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Why We Should All Love Hydraulic Fracturing

Hydraulic Fracturing - Tom ShepstoneTom Shepstone
Shepstone Management Company, Inc.

 

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.

Hydraulic Fracturing Is the FutureThis 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:

Jobs from Hydraulic Fracturing

Production from the Marcellus Shale is accelerating despite rig counts that might suggest otherwise to less than savvy observers or wishful thinking fractivists:

Marcellus Shale Production

The same thing is happening in the Utica Shale, as this chart demonstrates:

Utica Shale Production

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.

NGL Prices Unleashing Chemical Boom

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.

Costs of Production

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.

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4 thoughts on “Why We Should All Love Hydraulic Fracturing

  1. Nice try. But you fail hard.

    First of all fracking opponents are well aware of long-term economic impacts that are just too big to ignore: Cleaning water comes at a cost.

    Your number juggling might appear to be correct, but the conclusions you draw are done in an astonishing nonscientific way. According to your logic of reasoning the fact pollution did rise during the industrial age would have been proof of pollution being here to stay, too. Or yet to be loved. Which is plain wrong when it comes to goals to support mankind.

    Back to your charts: Due to not having to recycle used ressources (i.e. water) fracking for now is “cheap” for the companies dumping their waste underground. It’s not cheap if you add in costs of recycling water and greenhouse gas emissions of fossil fuels in general. The fact something appears to be cheap is useless when you don’t calculate in total costs. Like with nuclear the production costs ain’t the total costs. There is long-term issues which have to get paid for. Where’s your “scientific” math on that?

    And no, raising rig counts don’t demonstrate the inevitability of further natural gas development. They demonstrate the limited production capability per well, getting worse over its lifetime. And your charts don’t take into account ressources are limited, too: So there will be a peak as there is with conventional oil. Fossil fuel will die. It’s as easy as that.

    Comparison of the “all private sector employment” vs. “oil and natural gas industry” graphs are a prime example of how to represent data in a quite meaningless and misleading way, as that graph lacks total numbers. It is to be expected that total workforce does not chance much in a society with quite a bunch of jobs, whereas specific industries might be in need of temporary workers. Like the ones doing the cleanup work around Fukushima now. Though nobody would argue those jobs would be “healthy” ones, nor argue it’s great those jobs exist with a higher percentage gain, than all other private sector industries in Japan…

    • This is nonsense. Your basic presumption is wrong because fracking has never polluted a water supply in this country and even the flowback and produced water is being recycled for use on other sites (at very low cost I might add).

      Secondly, your comparison of industrial pollution with an industry is pure sophistry. Pollution declined precisely because of our economic progress. No better example exists than East and West Germany, the former being a polluted hell due to the imposition of an economic system that tried to plan progress rather than allow the free market to create it. Because West Germany chose the better path, there was no going back. It’s the same with the natural gas industry, which is a path of not only economic development but also far less air pollution, as NYC has learned.

      Your third paragraph is difficult to follow but I guess you’re saying the industry is burying problems and the costs will come later. Apparently, you are unaware the gas companies in Northeastern Pennsylvania are recycling virtually all their flowback and produced water. Cabot, the lowest cost producer around, is recylcing 100% because it makes economic as well as economic sense.

      You completely miss the point on rig counts. The point is that production is going up despite rig counts. You obviously didn’t read it carefully and jumped to conclusions. Production is going up because of better methods and wells are producing more every day. THe productivity of the Marcellus Shale is nothing less than astounding and getting better all the time.

      Your last point is total bunk. Employment in oil & gas is substantial and growing and our national economy is going nowhere fast.

      • Just a word game again Tom “fracking has never polluted a well ” .Those that are well (get it ! ) informed know it’s more than the fracing operation it’s the drilling that in most cases has caused the related issues .Issues that I have seen for myself.Just more continuous PR on your Pro NG drilling agenda !

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