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Clippy paperclip art on fracking drill well pad

Two years ago, the U.S. fracking industry was trying to recover from the crash in the price of oil. Shale companies were promoting the idea that fracking was viable even at low oil prices (despite losing money when oil prices were high). At the time, no one was making money fracking with the business-as-usual approach, but then the Wall Street Journal published a story claiming all of this was about to change because the industry had a trump card — and that was technology.

Today, frackers are again relying on technology as a financial savior, but this time, they are looking to Microsoft.

As ExxonMobil embarks on an ambitious move into fracking in the Permian oil fields of West Texas, it has announced a partnership with Microsoft to use cloud technology to analyze oil field data and optimize operations. Exxon claims the move could generate “billions in net cash flow.”

Time will tell if the Microsoft cloud will make Exxon rain profits in the Permian.

Fracking 2.0

In March 2017, the Wall Street Journal ran an article with the headline, “Fracking 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil,” which detailed the ways the shale industry expected technology could help it finally deliver profits. The article mentioned “longer, supersize wells” and said, “The promise of this new phase is potentially as significant as the original revolution.”

The article highlighted EOG Resources (as in, Enron Oil and Gas), a company often touted as the “Apple of oil,” and quoted the company’s chief information officer saying that technology advances allowed its employees to work at the “speed of thought.”

It also reported that Chesapeake Energy was betting on these new supersize wells as part of its “turnaround strategy.” Chesapeake needed to “turnaround” from losing money and move in the direction of profits.

…click on the above link to read the rest of the article…

Fracking the World: Despite Climate Risks, Fracking Is Going Global

March 5, 2019

Fracking the World: Despite Climate Risks, Fracking Is Going Global

'Fracking: it's happening' sign overlaid on a view of Earth from space

The U.S. exported a record 3.6 million barrels per day of oil in February. This oil is the result of the American fracking boom — and as a report from Oil Change International recently noted — its continued growth is undermining global efforts to limit climate change. The Energy Information Administration predicts U.S. oil production will increase again in 2019 to record levels, largely driven by fracking in the Permian shale in Texas and New Mexico.

And the U.S. is not alone in trying to maximize oil and gas production. Despite the financial failures of the U.S. fracking industry, international efforts to duplicate the American fracking story are ramping up across the globe.

The CEO of Saudi Arabian state oil company Aramco recently dismissed the idea that global demand for oil will decrease anytime soon and urged the oil industry to “push back on exaggerated theories like peak oil demand.”

But Saudi Aramco also is gearing up for a shopping spree of natural gas assets, including big investments in the U.S., and increasing gas production via fracking in its own shale fields. Aramco is deeply invested in keeping the world hungry for more oil and gas.

Khalid al Falih, Saudi Arabia’s energy minister, told the Financial Times, “Going forward the world is going to be Saudi Aramco’s playground.” But not if other countries frack there first.

China Expanding Fracking Efforts, Testing New Technology

As a major importer of oil and natural gas, it is no surprise that China is trying to exploit its own shale formations, which are rich with oil and gas. China is estimated to have the largest shale gas reserves of any country. However, China’s shale formations present different challenges than those in the U.S., including gas deposits at significantly greater depths.

…click on the above link to read the rest of the article…

The Bakken Hit A New Record In 2018, But It’s A Bad Sign For The Industry

March 5, 2019

The Bakken Hit A New Record In 2018, But It’s A Bad Sign For The Industry

The insanity continues in the United States second largest shale oil field as the fundamental economics go from bad to worse. While it is true that the shale industry doesn’t look as dire as it did back in 2016 when oil prices fell off a cliff, I can assure you the worst is yet to come. Unfortunately, the market is blind to the biggest Ponzi Scheme in history, because wisdom and reason have disappeared from the energy industry years ago.

How can I say that? Well, I heard it from several oilmen that worked in the conventional oil industry… an industry that made good money, paid its bills, and didn’t go much into debt. They told me that the only way shale oil could work is if the company went public so it could raise money from some poor unworthy slobs they didn’t know in order to fund an uneconomic business model. These oilmen told me none of them would be crazy or stupid enough to go into the shale oil business. As veteran oil analyst Art Berman stated, “Why on earth would anyone want to invest in shale to at best, breakeven?”

