Posts tagged “fracking”
It’s Not That Simple
In my previous article Why the Bakken Boomed, I discussed the shale oil boom that has had such a dramatic impact in North Dakota’s Williston Basin over the past decade. But throughout the U.S. shale boom there have been those who doubted that the production gains would prove anything other than fleeting. Those doubts were grounded in the fact that shale oil production is more complex and expensive than conventional oil production, and the fact that cash flow has been consistently negative for virtually all shale oil producers.
While the doubts are based on fact, the story is more complex than it may appear. Isn’t that always the case though? Things are never quite as simple as they seem. Superficially, the narrative for many has been “Shale oil isn’t economical. The wells deplete too quickly. Just look at the negative cash flow.” But it’s just not quite that simple. Let’s dig a little deeper to gain a better understanding of what has happened, what is happening, and what is likely to happen moving forward.
The Boom-Bust Cycle for Dummies
First it’s important to understand that the oil industry is cyclical, and more importantly to understand the reason that it is cyclical. The long history of the oil industry has been one of boom and bust cycles. During the booms we hear about windfall profits, but during the downward part of the cycle, oil companies lose a lot of money and many people lose their jobs. CONTINUE»
There was an energy story that stood head and shoulders above all the rest in 2014, but no clear runner-up. After the #1 entry on the list below, the rest of the Top 10 is highly debatable. I don’t think there is a consensus #2 story, and I don’t believe there is a well-defined Top 10.
But I do believe there is a clear #1. Here are my choices for the Top 10 energy stories of 2014, followed by about 15 more that could have easily been on the list. Feel free to chime in with any major stories I have missed.
1. Crude oil prices collapse
On July 30, West Texas Intermediate (WTI) closed at $104.29 per barrel (bbl). The next day it suffered a sharp decline below $100/bbl. As the year comes to an end, WTI has dropped below $55/bbl. The last time oil was this cheap was during the global financial crisis six years ago. CONTINUE»
This is the 2nd installment in a series that examines data from the recently released Statistical Review of World Energy 2014. The previous post – World Sets New Oil Production and Consumption Records – delved into world oil production and consumption figures. Today’s post looks at the global natural gas picture.
In 2013 global natural gas production advanced 1.1% to a new all-time high of 328 billion cubic feet per day (Bcfd). Except for a one-year decline in 2008-2009, global gas production has risen fairly steadily for about three decades, and production has more than doubled during that time span:
Energy’s Brief Appearance in the State of the Union Address
Energy issues received scant mention in Tuesday’s State of the Union speech, consisting mainly of a victory lap for the President’s “all of the above” formulation and a somewhat contradictory promise to place even more federal lands off-limits to drilling. While browsing through reactions from various energy leaders and environmental groups I was intrigued by one critique of Mr. Obama’s approach from an environmental NGO, arguing that he should instead be placing the country’s bets on “best of the above” energy. They weren’t the only ones to object to the current approach.
It’s clear from their statement that Earthjustice has definite ideas about what’s best and what isn’t, but their comment merits further discussion. After all, who could argue against supporting the best energy sources? And isn’t all of the above just a sop to the status quo, in which a diverse array of energy sources dominated by fossil fuels provides the energy for the rest of the economy?
Obama and “All of the Above”
As President Obama noted Tuesday, his reference to an “‘all of the above’ energy strategy”–a debatable characterization in itself–referred to a key phrase in his 2012 address to Congress. It’s worth recalling the context, in an election year in which the Republican nominee was certain to focus on conventional energy when it was delivering US production growth in both oil and natural gas that couldn’t have been imagined just a few years earlier.
This is the 4th installment in a series that examines data from the recently released 2013 BP Statistical Review of World Energy. The previous posts were:
- Renewable Energy Status Update 2013
- Hydropower and Geothermal Status Update 2013
- The State of Oil According to BP
Today’s post delves into the natural gas production picture.
The US as Gas King
Over the past seven years, the US has firmly established itself as the global king of natural gas production (and consumption). In 2011, the US produced 62.7 billion cubic feet per day (bcfd) — more natural gas than any country had ever produced in a single year. That record fell in 2012 when the US produced 65.7 bcfd — which represented just over 20% of all the natural gas produced in the world. And thus far in 2013, US natural gas production is running ahead of 2012’s record production level.
