A recent presentation by Tudor Pickering Holt & Co. should send frighten hydraulic fracturing opponents because it shows fracking is here to stay.
Our friend Nick Grealy at No Hot Air, who we often republish here, did a blog post on his site the other day called How to Stop Worrying and Love Hydraulic Fracturing. It reported on, among other things, a presentation by Tudor Pickering Holt & Co. by more or less the same name, going at it from the perspective of what it all meant for the United Kingdom, where Nick holds worldwide shale court. I took a close look at the presentation myself (available in Nick’s post, together with additional slides and important disclaimers) and found it contained some good information for us as well.
Here are some of the highlights and the implications:
Onshore Production Is the Future Thanks to Hydraulic Fracturing
Gulf of Mexico natural gas production is declining and being replaced by onshore production using hydraulic fracturing.
This is pretty astounding and when one realizes it’s fracked gas that’s making it happen, it dashes any hope of fractivists to reverse course. Hydraulic fracturing is here to stay. It’s also having long-term economic impacts that are just too big to ignore, even for head in the sand politicos now trying to just stand there. Look at these trends:
Production from the Marcellus Shale is accelerating despite rig counts that might suggest otherwise to less than savvy observers or wishful thinking fractivists:
The same thing is happening in the Utica Shale, as this chart demonstrates:
How would you like to be a fractivist facing those hill climbs? They are steep ones and, yet again, demonstrate the inevitability of further natural gas development.
And, It’s Not Just Natural Gas Being Produced by Hydraulic Fracturing
Making matters worse for fractivists, hydraulic fracturing fracturing is stimulating other development, especially from natural gas liquids, which are unleashing a boom in the petrochemical industry, as we noted here before. This chart demonstrates how the lower pricing delivered by hydraulic fracturing is creating all sorts of opportunities for places like Philadelphia, the new Houston.
The petrochemical industry, of course, is the one delivering products fractivists just can’t avoid; things like plastics, perfumes and parts for computers and cell phones. This makes it even harder for them to deny the benefits of hydraulic fracturing. That won’t stop them, of course, but it renders them increasingly irrelevant to the discussion, which is why they are going zanier by the day trying to get attention.
Marcellus Shale Costs of Production Very Low
This is the worst news for hydraulic fracturing opponents in the Northeast; the costs of producing natural gas in the Marcellus Shale are low – very low. This chart tells the story.
The chart is somewhat hard to read, so let me point out the Marcellus Shale costs of production or nearly at or below the current price required to achieve a 10% after tax financial return, lower than the cost of producing gas in the Gulf of Mexico and many other formations. We’ve noted this before as it applies to companies such as Cabot Oil & Gas, for example. More importantly, improving well productivity and cost efficiencies continue to move marginal costs to the left, which is why folks such as Art Berman and Deborah Rogers are completely wrong.
Taken together, this data is a nightmare for opponents of hydraulic fracturing, which has been in use since 1947 in this country and has yet to pollute a groundwater supply. Fractivists can speculate, try to blame methane migration on fracking, assert falsehoods and do whatever they can to stop it, but fracking has a sterling safety record and the economics prove its generating jobs, lower heating costs, a resurgence in manufacturing, energy independence and untold additional benefits. That’s why we should all love hydraulic fracturing.