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Sunday, August 16, 2015

Energy, the market, and liberty.

A few years ago I was discussing fracking with a friend in the oil industry and he mentioned the break even point for shale is 60-65 a barrel. They Jim said something that really blew me away, “Mike, we’re only getting 8-9% out of that rock right now…” Less than 10% and we had overtaken the entire oil market, become the largest producer of crude, forced Saudi Arabia to try to destroy our fracking industry at the cost of billions. And forced a alignment between Middle East oil producers and militant environmentalists in attack fracking with propaganda. See “Promised Land”, a piece of anti-fracking propaganda funded by the UAE. And multiple lawsuits from the environmental extremists.

Jim make the obvious point, “Mike, what will happened when get get 20-25% out of that rock..” and that, to anyone with any brains, is obvious. The energy market will be completely reconfigured. And for many in the government and the Middle East, that cannot be allowed.

Since the 1970s, two tenants have driven oil policy in the the West. One, we have a limited supply of it and it’s mostly from unstable countries in OPEC (Iran, Iraq, etc). And two oil, by increasing CO2 in the atmosphere, is causing global cooling, err global warming, no, climate change, oh, wait, global climate disruption.

So both these interests have aligned to destroy the fracking industry and so far they have been unsuccessful. Fracking mainly started on private lands where the EPA cannot get it’s dirty hands on it and the genie is out of the bottle. Saudi Arabia has flooded the market in hopes of destroying the fracking industry, but they cannot stop it with temporarily forcing down prices. Eventually they will have to close their spigots to bring prices up so they don’t go broke, and US domestic oil is back again. Their only hope is to use government and non-governmental groups to destroy fracking by legal and regulatory schemes. And again, so far, it’s not worked. Then again the B Hussein Obama regime is on overdrive in the last few months of it’s existence.

But one point is not made often enough, what is the real point of the leftist envliroomentatl movement. Not the conservation movement that wanted to preserve our national treasures, (e.g. national parks, etc) but the anti-progress/degrowth movement. It is to control people and limited energy has provided an excellent angle of attack for that movement. What has happened since the 70s because of “limited oil”? The government, mainly through the EPA has inflicted one set after another of fuel economy standards on us, making vehicles smaller, less safe and limited our choice for cars. We have entire cities and states moving to limit the ability of people to use cars in there daily lives (Los Angeles, San Francisco, New York, Portland), which controls the ability of people to move. An open secret of the left is the technology they really despise is the automobile because it allows people to go when and where they want, no permission required.

So back to this article. Assume we get thought the B Hussein Obama regime and neuter the EPA so fracking continues, brings oil down to prices were the US can flood the market and sell to the world. What would be the results:

1. Americans all over the country would ask, “Why the hell do I want to buy a golf cart when I can buy a SUV, be comfortable and be able to bring the entire family somewhere. I’ll buy a Tahoe, screw the Volt!”

2. Americans may finally start asking, “Why am I paying billions to solar, wind and electric car companies from the federal treasury when it is not needed.”

3. Iran, the largest supporter of terrorism in the world and working on being another nuke power (Thanks B Hussein Obama and John Kerry) will have it’s only source of income severely cut back. Nukes cost money, so do ICBMs and other weapons. Hard to support that with oil in the 30s for a barrel.

4. Saudi Arabia, and OPEC, will loose its ability to control us. We’ve needed their oil for generations. We provide our own, sorry guys, you can go back to what you were doing before we showed you how to get money from the ground.

So yes, you can see this cannot be allowed. If this works, get ready for another round of law suits from big environmental, more politician shopping from OPEC and other attempts to stop it.

Oil firms promise new life for shale
Cheap re-fracking key to the pursuit of revolution

Shale oil producers from West Texas and North Dakota have harvested enough crude to overwhelm the global oil market and force Saudi Arabia’s oil cartel to play offense on the world’s energy stage.

But U.S. producers have recovered only a small fraction of the oil that’s trapped in those rocks, and though the oil-market crash has put the nation’s energy boom on hold, some oil-technology companies are pursuing what they say will be a second American shale revolution.

That belief lies partially in re-fracking — giving oil shale deposits a second blast of water, chemicals and sand — to get more oil out of depleted or under-performing wells. The process could be up to two-thirds cheaper than drilling a new well, which is an alluring possibility for cash-strapped U.S. producers who are straining to keep operational costs down and drilling operations intact.

Over the next few years, thousands of wells could be in play for re-fracking, said Priyesh Ranjan, who manages the re-frack business and technology development at Halliburton.

“There’s so much low-hanging fruit,” Ranjan said in describing the oil left behind in many wells. “There’s an obvious push for everybody to think about how to achieve more with less.”

The technique has its skeptics. Re-fracking the wrong well or in the wrong way can damage it or the wells nearby. But this ongoing oil downturn might be the right time for experimentation, because the industry must learn how to coax more oil for fewer dollars, engineers say.

The oil bust this year has claimed thousands of jobs in Houston and across the globe, and oil companies have gutted spending budgets in North America because costs to drill shale wells are higher than older, vertical wells. The industry is now entering what may be the most ruthless phase yet of the downturn, as banks prepare to curtail oil companies’ credit lines and as billions in corporate debt weigh heavily on their balance sheets.