So, the shale oil saga continues as the blind lead the blind. I know this because I have been fortunate enough to speak with someone in the shale industry and I continue to receive updates on just how bad the situation is unfolding. Sounds crazy, but there are a few very smart and clever people that know the disaster taking place in the shale industry, but not many.

…click on the above link to read the rest of the article…

Bethany McLean: Saudi America

March 3, 2019

Bethany McLean: Saudi America

The truth about fracking & how it’s changing the world by Adam TaggartFriday, March 1, 2019, 3:37 PM

For years now we’ve been covering the false promise of the American shale oil “miracle”.

Yes, it has extracted a lot more oil out of American soil that most thought possible. But at an economic loss. And at great environmental cost.

If the shale drilling companies can’t make any profit, either when oil prices are high or low — why are we still pursuing shale deposits so aggressively?

To shed further light on this paradox, this week we welcome journalist Bethany McLean to the program. McLean is editor-at-large at Fortune Magazine and a contributing editor for Vanity Fair and Slate magazines. She is also author of the excellent book: Saudi America: The Truth About Fracking And How It’s Changing The World.

McLean warns that the hype, the hucksterism, and the geological shortcomings of the deposits themselves, are setting up both investors and American society for tremendous disappointment:

The real catalyst of the shale revolution was the Great Financial Crisis and the era of unprecedentedly-low interest rates that followed.
And that had two effects. One was that it made debt cheap. So these companies that are heavily dependent on being able to raise capital could raise debt at low prices. And without that, I’m not sure there would’ve been a shale revolution because they needed such immense amounts of capital to fund their drilling.
But it had a second impact, which is that when pension funds were no longer able to earn a return in traditional fixed income markets, they’ve increasingly put their money into riskier assets like hedge funds that invest in credit and private equity firms. Those entities, in turn, have increasingly invested in shale.

…click on the above link to read the rest of the article…

EXXONMOBIL U.S. OIL & GAS FINANCIAL TRAIN-WRECK: Producing Shale Is Destroying Its Bottom Line

February 21, 2019

EXXONMOBIL U.S. OIL & GAS FINANCIAL TRAIN-WRECK: Producing Shale Is Destroying Its Bottom Line

The United States largest oil company, ExxonMobil, is facing a financial train-wreck in its domestic oil and gas sector. And, the majority of the blame can be attributed to Exxon’s move into shale. After Exxon acquired XTO Energy in 2009, a U.S. shale oil and gas producer, it has seriously begun to ramp up shale oil production in the Permian.

ExxonMobil plans on expanding Permian shale oil production to 600,000 barrels a day (bd) by 2025, up from the 115,000 bd as of October (thanks to the data from Shaleprofile.com). If you look at the chart below, Exxon’s Permian shale oil production shot up from less than 50,000 bd at the beginning of 2018, to over 115,000 bd in October:

Exxon is now the largest player in the Permian, according to the article, Exxon Becomes Top Permian Driller to Combat Falling Oil Output:

Exxon Mobil Corp. has overtaken rivals to become the most active driller in the Permian Basin, showing the urgency with which the world’s biggest oil company by market value is pursuing U.S. shale.
Exxon’s escalation in the Permian is essentially a bet that it can drill wells so cheaply that they’ll be profitable despite crude’s tumble since early October. The company says its shale wells can make double-digit returns with oil at just $35 a barrel.

Exxon moved into the Permian to stem a decade of falling domestic U.S. oil production. However, its statement that it will enjoy double-digit gains at a $35 oil price in the Permian may be more “delusional thinking” rather than company pragmatic optimism. I spent some time looking over Exxon’s financial statements, and I have to say I was quite shocked by their utterly dismal 2018 U.S. oil and gas financials.

