The F Word
I expect that those of you with kids will be able to identify with this statement: They are always pushing boundaries. Right now, one of the frontiers with mine is around language - specifically, swear words.
My standard response when asked if it is OK to swear is to say “When you’ve learned and understood every other word in the language, and you’re able to select a swear word as the most appropriate for the situation, then ok”. Now, clearly I’m a hypocrite - I haven’t learned every word, but I’ve given it a red-hot go (one of my favourite Australian-isms), including living in four anglophone countries and I’m still trying. I don’t punctuate with profanity… but my mother wouldn’t appreciate every word that slips from my lips.
However, in the gas business (and, to be fair, oil also), we have our own F-bomb.
Fracking.
To be more correct, Hydraulic Fracturing. Or to be even more historically correct, slick-water fracturing.
As per the favourite tactic of Citizens Against Virtually Everything (CAVErs), anything on a spectrum is defined by it’s most extreme elements and fracking is an unsurpassed, absolute evil, responsible for everything Miley Cyrus has done since she left Hannah Montana behind. But many things in life can be done well or done badly, with high risk or with risks managed. So it is with fracking - and I think there are lots of things we can learn from it.
Full disclosure, I am not experienced in the technicalities of fracking, but I have studied, worked and read widely around the impact on the gas industry and areas in which it operates. For the benefit of those outside the industry, there’s a brief non-technical explainer below*.
Firstly let’s look at the development of the technology and what lessons it yields for the Energy Literacy class I’d like to put together for our politicians and fellow citizens.
In the late 90s & early 2000s, US gas production was in decline and prices were rising; there was a lot of activity to construct LNG import terminals to support supply to the US market - indeed, without this, I’m not sure we would have seen the massive LNG developments in Qatar to the same degree. For reference, a ‘typical’ Asian LNG price might be $8-10; this winter we’ve seen prices north of $40 in both Europe and Asia.
In 2006, word began to emerge that Mitchell Energy had cracked the code to extracting gas from shale rock - gas that was known to exist, but broadly considered to be unrecoverable economically. By 2009, it was commonplace and quickly becoming the standard in the gas industry - and applied to oil-bearing shale rock also. Its impact on gas prices as shown in the chart is pretty clear.
An overnight success! A technological revolution! A stroke of genius!
Not so fast. Mitchell Energy - under the stewardship & belligerence of George P. Mitchell** - had spent 17 years working on becoming an overnight sensation.
Even within the company, George didn’t have a lot of support for continuing the development for most of this time. Lots of trials, lots of errors, lots of board meetings where - had George been subject to the oversight of a typical publicly traded company board - the programme would almost certainly have been killed. But when it happened, it happened fast because it made economic sense. After the might of the American industry had mobilised to copy this technique, it made even more sense.
What’s more - it happened without a dime of government support, notwithstanding the usual tax writeoff for R&D expenses that exists in most jurisdictions. It’s also been the key factor that has allowed the US to significantly reduce CO2 emissions in the last decade.
Greenpeace didn’t save the whale; the discovery of oil & development of refined products made whaling uneconomic. No government programme made fracking happen, no conference of the parties, not the UN. So why, when it comes to the energy transition, do so many believe that government subsidies of hydrogen, the picking of winners and coercion towards patently uneconomic solutions (like electric vehicles) is the right way to go?
It’s unusual for an individual to fund a technology through to fruition, although there are arguably a handful of folk these days who could do it without blinking. Typically it’s the role of government to fund fundamental research, but grants for such things have been on the decline for decades in favour of, well, ideas with a clearer line of sight to votes.
Yes, this stuff can take time… but then the economics take care of themselves.
Secondly, in a post about fracking, I also need to address the negatives that are often thrown around by the CAVErs.
Almost all the data I’ve seen about fracking comes from West Texas, an area where the crust of the earth is thin and the oil and gas reservoirs are shallow - that’s why so much was found there in the Beverly Hillbillies days. Spending a few days driving through this area is an incredible experience, and should certainly be on the bucket list of anyone working in this industry (preferably while listening to the outstanding Boomtown podcast***) .
It’s amazing to see the scale (not to mention the wind turbines…), but it’s also easy to see some of the failings of the industry. In my opinion, the ‘industry-friendly’ regulation has exacerbated some of the problems - this point perhaps could have become “Where did gas go wrong? Part 3”
The rapid, fracking-based rush to produce oil in the Permian basin (West Texas / New Mexico) led to many operators seeking permits to produce oil while flaring the (sometimes significant) quantities of associated gas. Most jurisdictions I have worked in would not have allowed this; they would have insisted that the gas be gathered and, for example, compressed into a pipeline system - but that’s not the case here. Doing so would have tempered the pace of development, taking the heat out of the booms - in doing so, quelling some of the bad behaviour that comes with gold rush fever - and softening the busts and the human consequences they bring.
Instead, it’s easy to find examples of patently egregious behaviour - such as extinguished flares on unmanned sites venting gas for days. In the absence of formal regulation, industry self-regulation should have kicked in and behaved more sensibly. Moves are happening towards correcting this - Equitable Origins and Project Canary are examples that provide an indication of direction - and this is something I’m sure to speak about in a future post.
Another common point raised relates to the interaction of gas with the with water table. The gas reservoirs in West Texas intersected the water table long before anyone drilled a hole through them, and certainly long before the film crew from Gasland turned up. This is simply not true everywhere - for example, the reservoirs of Northern British Columbia are several kilometres deep. The risks are not all the same; it is necessary to understand the rocks - and remember, anything can be done well or done badly.
As a third and final point, let us consider the geopolitical aspects of a global commodity. When George Mitchell died in 2013, I don’t know if he could have foreseen the scale of the US LNG industry that his technology was about to enable. He may have foreseen a bully in the East with one hand on the gas tap to Europe. In 2022 to date, at least 60 US LNG cargoes have been delivered (or are on their way) to European ports - for the uninitiated, that is a very, very large number. Without George, Putin’s leverage over Europe would have been significantly higher… and I, for one, am grateful for his perseverance.
George - you did a Fracking great job!
AB
* Traditional gas production accesses reservoirs of gas held in permeable rock (often sand), trapped underground by an impermeable cap. Imagine the fizz in a can of coke, held in by the can, released when the can is opened. Same with drilling a well into a gas reservoir - the gas that had been trapped by the cap flows out through the well.
Now imagine that it isn’t permeable, it’s solid, hard rock. Less Lionel Richie, more Metallica. You can drill a hole - and a small amount of gas will be released - but the rest will remain trapped by the shale rock. Fracturing, as the name implies, cracks the shale to increase surface area such that more of the gas can be released.
Geologists, please forgive my gross simplifications :o)
** A lot of my information in this piece comes from Loren C. Steffy’s excellent biography of George. If you’re in the industry - particularly if you’re familiar with the Houston area - it’s compelling reading. If neither of those things apply… maybe stick with my summary…