D. Dowd Muska

 

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What Comes After Fracking? More Fracking

May 28, 2015

The hydrocarbon-hating community’s glee is almost palpable.

The price of a barrel of West Texas Intermediate began to plummet a year ago -- when it topped $100 -- and has been stagnant since December. Roughnecks are being laid off. The rig count is down. There’s talk of a recession in Texas. BNSF Railway, a major carrier of petroleum from North Dakota’s Bakken formation, is imposing furloughs.

On the surface, greens have a cause to crow. Half of all domestic petroleum is now derived from fracking, the combination of horizontal drilling and hydraulic fracturing that taps “tight” reservoirs. Shale is costlier to access than traditional plays. When the buyers and sellers on the international market dampen the value of black gold, fracking often becomes unprofitable. So some on the eco-left are smugly arguing that the shale boom is about to go the way of the dot-com bust.

Energy analyst Mark P. Mills has an important message for the moonbats: Not so fast.

“Shale 2.0: Technology and the Coming Big-Data Revolution in America’s Shale Oil Fields,” published by the Manhattan Institute, examines where shale technologies going, and whether “more oil [can] be unlocked at lower costs and with fewer rigs.”

Mills starts with a few facts about an oft-cited metric: “[T]he impact of rising shale-rig productivity was visible before the current, widely publicized drop in rig count. A sixfold rise in shale oil rigs, beginning in 2006, yielded only modest output growth. Then, starting in about 2012, the growth in rigs slowed and nearly stopped, but output soared. Also noteworthy is the fact that when, in 2006, entrepreneurs first began profitably deploying then-nascent shale technologies, oil sold for less than $50 per barrel; when production first took off, the price was still below $60 per barrel.”

Next up, an overview of Frackland. “Although America’s shale industry is new,” Mills writes, “its scale is such that it is now a permanent fixture of the U.S. techno-industrial base. The U.S. shale ecosystem has exploded -- from essentially nonexistent, just over a decade ago -- to a $300 billion component of GDP, featuring thousands of companies. The U.S. shale ecosystem is also a distinctly different industry, in structure, operation, and technique, compared with its cousin, the conventional hydrocarbon industry.”

With such a solid foundation, oil from shale is seizing the advantages technology provides. The “three key measures of drilling -- time to drill, wells per rig, and total distance drilled -- have improved by 50-150 percent in less than five years.” A “walking rig” allows multiple wells to be placed on the same pad. Higher pressures and more powerful chemicals add to capacity improvements, as do stronger motors and better pipe-perforation.

And the future? More and more. “Incremental and dramatic improvements,” Mills adds, “will continue in all aspects of the many technologies used in shale production: logistics, planning, seismic imaging, well-spacing fluid and sand handling, chemistry, drilling speed, pumping efficiency, instrumentation, sensors, and high-power lasers. Shale fields will increasingly be developed using advanced automation, mobile computing, robotics, and industrial drones. At present, barely 10 percent of projects use fully automated drilling and pressure-control systems, for example.”

Mills predicts that Shale 2.0 will benefit most from “big-data analytics.” Mega-crunching mountains of 1s and 0s “offers nearly all industries the potential for unprecedented insight, efficiency, and economic value.” Fracking is no exception. “Big-data analytics can already optimize the subsurface mapping of the best drilling locations; indicate how and where to steer the drill bit; … and ensure precise truck and rail operations. Mobile computing, using app-centric analytics, can increase uptime, reduce maintenance, improve workforce productivity, reduce errors and rework, and enable low-cost compliance.” Stimulation practices present the brightest opportunity. Horizontal wells are currently stimulated in “24-36 stages, with, on average, only one-fourth to one-third of those stages productive.” Mills believes that using data “on the complexities of shale geology, geophysics, stimulation, and operations to optimize the production process would potentially double the number of effective stages -- thereby doubling output per well and cutting the cost of oil in half.”

One of the most amusing oversights of the politically correct energy “industry” is its adamantine faith that technological advances will soon make wind, solar, biomass, and hydrogen affordable for businesses and consumers. Well, two can play at that game. “Shale 2.0” supplies compelling arguments that when it comes to creating wealth and dispensing cheap energy, fracking has only just begun. Sorry, greens, but it looks like you’re have shale oil to kick around for a long, long time.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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