…click on the above link to read the rest of the article…

Energy Dominance Isn’t Just a Trump Obsession

February 9, 2019

Energy Dominance Isn’t Just a Trump Obsession

Energy Dominance should be the catchphrase of the day. It’s on the minds of every political figure, and the focus of every economy.

This is especially true of those vulnerable to a change in the status quo, namely Saudi Arabia.

While some continue to believe the gyrations of the oil market over the past few months are evidence of our running up against the limit of the petroleum based global economy, I disagree.

The world is awash in decades of easily-extracted oil and gas. The supply of it has been kept off the market due to its centrality in the grand game of geopolitics. But, it has nothing to do with the amount of oil and gas out there.

Peak oil has become a religion among its adherents. Decrying the U.S. shale boom, rightly, for its profligacy has more to do with it being a consequence of disastrous central bank inflation rather than some grand plan of the ‘cabal’ because we passed peak EROEI some time ago.

When you drop interest rates to zero and flood the world with liquidity that can only find a home in equity markets, the natural result is malinvestment into unsustainable business practices.

The first wave of the shale boom in the U.S. occurred during this period and created the dynamic we have today. It’s groundwork was laid when oil prices spiked during Greenspan’s post-9/11 reflation and the Iraq War took a lot of marginal supply off the table.

That sparked a gold rush mentality and a huge boom occurred as oil prices kept rising after “Bernanke saved the world” with trillions in liquidity and multiple rounds of QE.

Properties were bought based on sky-high valuations which were the result of searching for yield in a yield-free world.

…click on the above link to read the rest of the article…

Are Investors Finally Waking up to North America’s Fracked Gas Crisis?

February 8, 2019

Are Investors Finally Waking up to North America’s Fracked Gas Crisis?

The fracked gas industry’s long borrowing binge may finally be hitting a hard reality: paying back investors.

Enabled by rising debt, shale companies have been achieving record fracked oil and gas production, while promising investors a big future payoff. But over a decade into the “fracking miracle,” investors are showing signs they’re worried that payoff will never come — and as a result, loans are drying up.

Growth is apparently no longer the answer for the U.S. natural gas industry, as Matthew Portillo, director of exploration and production research at the investment bank Tudor, Pickering, Holt & Co., recently told The Wall Street Journal.

“Growth is a disease that has plagued the space,” Portillo said. “And it needs to be cured before the [natural gas] sector can garner long-term investor interest.”

Hints that gas investors are no longer happy with growth-at-any-cost abound. For starters, several major natural gas producers have announced spending cuts for 2019.

After announcing layoffs this January, EQT, the largest natural gas producer in the U.S., also promised to decrease spending by 20 percent in 2019.Embed from Getty Images

Such pledges of newfound fiscal restraint are most likely the result of natural gas producers’ inability to borrow more money at low rates.

As DeSmog has reported, the historically low interest rates following the 2008 housing crisis were a major enabler of the free-spending and money-losing attitudes in the shale industry. Wall Street has funded a decade of oil and gas production via fracking and incentivized production over profits. Those incentives have worked, with record production and large losses.

However, much like giving mortgages to people without jobs wasn’t a sustainable business model, loaning money to shale companies that spend it all without making a profit is not sustainable.

…click on the above link to read the rest of the article…

Will BC’s Budding LNG Industry Spark More Quakes and Shake Northeast Housing Prices?

February 2, 2019

Will BC’s Budding LNG Industry Spark More Quakes and Shake Northeast Housing Prices?

Look at Oklahoma as a possible preview of things to come.

House damage in central Oklahoma from a magnitude 5.6 earthquake on Nov. 6, 2011. The cause was wastewater disposal in the oil and gas industry. Photo by Brian Sherrod, USGS.

B.C. Premier John Horgan and Prime Minister Justin Trudeau could barely contain their glee last year when LNG Canada declared its $40-billion Kitimat export terminal and related pipeline were going ahead.

But neither leader mentioned the dramatic surge in horizontal drilling and fracking in northeastern B.C. that will be required to extract the natural gas (or methane) needed by LNG Canada. The plant will take methane, process it into liquefied natural gas and then export it overseas.