Recycling and Reusing Becoming an Imperative
There is no greater example of the water-energy nexus than the juncture where water meets the hydraulic fracturing process, or fracking, of natural gas and oil. This nexus has created a public-private crossroads, with both sides attempting to further their goals. For legislating and rulemaking bodies, their goals revolve around protecting public safety and natural resources needed by society.
For energy firms, producing energy to meet demand in a profitable way is the target. Non-governmental organizations play a public advocacy role as well, sometimes positively and constructively and sometimes losing sight of their mission. Increasingly, the challenge is about producing energy in the most environmentally-friendly manner, using less water more efficiently and responsibly, and utilizing natural resources as if a sustainable imperative were upon us. It may well be.
Many believe that the effects of climate change will be felt through water — extremes of floods and droughts, rising sea levels, and warming oceans, to name a few challenges. Whether viewing the water-energy nexus through the lens of climate change or resource sustainability, the impact of energy development on water resources has reached an inflection point.
Touring a “Fracking” Site in Pennsylvania
It’s easy to talk about the shale gas revolution in the abstract and forget that it is the cumulative result of thousands of operations in locations across the country. It combines the technological marvel of precisely planned and executed drilling more than a mile below ground with the efforts of teams of skilled workers on the surface, and affects the surrounding community in many ways. Last week I had my first opportunity to visit one of these sites, near Williamsport in north-central Pennsylvania. I also saw several nearby sites in different stages of development. Although I was consistently impressed, I also tried to observe with the concerns of shale gas critics in mind.
The Anadarko Petroleum well “pad” I toured is located in Cogan House Township in rural Lycoming County, atop the Marcellus shale formation. This site visit for bloggers and other media was arranged by API, which also paid for accommodations in Williamsport. Anadarko provided experts from its local engineering and public affairs staffs and hosted a dinner with members of the community the evening before the site tour.
Reduction in Energy-Related CO2 Emissions
The United States has seen a remarkable run in reducing its greenhouse gas emissions over the last five years, reducing energy-related CO2 emissions from 2007 to 2012 by 12%, from six billion tons to 5.29 billion tons. While part of this reduction in emissions is attributable to a reduction in energy demand due to the economic downturn, another reason for this huge reduction is an increase in the use of natural gas for electricity.
In a story that is now familiar to most readers, the shale gas revolution in the United States has dramatically reduced the cost of natural gas. From a peak of $10.54 per million btu (mbtu) in July 2008, the spot price of gas at the well-head had fallen to less than $2/mbtu by April 2012.
Because utilities respond to price incentives, this caused fuel-switching of baseload electricity production from coal to natural gas, leading to a time in April 2012 when natural gas equaled coal as an energy source for the first time. This switch has partially been undone, with coal now producing 40% of electricity and natural gas 26% as gas prices have bounced back to $3.85/mbtu. Because burning natural gas for electricity produces half as much carbon emissions as coal, fuel switching is one of the main causes in the U.S. reduction in emissions.
As a result of the hydraulic fracturing (fracking) revolution, US oil and natural gas production have been rising for several years. According to the Energy Information Administration (EIA), US oil production has risen by 27% over the past 5 years.
In reviewing the data for individual states, I came across some interesting trivia. So I decided to put together a little quiz. The data source is the EIA. A table showing the Top 15 states with the highest percentage increases in oil production follows the quiz. Answers are at the end.
1. Which state had the largest percentage increase in oil production over the past 5 years?
b. North Dakota
In last week’s Energy Trends Insider (ETI) I analyzed why The Road to Chinese Shale Gas Goes Through the U.S. In addition to my article, Andrew Holland explained how the DOE Report on Economics of Natural Gas Exports Will Lead to LNG Export Permits and Robert Rapier wrote about profiting from the peculiarities of gas price fluctuations in ‘Rockets and Feathers’ — Investing in Refiners. As we have done previously, we would like to share a story from ETI with regular readers of this column. Interested readers can find more information on the newsletter and subscribe for free at Energy Trends Insider.
The Road to Chinese Shale Gas Goes Through the U.S.
China is reported to have massive unconventional natural gas resources. Technically recoverable gas reserves are forecast to be 36 trillion cubic meters, making it the world’s largest reserve pool according to EIA, and nearly 50% larger than the U.S.’s reserves. In the country’s most recent 5-year plan it laid out a goal of 6.5 billion cubic meters of production by 2015, a steep increase from the current production level of zero.