Friday, September 12, 2014

Fracking: a one night stand?

Well one night in historical terms.  Something more like three years is the actual number.
Robert S. Eshelman, Vice News, 8 Septemeber 2014 (hat tip: NC)
Working with the Post Carbon Institute, a sustainability think-tank, [Canadian geologist David] Hughes meticulously analyzed industry data from 65,000 US shale oil and natural gas wells that use the much-ballyhooed extraction method of hydraulic fracturing, colloquially known as fracking. The process involves drilling horizontally as well as vertically, and then pumping a toxic cocktail of pressurized water, sand, and chemicals deep underground in order to break apart the rock formations that hold deposits of oil and gas.
Hughes found that the production rates at these wells decline, on average, 85 percent over three years.
"Typically, in the first year there may be a 70 percent decline," Hughes told VICE News. "Second year, maybe 40 percent; third year, 30 percent. So the decline rate is a hyperbolic curve. But nonetheless, by the time you get to three years, you're talking 80 or 85 percent decline for most of these wells."
Hughes explained that more than 80 percent of the nation's shale oil comes from just two plays, the Bakken field in North Dakota and Montana and the Eagle Ford in Texas. He estimates that production in those regions will recede back to 2012 levels in 2019. Overall production across the nation's shale oil fields will peak in 2017.
In just the Bakken, Hughes calculates that 1,400 new wells are needed per year to offset current production decline, which right now is 45 percent of current production rates of about a million barrels per day, or 450,000 barrels per day each year.
"You need 1,400 $8 million wells to keep production flat, and they're drilling more than that — they're drilling 2,000 wells per year," he explained. "So production in the Bakken will continue to go up. But it's because at the moment they're continuing to drill the sweet spots."
So I think the title of the article shouldn't be that fracking will end, but "Fracking to Become More Expensive Than You Think".   And that is even more expensive than where we are at currently with the climb down from the initial Chesapeake Oil driven enthusiastic surge.
Which is pretty much what you would think would happen when your at a production plateau, a plateau that is naturally going to occur when rising costs hit a demand wall: an extended "peak" of sorts.


PioneerPreppy said...

The tight oil plays are only financially possible with zero interest rate loans, massive subsidies and huge tax breaks. Which literally means the real cost of extraction is being paid for by us not the companies doing the drilling. We pay for it in lost interest, declining dollar value and higher taxes on our end.

Whether or not the actual extraction process is outside the EROI is still debated though.

I guess we should enjoy it while we can.

Harry Flashman said...

Don't overlook the tax advantages associated with working interests tied to non productive or low production facilities. You get a write off on your "losses" and you also get a depletion credit, which really means that you can make money , not on oil production, but on the lack of it if you are in the right tax bracket.

russell1200 said...

Pioneer: Oh, you mean there is leverage involved? Shocking I tell you, just shocking...LOL

The leverage you speak of, was to bail out the banks from their foolish leveraging of themselves in the housing bubble. Fracking is an unintended beneficiary.

Flashman: True, a good point. But doesn't someone, somewhere still needs to make money to make it worthwhile? With solar tax credits, the big banks buy them up because they have consistent profits to offset. I am not sure where the balance lies with fracking, and how easy it is to transfer the tax losses.