What Trudeau called the largest capital project in the nation’s history will initially process two billion cubic feet of methane a day — almost half B.C.’s current production. It has the capacity to scale up and gobble four billion cubic feet a day. That’s more than one-third of Canada’s total demand.

According to energy analyst David Hughes, the project will require the drilling of an additional 400 gas wells a year for 40 years, in addition to the almost 500 wells now being drilled annually.

If you want a preview of what that kind of rapid industry expansion brings, look at Oklahoma.

In that state, America’s fifth largest oil producer, earthquakes caused by industry wastewater injection have damaged homes, sparked lawsuits and a regulatory scramble, and even depressed housing prices.

The state and northern B.C. share a well-studied geological phenomenon: unprecedented earthquake activity caused by fluid injection into the ground — mostly wastewater injection in Oklahoma and massive fracking operations in B.C.

…click on the above link to read the rest of the article…

The Shale Oil Revolution Actually Reflects a Nation in Decline

January 12, 2019

Shutterstock

The Shale Oil Revolution Actually Reflects a Nation in Decline

Faster consumption + no strategy = diminished prospects

Here in the opening month of 2019, as the US consumes itself with hot debate over a border wall, far more important topics are being ignored completely.

Take US energy policy. In the US press and political circles, there’s nothing but crickets sounding when it comes to serious analysis or any sort of sustainable long-term plan.

Once you understand the role of energy in everything, you can begin to appreciate why there’s simply nothing more important to get right.

Energy is at the root of everything. If you have sufficient energy, anything is possible. But without it, everything grinds to a halt.

For several decades now the US has been getting its energy policy very badly wrong. It’s so short-sighted, and rely so heavily on techno-optimism, that it barely deserves to be called a ‘policy’ at all.

Which is why we predict that in the not-too-distant future, this failure to plan will attack like a hungry wolfpack to bite down hard on the US economy’s hamstrings and drag it to the ground.

Shale Oil Snafu

America’s energy policy blunders are nowhere more obvious than in the shale oil space, where it’s finally dawning on folks that these wells are going to produce a lot less than advertised.

Vindicating our own reports — which drew from the excellent work of Art Berman, David Hughes and Enno Peters’ excellent website — the WSJ finally ran the numbers and discovered that shale wells are not producing nearly as much oil as the operators had claimed they were going to produce:

Fracking’s Secret Problem—Oil Wells Aren’t Producing as Much as Forecast

Jan 2, 2019

…click on the above link to read the rest of the article…

Oil’s Wild Price Swings Set to Create Global Chaos

January 10, 2019

Oil’s Wild Price Swings Set to Create Global Chaos

Volatility is here to stay — and the political and economic implications will touch us all.

Oil once gushed from the ground for drillers, like these workers in Port Arthur, Texas, in 1901. Now costly fracking and oilsands mining produces lower-quality oil at far higher costs. Photo: US Library of Congress.

As the current global oil glut shakes up petro states around the world, oil prices are becoming more volatile than Donald Trump tweets.

Neither Canada, now the dumb owner of a marginal 65-year-old pipeline, nor Alberta, a key exporter of bitumen, a cheap refinery feedstock, has paid much attention to this revolution.

As a consequence Canada has no strategy to deal with the new normal of highly volatile oil prices.

Government incompetence explains the hew and cry in Alberta about its overproduction crisis and the various proposals to solve it, ranging from the purchase of rail cars (a bad idea) to the decision to order companies to cut production of heavy oil by about 325,000 barrels a day (a sensible idea).

Alberta’s panic attack is based on the idea that bitumen from the province’s oilsands producers is selling at a discount because of a lack of pipeline capacity.

The reality is that the dramatic 30-per-cent drop in oil prices since the beginning of October, from more than US$70 to US$50, is upsetting oil exporters, producers and markets around the world.

Different kinds of oil fetch different prices, based on their quality and transportation costs. And all are experiencing dramatic price drops. Alberta’s bitumen, a cheap refinery feedstock, is not the only crude languishing during a global market glut.

