Wednesday, 12 March 2014

Thanks to Fracking, U.S. Will Pass Saudi Arabia In Oil Production

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Thanks to the success of U.S. oil companies engaged in hydraulic fracturing, or “fracking” — a process used to extract oil trapped in shale formations — the United States will soon pass Saudi Arabia as the world’s largest oil producer. Both Saudi Arabia and the United States passed Russia for the top spot in recent years.

The Economist reported on February 15 that U.S. oil production reached a peak of 9.6 million barrels per day (bpd) in 1970, then declined to less than five million bpd in 2008. About that time, independent oil producers began adapting the new technologies of hydraulic fracturing (“fracking”) and horizontal drilling (which had previously been used to tap natural gas found in shale) to reach shale oil. 

Since fracking was introduced, U.S. oil production has risen to 7.4 million bpd and the U.S. Energy Information Administration (EIA) predicts that U.S. production will return to 1970 levels by 2019. 

The International Energy Agency has issued projections that the United States will displace Saudi Arabia as the world’s largest oil producer by 2015. By 2020, notes a report in Investing Daily, the United States will produce 11.6 million barrels a day. During the same period, Saudi Arabia’s output is expected to fall from 11.7 million bpd to 10.6 million bpd.

In “America’s Energy Edge,” an essay in the March/April issue of Foreign Affairs (the journal of the Council on Foreign Relations), Robert D. Blackwiil and Meghan L. O’Sullivan noted that during the past five years U.S. energy producers have taken advantage of two new technologies: “horizontal drilling, which allows wells to penetrate bands of shale deep underground, and hydraulic fracturing, or fracking, which uses the injection of high-pressure fluid to release gas and oil from rock formations.”

Blackwill and O’Sullivan continue:

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The resulting uptick in energy production has been dramatic. Between 2007 and 2012, U.S. shale gas production rose by over 50 percent each year, and its share of total U.S. gas production jumped from five percent to 39 percent.... Between 2007 and 2012, fracking also generated an 18-fold increase in U.S. production of what is known as light tight oil, high-quality petroleum found in shale or sandstone that can be released by fracking. This boom has succeeded in reversing the long decline in U.S. crude oil production, which grew by 50 percent between 2008 and 2013. Thanks to these developments, the United States is now poised to become an energy superpower.

At the heart of this story is a technique that has been used so successfully to increase U.S. oil production: fracking, the popular term for what scientists call hydraulic fracturing. Basically, hydraulic fracturing is the fracturing of rock — in this case shale containing oil — by a pressurized liquid. Water mixed with sand and chemicals is injected at high pressure into a borehole, producing small fractures in the shale, allowing natural gas or oil to seep into the well, from which it is extracted.

As was noted in a biographical sketch about George Mitchell (who pioneered fracking) posted by The New American last July 29, fracking is being used to access natural gas and oil in the Marcellus (New York and Pennsyvania), Haynesville (Arkansas, Louisiana, and East Texas), Barnett (North Texas and Oklahoma), and Utica (New York, Pennsylvania, Ohio, West Virginia, Kentucky, Maryland, Tennessee, Virginia, and Ontario and Quebec in Canada) shale beds, along with the Bakken Formation in North Dakota. Fracking technology has increased production so much that it has made North Dakota into one of the most prosperous states in the union.

But it is mainly the increased production in North Dakota and Texas that will enable the United states to displace Saudi Arabia as the world’s top oil producer. As of 2013, the Bakken formation produced more than 10 percent of all U.S. oil. In November 2013, the U.S. Energy Information Administration projected that Bakken production in North Dakota and Montana would exceed one million barrels per day in December 2013, making North Dakota the second largest oil-producing state in the United States, behind Texas.

Britain’s Independent newspaper reported on March 12 that Texas is currently producing three million barrels of oil a day, “most of it from fracking in two huge shale fields.”

The article notes that by next year, Texas oil production will rise to four million barrels per day, more than the United Arab Emirates, Iraq, and Iran. If Texas were a nation, notes the writer, it would already be the ninth largest oil producer in the world.

The success of the oil boom resulting from fracking is not without its usual critics among environmentalists, however. A leading anti-fracking measure is in the works in Colorado. In January 2014, the Colorado Community Rights Network (CCRN) submitted ballot language for a proposed amendment to Colorado’s constitution that would give municipalities the right to ban or regulate fracking and any other industrial activity — such as factory farming and hazardous waste disposal — within their borders. If the language is approved by the secretary of state, the group will collect signatures to get the measure on the fall ballot.

The amendment really highlights two separate issues. First, local rule, which even the most conservative constitutionalists tend to regard as a good thing. The other consideration, however, is that the target of this home rule is a private enterprise sure to benefit Colorado’s economy. Simply because an action is constitutional does not always mean it is wise or well-motivated.

Energy producers in Colorado are confident that the anti-fracking measure will fail, however. When Reuters News asked Jack Ekstrom, a Whiting Petroleum Company executive and incoming chair of the Western Energy Alliance, an industry advocacy group, if his company planned to fight back he replied, “Are we willing to fight? You bet we are. If you ask me if I’m concerned, the answer is no. Our intent is to grow here, not shrink.”

Another oil industry advocate interviewed by Reuters, Tisha Conoly Schuller, president of the Colorado Oil & Gas Association, a group that is challenging local fracking bans, said, “We’re confident that common sense and economic certainty is going to prevail in the end. That’s why you don’t see (energy) companies changing their investment strategy in Colorado.”

Colorado Governor John Hickenlooper, a Democrat who will run for reelection this November, is expected to talk about the ballot measure at this week’s IHS CERAWeek conference in Houston, an annual meeting of global energy leaders. While he has not indicated how he stands on the measure, the venue suggests that he will not take a position opposed to the energy industry hosting the event. And since Hickenlooper worked as a geologist for Buckhorn Petroleum in the early 1980s, he does have a background in the oil industry.

The U.S. oil industry has responded with many innovative techniques to provide for America’s energy needs, including building the Trans-Alaska Pipeline System, building offshore drilling platforms, and using fracking to vastly increase oil production. Each of these methods has come under heavy attack by the more extreme segments of the environmental lobby. While every individual with common sense wants to protect our environment from harmful effects, shutting down energy is not necessary to protect the environment. Our free enterprise system provides both the incentive and the know-how to create affordable, plentiful energy that is environmentally friendly.

Photo of fracking equipment in the Bakken oil field

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