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How US Fracking Companies Defeated OPEC with Innovation

DRBC fracking ban - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

 

U.S. shale gas producers beat OPEC soundly through innovation in hydraulic fracturing and horizontal drilling techniques; a continuing shale revolution.

One of our readers just sent me a wonderful article from a news site called Lima Charlie News. I was not previously aware of the site but it’s one I’m bookmarking due to the quality of this particular post entitled “Fracking, BREXIT and An Oil and Gas Shale Bonanza,” which was authored by Dr. Gary K. Busch. As the title indicates, it’s focused on the UK and the special needs and opportunities representatives by their move to develop their shale resources. It’s worth reading for that alone, but there’s another story within the story and it’s all US fracking innovation and how beat an OPEC determined to lowball price us out of existence as competition.

OPEC Here’s the big picture, as laid out by Busch (emphasis added):

The lessons learned in the production of fracked oil and gas in the U.S. were that in order to compete with OPEC’s desire to drive the U.S. industry to its knees it would lower the oil price to make fracking uncompetitive. Instead of folding up their hands, U.S. producers innovated new processes and introduced new technologies which drove down costs. Now, OPEC cannot compete and is fighting a losing battle to drive out U.S. frackers. The U.S. will be self-sufficient in energy by late 2019.

Busch then proceeds to lay the innovations that beat OPEC beginning with an increase of sand to help reduce the demand for water:

The high water demand was addressed by increasing the yield of each well by increasing the use of sand. Sand is a much greater tool in hydraulic fracking than drillers had understood it to be. The more grit they pour into horizontal wells — seemingly regardless of how extreme the amounts have become — the more oil comes seeping out. On a per-well basis, sand use has doubled since 2011, climbing to nearly 9 million pounds.

Then, there is “zipper fracking,” described as follows:

The process requires operators to drill two wells side by side. Once both wells are completed, they’re fracked at the same time. The fractures form a zipper pattern that cracks the rocks more deeply and efficiently than in a single well. The process allows both wells to produce more oil and gas. In the Barnett Shale, a formation near Fort Worth, Texas, the zipper-fracked wells doubled the volume of a typical well.

Among the shale oil drilling innovations also being applied to shale gas in places such as Susquehanna County, Pennsylvania, is this one:

Another one of the largest cost-saving techniques came from the offshore oil industry. When drilling wells offshore, it isn’t feasible to build a platform, or pad, for each well. So out on the ocean, several wells are drilled from a single pad. They are like “chicken feet” with several horizontal wells being drilled around the base of the vertical shaft. In some cases, there are five to seven horizontal wells leading to a central well shaft.

Onshore shale drillers quickly adopted that technique for themselves. Because shale is a uniform layer of rock, companies can drill the wells close to each other. Since the drillers don’t have to move the rigs too far between holes, the method saves time and money. The process of taking down and setting up a drill rig can take days and cost a company hundreds of thousands of dollars.

In addition, many shale layers, like those in the Bakken and the Eagle Ford and Permian Basin in Texas, are stacked like pancakes. Companies can drill many wells into these layers, reaching many layers of stacked shale reefs; a single pad can have many “stacked laterals.” The trend has been to extend these laterals to over two miles in length.

There are also numerous other new techniques being applied in the industry, including the following:

  • “Smart drill-bits with computer chips that can seek out cracks in the rock and adjust the drilling accordingly.”
  • “Fully degradable fracture balls and fully degradable seats instead of plugs to isolate zones during well stimulation” that eliminates previous limitations on lateral lengths and maximizes estimated ultimate recovery, while reducing risks and costs.
  •  “Degradeable technology” that “offers a faster and more cost-effective method of starting the fracturing process.”
  • “Expandable tubulars, more cost-effective rotary steerable systems, and intelligent drill pipe for high-rate bottomhole data telemetry” the expandable tubulars allowing “drilling to depths no longer limited by initial hole diameter.”

These developments are eye-opening, to say the least, and indicate a certain ingenuity typical of Americans and the oil and gas industry. The industry never fails to adapt, which is why it beat OPEC and it continues to beat most renewables even when (or perhaps because) they are heavily subsidized. Read the whole story to get more detail and see how how all this fits into the prospects for the UK to break the bonds of foreign energy dependence. Bear it in mind, too, whenever some pompous prognosticator of doom for oil and gas pontificates on how things will all end for us. They’re dreaming while we innovate.

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4 thoughts on “How US Fracking Companies Defeated OPEC with Innovation

  1. Please see my related article published on this website
    Energy is the life-blood of a nation’s economy. Indigenous energy sustains and grows the economic capability. Shale Oil and Gas [yielded from Horizontal Drilling and Hydraulic Fracturing] has liberated the USA economy from foreign oil [e.g. Arab Oil Embargo 1973]. This unconventional energy resource has become a fiscal weapon – Hard Power’ application – coercing our adversaries to adopt USA favorable policies. Shale Oil and Gas has become the USA’s Big Stick as depicted in the attached figure.
    Hydraulic fracturing bans are scientifically unjustified while contravening USA foreign and military policy.

    Goodwin, R.W; “The Shale Revolution in Oil and Gas – Our Economic Big Stick”: Natural Gas Now, September 7, 2017
    http://naturalgasnow.org/shale-revolution-oil-gas-economic-big-stick/

  2. No, we have not defeated OPEC with technology, rather we have a short-term advantage until it spreads, is sold or copied by other oil and gas producers. Unfortunately this will only add to the glut of oil and gas in the short term and put even more price pressure on already debt laden gas companies, like Chesapeake and Range. As interest rates rise, what they pay for debt service will matter more than increased supply they try to pump into a stagnant market.

    The first rule for any company is to create a market for its product. The natural market for Marcellus and Utica gas is the east coast of the US. Because of the lack of pipelines in and to and the closing of all but one oil refinery in New England and the Middle Atlantic states, that area is a virtual island and imports huge amounts of refined product as foreign imports.

    The anti’s gleefully conflate filth, like coal and tar sand oil, with natural gas. The three stooges of Trump energy policy (Pruitt, Perry and Zinke) deregulate and subsidize coal at the expense of gas, which had virtually no regulation under Obama rules. We have to play up the advantages and safety of gas, as well as the disadvantages of renewables in order to create a nearby market for our gas.

    Remember, renewable technology is also improving also. Once there is utility scale storage of surplus renewable energy, the energy market will be as disrupted as what fracking did. Everything the anti’s are doing is a rear guard action until then; how much time do you think you have?

  3. Dr. Goodwin energy infrastructure is the backbone of America and pipelines are the vascular system that keeps the life blood flowing in our nation. Your wisdom is great thank you for sharing

    • thank you I am pleased that what I have written regarding benefits of hydraulic fracturing and horizontal drilling to unleash shale oil & gas has been recognized – please note that engineers developed this technology – we are a silent profession i.e. engineers so not get recognition until something fails e.g. Miami Bridge collapse

      thanks for you comment

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