Refineries in Japan and Korea, for example, scooped up cheap U.S. oil earlier this year.

…click on the above link to read the rest of the article…

BC earthquakes and fracking

January 4, 2019

BC earthquakes and fracking

As a general rule, the most successful man in life is the man who has the best information

There is no fracking going on right now in northeastern British Columbia, the epicenter of the province’s oil and gas production. Hydraulic fracturing operations have been shut down there for a month due to earthquakes that happened on Nov. 29 about 20 kilometers southeast of Fort St. John.

The BC Oil and Gas Commission (BCOGC), which both regulates and promotes the industry (more on that below), is investigating the 4.5 magnitude quake, followed by two smaller aftershocks. One of the largest oil and gas producers in Canada, Canadian Natural Resources, was fracking in the area.

The commission has linked previous earthquake incidents to increased seismicity, though it states on its website that none of the events in BC have resulted in environmental or property damage. Yet.

For those who have been following our investigations into the BC government’s plans to develop a liquefied natural gas (LNG) industry in BC – something we vehemently disagree with considering its costs will vastly outweigh its benefits – there is an irony in the operations suspension.

A couple of months ago the BC Premier and the Prime Minister gathered with industry representatives to announce the final investment decision by Shell and its Asian partners to go ahead with LNG Canada. The first-in-BC $40 billion LNG compression plant, to be built in Kitimat, will receive natural gas via a new pipeline – filled with the same fracked gas that is causing earthquakes and shutting down the industry while the BCOGC investigates. It would be downright shocking if they found anything that would slow fracking in northeastern BC, which supplies natural gas to BC and Alberta, as well as valuable liquefied gas products like diluted bitumen (dilbit) to the oilsands, not to mention hundreds of millions in royalty payments to the BC and Alberta governments.

…click on the above link to read the rest of the article…

Fracking Future Shock in Colorado

December 28, 2018

Fracking Future Shock in Colorado

If fracking treated all people equally, that is, if every person in Colorado were threatened with anywhere from 10 to 50 fracked wells in their neighborhood, the oil and gas industry would be long gone. But it doesn’t, so only a minority of Coloradans reap the whirlwind in the state’s fracking fields.

That Prop 112, a citizen setback initiative, made it onto the fall ballot and that about one million Coloradans supported it shows there is growing public awareness and concern over industrial fracking. It mandated 2500 foot drilling setbacks from homes and other essential human resources such as watercourses. The oil and gas industry defeated the initiative by spending $40 million to create uncertainty about the factual health and safety hazards of fracking. That money onslaught influenced statewide politicians from both parties who didn’t want those deep pockets turned inside out on them. For too many, it appears, the business of government is business.

As a species we hate uncertainty. Like the cigarette industry before it, the oil business and their political allies have adopted uncertainty as their life blood. Sure, many people get sick living near fracking sites, but some don’t, say they. The air quality along the front-range is deteriorating and is a threat to all, but it’s not all the fault of frackers in Weld County, say they. And so it goes, for certainty is elusive in the complicated world we’ve created.

Still, some things about fracking are certain. As an example, fracked wells decrease in production very rapidly, after which they must be properly closed. The state contains over 100,000 wells, and about half are closed or inactive. A small subset, of roughly 720 wells, are called orphaned wells. These are wells where ownership can’t be determined.

…click on the above link to read the rest of the article…

Pick Your Poison: The Fracking Industry’s Wastewater Injection Well Problem

November 20, 2018

Pick Your Poison: The Fracking Industry’s Wastewater Injection Well Problem

$Oklahoma fracking industry site$

The first known oil well in Oklahoma happened by accident. It was 1859 and Lewis Ross was actually drilling for saltwater(brine), not oil. Brine was highly valued at the time for the salt that could be used to preserve meat. As Ross drilled deeper for brine, he hit oil. And people have been drilling for oil in Oklahoma ever since.

