GAIA and TECHNOLOGY

Fracking is cool

The old guard who believe we will be soon running out of ‘affordable’ oil and natural gas continue their rants and dismiss the fracking revolution.

Gary Mason of the Globe and Mail is one such pessimist and his recent article “What y-happens when fossil fuels run out?’ (January 21, 2014, A11) relies on Chris Martenson who gave up on modern society and the corporate ladder and now grows his own food in the country.

Mr. Martenson’s arguments –n which Gary Mason repeats unchallenged, is that it takes much more ‘energy’ today to pump out oil than in the past and claims the Alberta tra sands have a 1 to 3 or 1 to 5 energy ratio – unlike the 1 to 99 output of the distant past and 1 to 25 output in the 1970s.

Oil exploration and production, according to Martenson, is becoming more and more expensive overall.

Moreover, we will run out of oil in the next 50 to 60 years!!

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That last comment is oh so familiar and the rallying cry of ‘peak oil’ doomsayers for over 40 years!    But we keep on finding more and more as time progresses, and new ways – as with the tar sands and fracking – to squeeze out oil and natural gas.

And if the economics or ratios of oil exploration and technology are so ‘costly’ today, why are oil prices dropping across North America so that West Texas Crude is selling – in the worst winter in over 20 years – at under US $98  a barrel? And if not for the political and environmentalist delays, the XL pipeline would already be completed and pumping millions more barrels of Alberta and northern US oil to the US refineries along the Gulf Coast – and dropping the spot market rate to around $80 a barrel.

 

Shale Fracking in particular seems to be overlooked by Martenson and Mason.

They ignore a variety of scientific and market facts:

1. Success rate in drilling

Conventional oil and gas drilling has always been a ‘crap shoot’ as one had to guess --based on close to the surface ‘indicators’ -- which location might —when drilled straight down – pop an oil or natural gas reservoir.  This challenge and guesswork applies to both land and ocean fields and unsuccessful ‘exploration’ is a major cost and headache.

 On land, the industry assumes for every 5 test wells drilled, only one will bear fruit, and often with such small pools as to be uneconomical.  On average, the result is 1 in 20.

Fracking into shale and using horizontal drilling is almost 100% guaranteed success.

2. Fracking produces, unlike most conventional oil and gas drilling, huge amounts of the sought after product immediately.  According The Atlantic, conventional wells start slowly and feed slowly, at 50 barrels a day, but fracking can release 7000 barrels from day one though depleting the reservoir much faster. http://www.theatlantic.com/business/archive/2013/08/shut-up-and-drill-why-fracking-could-end-the-age-of-gas-price-spikes/278494/. And thanks to fracking, US oil production has increased by 2.3 million barrels a day since 2011 and possibly another 1 million additional barrels a day in 2014 according to Citigroup. (Globe and Mail, “Oil price volatility in retreat” Jan 22, 2014, B13)

3. Also, as noted in the above Globe and Mail article,  fracking wells are up and running in about a month’s time unlike the year or more for conventional land wells and far, far longer for deep ocean rig drilling.  This economy of time and costs is a huge benefit to company profits and allows for sale at lower prices.

4. Shale oil is ‘sweet’ light crude – similar to the benchmark West Texas or European Brent --  and requires minimal refining allowing for old mothballed or newer, simpler refineries to get up and running – at a huge cost savings. (Again, The Atlantic, http://www.theatlantic.com/business/archive/2013/08/shut-up-and-drill-why-fracking-could-end-the-age-of-gas-price-spikes/278494/)

 

5.  As shale fracking is from start to final processing far cheaper than conventional drilling, and much more rapid to the marketplace, costs for gas and oil are dropping across the USA.  Oil is below $100 a barrel at present and ongoing (old) predictions of $200 a barrel are just crying wolf. As more fracking fields open up all over the USA and in numerous countries around the world, supply gluts will lead to lower oil prices.  As for natural gas, that magic moment has already passed as gas that sold for $14 in 2008 is now going for 14 .     

Finally, dirty coal has a head to head challenger for price, and most coal burning plants can be readily converted to gas, which produces under ½ the carbon footprint.  New gas plants can also be built within 3 years: far faster than hydro-electric (with its new dams and long power lines) and multi-decade nuclear power.  

So, ignore the naysayers who have bet their money on the old thinking and old fears.

Gaia is bountiful, and gas and oil will continue to economically fuel human endeavors for generations to come.