be added to existing refinery output.
UPS has announced the conversion of 1,000 trucks to CNG/LNG. This adds to the 900+ fleet of natural gas vehicles in Canada. Look for the methane powered cars to become more available for consumers this year and next. Without a dime from government coffers, this new industry is slowly emerging into the limelight. Truckers realize the savings. Shippers have the storage capacity and the new engines pay for themselves in three years or less.
CBR, crude by rail, is a growing aspect of deliveries from wellhead to refiner. It offers flexibility of crude type, delivery schedule and locale, as well as some pricing advantages. Most important, rail exists where pipe does not – the only game in town. Both will work together as new pipe is laid, but rail is here to stay. The rail industry is ahead of the curve on safety, more so than the government.
Keystone pipeline approval will increase North American sourced crude for the nation.
Open ANWR, the Arctic National Wildlife Refuge, to further developmental drilling. It has worked for decades without major problems. It exemplifies wise crude reserves development while protecting the environment.
Open crude exports to preferred nations with an executive order. He tells us how he can use the pen – do so.
Open our coastal waters to hydrocarbon exploration. This includes Alaska and the Atlantic and Pacific seaboards. There are methane hydrate deposits as well as crude and natural gas to be lifted. Methane in both forms is far less harmful to the environment than crude.
Open the Strategic Petroleum Reserve, simply as a further priming of the price pump. Access will further erode crude prices.
Open the LNG export approval process and encourage the open and final licensing of the Sabine Pass export terminal currently set for 11/15, subject to final review by four federal agencies.
OPEC should be encouraged to produce more. The Saudis control it still, and their greatest threat is the Shiite crescent from Iran to Syria – close allies to Russia.
Control and restrict the Russian senior politicians/oligarchs: refuse travel permits, restrict capital flows, force the currency down through Forex trading.
The impact is three fold:
hydrocarbon pricing, economic revival, and currency.
The price for most, if not all, hydrocarbon energy sources will plummet. Russian export demand will drop as prices fall and our sources open. Just as we overloaded the Soviet system with military expenditures under Reagan, finally destabilizing a corrupt regime, lower crude prices will overload Russia’s capital position. Yes, they have enormous capital reserves, but their crude and gas delivery system is at risk of collapse. How long can they last by feeding off their savings?
U.S. and global energy firms will complain, but the reality is they remain profitable even at $70/bbl and $2.40/mcf. The direct impact on the nation will be lower prices for gasoline, propane, heating oil (during this cold winter), and aviation fuel. Electricity, heating, and travel should benefit.
The markets will explode upwards as lower costs drive directly to bottom line profitability. New capital projects will result, offering more jobs and higher local and state tax revenues. Exploration excesses will bleed out of the E&P industry, which is overheated after five years of massive capital flows. This will allow the pipeline industry to catch up with production, tying the Marcellus more completely to the Northeast and MidAtlantic demand centers. Import centers such as the Delaware River will face inland to receive Bakken crude by pipe and rail.
The economic impact on non-Russian states will be enormous. The flow of U.S. hydrocarbon wealth can more than supplant Russian flows, particularly for our European friends. They have sufficient gas and crude reserves to last the winter. The Rotterdam LNG market has taken 25% of market share from the Russian pipeline system since the previous Russian pipeline closure. Qatar, Algeria, Australia, and Indonesia have the production capability and carry weight to deliver LNG today. The price variance between European gas and global gas is wide enough to drive a tanker through. Everyone wants in on the action. These carriers, in particular the Qatari fleet of LNG ships, can close the Russian pipeline dependency until we open our first export terminal in Louisiana next November. Speed that approval process up, too. With the Russian bear restricted from European gas markets and Russian oil replaced with US and OPEC oil, he will realize the cage he has built around himself. Let him feed on his own capital carcass for a while.
Currency restrictions by global banking centers and reserve banks will be the coup de gras. Speculators will immediately gang up on the ruble. Watch as it follows the Russian stock and bond markets over the abyss. Further restrictions upon travel by those directly involved in the Crimean invasion – military and government officials, Gasprom executives, et. al. – will drive the bear to destruction.
By the way, these tactics will also destroy the regimes in Iran and Venezuela. We were close to capital destruction with Iran. Let’s continue the fight. Offer them a hand only when they are defeated.
The Russian people have spoken once before, in 1989. Many wish to live in a free country today. They are repressed by an oligarchic mafia and government hoodlums. Set the stage for the new Russian Revolution. All without firing a shot. All to the benefit of the this nation’s consumers. Tax revenues will increase as jobs and communities grow. The wise extraction of our natural wealth will offer a hand, from the nation and the world, to Adam Smith’s invisible hand.
We have many weapons to fight aggression. Our military is hobbled, so hold it in reserve. These straightforward economic tools are our strong suit. Play it well. If President Obama has to, he can make a back deal with his environmental left that some of these tools are simply political threats, not actualities (good luck with retraction). He can do as he must. The results of such bold action are clear to many.
Take the bullies’ lunch money!
Tags: Arctic National Wildlife Refuge, currency restrictions, Forex trading, hydrocarbon exploration, Keystone Pipeline, KOPEC, LNG export approval, OPEC, open ANWR, open crude exports, restrict Russian senior oligarchs, restrict Russian senior politicians, Rotterdam LNG market, Strategic Petroleum Reserve