“All this will force companies that are over-levered to take drastic action,” said Stephen Trauber, an investment banker at Citigroup. The next few months, he said, will likely see more oil firms sell themselves or default on their debt.

A wave of re-fracking is one way companies could help mitigate the effects of the downturn, by pumping more oil for less money, oil field service companies say.

A little-advertised truth about the American shale movement is that, in each well, drillers have left behind all but about one tenth or less of the oil and gas stored in shale. That’s because in recent years, $100 oil spurred producers to adopt a “pump-and-pray” mentality that produced many nearly infertile wells in Texas and elsewhere. Refracking didn’t grab oil companies’ attention because it would have diverted resources from the non-stop drilling boom. But that sentiment is changing.

“Operators are moving away from a factory approach,” said Hans-Christian Freitag, vice president of integrated technology, global products and services at Baker Hughes. “They’re putting a lot more emphasis on understanding the reservoir. It’s a big change.”

Re-fracking can boost a well’s productivity by a third to half, reaching up to 12 percent of the oil stored underground. “Which is still quite deplorable,” Freitag said. But it’s comparable to amounts early oil companies were able to extract from sandstone nearly a century ago. The oil is down there, and as technology improves, drillers will eventually be able to reach it, he said.

More planning, engineering

At a Baker Hughes lab in Tom-ball, northwest of Houston, engineers from different fields of the oil business got a glimpse of the latest key ingredient used in refracking.

With fracking, which is the common term for hydraulic fracturing, producers deploy fleets of trucks with high-horsepower pumps to blast payloads of water, chemicals and sand underground to crack open shale plays and release oil and gas.

Elizabeth McCartney, a product champion and pressure pumping specialist at Baker Hughes, presented containers with so-called diverter chemicals

— solid fine-grain biodegradable substances — that temporarily block the flow of oil and gas from existing fractures in a shale well-bore.

“In re-fracturing, we can pump these diverters and plug off existing fractures so we can access parts of the formation that haven’t previously been fracked,” McCartney said.

In other words, the second blast of fluid will go where the engineers want it to go, toward fresh rock that hasn’t been drained of oil and gas, and away from old pathways that naturally draw fluids because of their particular rock properties and subterranean pressure.

Out in the field, whether near Midland in Texas or Williston in North Dakota, a re-fracking job doesn’t look much different than the first one, except for the addition of the diverter chemical. But re-fracking requires more upfront planning and engineering.

Oil field service firms are using massive databases on hundreds of thousands of American oil wells to find the right candidates for a re-frack job. New programs can tell engineers if a poor-performing well was drilled in a productive region, or whether one highly productive well in another area suggests a whole batch of poorly performing wells nearby could benefit from a re-fracking job.

The march of technology

“We’re trying to reproduce those results across a large set of candidates — that’s what’s going to create the re-frack boom,” said Matt Lahman, a Halliburton specialist in enhancing oil and gas production.

Talk of re-fracking has grown in recent months, but it hasn’t hit it big yet.

Oil companies have re-fracked about 600 wells since 2000 — not a large number considering the 50,000 U.S. wells that got a first round of fracturing in the last few years.

For years, the problem has been that re-fracking is a gamble, even for wildcatters. If a driller re-fracks a well too close to an adjacent well, the fluid from the fractures may begin to spill into one another and ruin both wells, a phenomenon called a frack hit. The wells could start to produce water or natural pressures could dissipate.

“This technology is very much in its infancy and it’s not going to be something that’s going to change the game or move the needle at least in the near term,” said Jonathan Garrett, an analyst at Wood Mackenzie.

Nevertheless, re-fracturing has a lot of potential as research on the process continues to expand, said Christopher Robart, an analyst at IHS.

“It’s still early days,” he said. “What will make it more successful is undertaking a significantly larger number of re-frack jobs. A lot of that comes down to the E&P’s confidence and appetite for doing science with not-fully proven techniques on their own wells.”

With the oil bust, that appetite is starting to grow, technology companies say. Executives at the Schlumberger and Halliburton, the world’s No. 1 and No. 2 oil field service companies, recently told investors U.S. energy producers are increasingly willing to take up technology used to re-stimulate wells.

Private equity firm BlackRock has promised to put up $500 million over the next three years to pour into Halliburton’s refracking operations, Halliburton President Jeff Miller announced during an earning conference call last month.

Schlumberger CEO Paal Kibsgaard said his firm is willing to change the way it sets up service contracts, and bear the up-front costs of re-fracking as a way to show it is confident in its technology, in exchange for more of the upside when the oil starts flowing.

Oil companies’ demand for new technology is much higher than in any previous downturn, Kibsgaard said, as more technological breakthroughs emerge to help firms bring more oil out of the formations.

“In the rear-view mirror, we think, ‘That was easy,’ ” Baker Hughes’ Freitag said. “It was never easy. Fifty or sixty years ago, it was difficult to extract oil and gas, but we figured it out.”

1 comment:

  1. Nice piece on resourceship. Who are you? Please reach me at rbradley@iertx.org.