Lewis Ross might find today’s drilling landscape in the Sooner State somewhat ironic. The oil and gas industry, which has surging production due to horizontal drilling and fracking, is pumping out huge volumes of oil but even more brine. So much brine, in fact, that the fracking industry needs a way to dispose of the brine, or “produced water,” that comes out of oil and gas wells because it isn’t suitable for curing meats. In addition to salts, these wastewaters can contain naturally occurring radioactive elements and heavy metals.

But the industry’s preferred approaches for disposing of fracking wastewater — pumping it underground in either deep or shallow injection wells for long-term storage — both come with serious risks for nearby communities.

In Oklahoma, drillers primarily use deep injection wells for storing their wastewater from fracked shale wells, and while the state was producing the same amount of oil in 1985 as in 2015, something else has changed. The rise of the fracking industry in the central U.S. has coincided with a rise in earthquake activity.

From 1975 to 2008, Oklahoma averaged from one to three earthquakes of magnitude 3 or greater a year. But by 2014, the state averaged 1.6 of these earthquakes a day. It now has a website that tracks them in real time.

…click on the above link to read the rest of the article…

Judge Orders Moratorium on Offshore Fracking in Federal Waters off California

November 16, 2018

Judge Orders Moratorium on Offshore Fracking in Federal Waters off California

In a victory for the ocean, a federal judge on Friday, November 9, ordered the Trump administration to cease issuing permits for offshore fracking and acidizing in federal waters — waters over 3 miles from shore — off the coast of Southern California.

U.S. District Judge Philip S. Gutierrez ruled that the federal government violated the Endangered Species Act and the Coastal Zone Management Act when it allowed fracking (hydraulic fracturing) and acidizing in offshore oil and gas wells in all leased federal waters off Santa Barbara, Ventura and Los Angeles counties.

Gutierrez issued an injunction prohibiting the two responsible federal agencies, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), from approving any plans or permits for the use of well stimulation treatments (WSTs) off California.

The court concluded that the Federal Defendants “satisfied their obligations” under the National Environmental Policy Act (“NEPA”) in preparing the environmental assessment that is the subject of the suit.

“But theCourt also concludes that the Federal Defendants violated the Endangered Species Act (“ESA”) by failing to consult with the relevant federal services and violated the Coastal Zone Management Act (“CZMA”) by failing to prepare a consistency determination and submit it to California for review as required by that statute,” Gutierrez wrote.

Hydraulic fracturing is a well stimulation technique that uses a pressurized liquid to fracture rock. Acidizing is another well stimulation technique that entails pumping acids into a well in order to dissolve the rock, increasing the production by creating channels in the rock to allow oil and natural gas to reach the well.

…click on the above link to read the rest of the article…

Fracking in the UK

November 9, 2018

Fracking in the UK

Burning fossil fuels is a major cause of greenhouse gas emissions (GGE), and, greenhouse gas emissions (water vapor (H2O), carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O)) are the principle cause of man-made climate change. Given this fact, governments throughout the world should be moving away from fossil fuels and investing in, and designing policies that encourage development of, renewable sources of energy. But the British Conservative government, despite public opinion to the contrary, has all but banned the construction of onshore wind turbines and is encouraging fracking in England. The Tories are the only UK political party to offer support for this regressive form of energy production, Labour, the Liberal Democrats and the Greens having all promised fracking bans should they gain political office at the next general election.

Hydraulic fracking is the process of releasing gas and oil from shale rock: huge quantities of water, proppant (usually sand) and chemicals are injected at high-pressure into hydrocarbon-bearing rocks, rocks that can be up to a mile down and were once thought to be impermeable. This process of fracturing (or cracking) forces the rocks to crack open, and gas held inside is released and allowed to flow to the surface.

Shale gas is a fossil fuel, and when combusted produces GGE, albeit at around 50% less than coal or oil, but GGE nevertheless. The leading fracking company in Britain is the energy firm Cuadrilla. An organization that according to its website, aims “to be a model company for exploring and developing shale gas in the UK,” they state that they are “acutely aware of the responsibilities this brings, particularly with regard to safety, environmental protection and working with local communities.” Really?

…click on the above link to read the rest of the article…

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