An earlier post, Fracking’s Game Changing Technology, covered the advent of a now famous experiment by Halliburton in the Hugoton field of Kansas in 1947, and summarized the fracking process.
It also identified some of the fracking experiments that were undertaken through 1976 when the U.S. government funded research on fracking and created the Eastern Gas Shales Project.
This post picks up with cracking the code for fracking in the 1970s and 1980s that led to the shale oil boom that we are experiencing today. Two goals of the Eastern Gas Shales Project sponsored by the Department of Energy (DOE) were to evaluate the gas potential of Devonian and Mississippian shale basins and develop new drilling, stimulation, and recovery technologies. [Ref 1] It was well documented that the U.S. had a bounty of shale plays, however the technology was not available to extract it.
The fix was found using the engineering and entrepreneurial skills of George P. Mitchell, and work of other individuals and firms.
Enter the concept of horizontal drilling. Fracking has generated a lot of discussion over the past two decades and especially the last five years. Some mistake horizontal drilling and fracking as the same thing. They are not. In an earlier post, fracking is defined as a process. That process includes the technology associated with vertical and horizontal drilling.
What is horizontal drilling? Horizontal drilling is the process of drilling and completing, for production, a well that begins as a vertical or inclined linear bore that extends from the surface location just above the target oil or gas reservoir called the “kickoff point”, then bears off on an arc to intersect the reservoir at the “entry point”, and thereafter, continues at a near-horizontal attitude tangent to the arc, to substantially or entirely remain within the reservoir until the desired bottom hole location is reached. [Ref 2] DOE subsidized Mitchell’s company to drill his first horizontal wells, covering any costs beyond a typical vertical well, and the federal government provided unconventional gas tax credits.
The Bureau of Economic Geology created high-resolution images of rock surfaces that yielded information about their porosity. Union Pacific Resources, the Fort Worth-based exploration and production company, shared its superior method for hydraulic fracturing. DOE’s Sandia Labs contributed micro-seismic fracture mapping software that helped the operator make adjustments to improve the flow of gas. [Ref 1]
The initial horizontal drilling work that began the second half of the 1970s produced good information, but not very good equipment. About a decade later, equipment manufacturers would turn their attention to enhancing the rigs, drill pipe, and down hole equipment for horizontal directional drilling applications. Technology has produced more accurate steering methods. According to Halliburton, horizontal drilling follows this timeline:
1979 – Halliburton reports first exploration work in Barnett Shale of Texas.
1980 – George Mitchell successfully combines horizontal drilling with hydraulic fracturing to “crack the code” of the Barnett Shale in north Texas. Refining the process continues into the 1990s.
1985 – Horizontal completions introduced into tight sandstone.
By the time George Mitchell sold his company to Devon Energy in 2002, the fracking process had moved from the design and testing phase to the operational phase with revenue.
From 2003 forward, the shale-oil and shale-gas boom in the U.S. has been called the Golden Age of Fracking. National Geographic Magazine’s March 2015 digital issue includes a short video and simplified definition of the fracking process. [Ref 3] Fracking involves digging a vertical well with cement and steel casing to prevent leaks into the groundwater. The well curves when it reaches the shale formation. The formation has layers of shale and sandstone. The target layer is the sandstone that is wedged between the shale layers. This is where gas and oil collect. Horizontal pipe can stretch up to two miles long.
Fracking begins by forcing plastic balls down the wells. The balls open sleeves in the pipe to expose holes. Fluid is then pumped down the well under extreme high pressure. Fluid shoots thru the holes and fractures the rock. Fissures are created. Once fracking is complete, the oil or gas is released and flows up the well. The used fluid that contains toxic materials flows up with the oil or gas and is either recycled or pumped into disposal wells below groundwater levels. The long-term environmental effects of fracking are unknown.
Fracking continues to make news for several reasons. There’s the positive attribute of being able to unlock oil and gas in the shale formations that underlie large regions of the U.S. This has assisted the U.S. in exporting more oil than it consumes. Fracking also continues to make news for negative reasons including environmental and health concerns.
Most recently, however, the falling prices of crude oil have put fracking in the news because the technology used to produce oil or natural gas becomes less cost competitive when a barrel of crude falls below $85. The price of crude fell below $50 and this put pressure on some drillers to stay in business, and most if not all drillers paid more to extract the product than what they could sell it for.
Within the past two to three weeks, the price of crude has been bouncing around the $50 mark. At the close of business (COB) today, NASDAQ reported crude oil for West Texas Intermediate (WTI) at $49.28 per barrel. [Ref 4] Similarly, the average cost of regular gasoline at COB is $2.326 per gallon.
Future movement of crude oil and gasoline prices are unknown, but my bet is that they will move forward. How quickly is the real question?
- It’s Time To Frack the Innovation System: What the history of fracking tells us about our short-sighted R&D system, by Adam Briggle, April 11, 2012, http://www.slate.com/articles/technology/future_tense/2012/04/george_p_mitchell_fracking_and_scientific_innovation.html
- Bakken Shale Oil: What Is Fracking?, National Geographic Magazine, March 2015 (digital edition), http://ngm.nationalgeographic.com/2013/03/bakken-shale-oil/fracking-animation-video
- Crude Oil West Texas Intermediate Prices, NYMEX Price (COB on 02.24.2015), http://www.nasdaq.com/markets/crude-oil.aspx
- Drilling Sideways – A Review of Horizontal Well Technology and Its Domestic Application, Energy Information Administration, Office of Oil and Gas, US Department of Energy, DOE/EIA-TR-0565, Distribution Category UC-950, April 1993