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Peak US Oil Production Looms as the Domestic Shale Boom Ends

After a decade of losing hundreds of billions of dollars, the shale oil industry is finally making money — and running out of oil.
A lone pumpjack in Loving County, Texas, in the Permian Basin. Credit: Justin Hamel
It appears that the U.S. fracking boom is ending far earlier than many industry experts and CEOs predicted. After an understandable dip in 2020 due to the pandemic, oil production still has not regained the record levels achieved in 2019, and predictions that the industry would set new records this year have not materialized, despite 2022’s high oil prices.

In late 2018, DeSmog first raised the alarm about the reality that the U.S. shale industry was likely to hit peak production much sooner than most experts expected.

At the time and since, the oil industry has continually promised big things for the future of U.S. shale oil production.

Credit: U.S. Energy Information Administration

In 2017, Inside Energy reported that the governor of North Dakota was aiming to have the Bakken shale play produce 2 million barrels per day. In that same article an analyst for S&P Global Platts predicted that even in 2027 the Bakken would be producing 1.5 million barrels per day. The Bakken peaked at 1.5 million barrels per day in 2019 but has yet to return to that level.

Similarly, a 2019 article in industry publication oilprice.com noted that “there is a consensus in the market that the Permian Basin will be the dominant part of 2040 US oil supply.” In that article, industry analysts Rystad predicted the Permian could be producing 7.5 million barrels per day in 2040.

And in 2020, Rystad made optimistic predictions for the future of U.S. shale oil at its Energy 2020 Americas Virtual Annual Summit.

…click on the above link to read the rest…

Cash For Fracking: UK Households May Receive Payouts For Allowing Fracking

Cash For Fracking: UK Households May Receive Payouts For Allowing Fracking

  • The UK lifted its long-running ban on fracking last month.
  • UK households could soon receive cash payouts for allowing fracking in their neighborhoods.
  • Drilling companies could soon go door to door in Britain, offering money in exchange for fracking support.

UK households could soon receive cash payouts for allowing fracking in their neighborhoods, media reported on Monday.

The UK may have lifted its long-running ban on fracking last month, but its fracking industry still has one big hurdle that it must overcome: local opposition.

Fracking has been criticized for its reported ties to earthquakes and other environmental damage, and has fallen out of favor. The practice’s sullied reputation has led to its ban in several countries, including France, Germany, Spain, and until recently, the UK.

Despite its pariah status, fracking managed to make its way into the hearts and minds of Texans to eventually become the backing behind the United States’ rise to stardom within the global oil and gas industry. Fracking was able to make inroads in the U.S. shale patch precisely because locals benefited from the fracking activity by way of receiving money from the oil and gas taxes that the states collected, which then flowed into the areas that allowed it.

That those areas benefited greatly from the fracking dollars cannot be denied. Now Britain, too, is taking a page from the U.S. shale handbook: paying households £1,000 for allowing fracking in their areas. But the money will come directly from drillers rather than from industry tax revenue.

Drilling companies could soon go door to door in Britain, according to media reports on Monday, offering money in exchange for fracking support.

When the UK’s new Prime Minister Liz Truss removed the fracking ban last month, she did so with one caveat: it would only be allowed in communities that showed at least 50% support. Drillers must now gain half the residents over to the controversial practice in order to commence drilling.

Sand for fracking is now 3 times as expensive as it was last year, and it’s one of several reasons US oil production isn’t increasing

Sand for fracking is now 3 times as expensive as it was last year, and it’s one of several reasons US oil production isn’t increasing

Fracture manager Eric Vaughan holds a mixture of sand and water which will be pumped down the pipes as shale gas developer Cuadrilla Resources will start fracking for gas next week at its Preston New Road site near Preston
A hydraulic fracturing manager holds a mixture of sand and water which is pumped down the pipes at a shale gas site in the UK. 
Peter Powell/Reuters
  • Russia’s invasion of Ukraine has knocked 1.5 million barrels of oil per day out of the global supply.
  • With prices spiking, US oil producers have not significantly stepped up production.
  • One reason: the special sand needed for fracking is 185% more expensive.

With Russian oil on the international blacklist due to the invasion of Ukraine, the world is seeking a replacement for as many as 4.5 million barrels per day.

Indeed, analysts at Rystad energy consultancy estimate that global trade of crude is down by an average of 1.5 million barrels per day since the beginning of Russia’s assault on its Eastern European neighbor.

Nearly a month on, crude oil is trading at over $110 per barrel, a price which has historically motivated oil companies to ramp up production, but the output of US drillers hasn’t appeared to move significantly.

One of the key reasons actually predates the war in Ukraine: the special sand required for hydraulic fracturing (frac sand) in shale oil production has gotten a lot more expensive.

Frac sand is made of silica crystals processed from pure sandstone, with a small grain size and round shape that allows natural fluids like oil and water to pass between them. At a drilling site, sand is mixed with water and special chemicals, then injected into the ground at high pressure to break up shale to release and pump out the oil inside.

That material now costs between $40 and $45 per ton, Rystad Energy analyst Ryan Hassler told Axios — nearly 185% higher than last year. Two years ago, sand prices were in the teens.

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

Oil Frackers Brace for End of the U.S. Shale Boom

Oil Frackers Brace for End of the U.S. Shale Boom

Limited inventory leaves the industry with little choice but to hold back growth, even amid high oil prices

The end of the boom is in sight for America’s fracking companies.

Less than 3½ years after the shale revolution made the U.S. the world’s largest oil producer, companies in the oil fields of Texas, New Mexico and North Dakota have tapped many of their best wells.

If the largest shale drillers kept their output roughly flat, as they have during the pandemic, many could continue drilling profitable wells for a decade or two, according to a Wall Street Journal review of inventory data and analyses. If they boosted production 30% a year—the pre-pandemic growth rate in the Permian Basin, the country’s biggest oil field—they would run out of prime drilling locations in just a few years.

Shale companies once drilled rapidly in pursuit of breakneck growth. Now the industry has little choice but to keep running in place. Many are holding back on increasing production, despite the highest oil prices in years and requests from the White House that they drill more.

The limited inventory suggests that the era in which U.S. shale companies could quickly flood the world with oil is receding, and that market power is shifting back to other producers, many overseas. Some investors and energy executives said concerns about inventory likely motivated a recent spate of acquisitions and will lead to more consolidation.

Some companies say concerns about inventories haven’t factored into their decisions to keep output roughly flat. For several years before the pandemic, frustrated investors had pressured companies to slow production growth and return cash to shareholders rather than pump it back into drilling. Companies have promised to limit spending, though some executives recently said high prices signal a need for them to expand again this year.

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


Dutch Plan To Boost Gas Output At Earthquake-Prone Site Sparks Anger

Dutch Plan To Boost Gas Output At Earthquake-Prone Site Sparks Anger

Residents in the Groningen area in the Netherlands have voiced their anger at a plan by the Dutch government to potentially double this year production from the Groningen gas field, which has been hit by earthquakes in the past.

The Dutch government said on Thursday that it might need more gas to be pumped at Groningen, once Europe’s biggest gas field, which the Netherlands has pledged to phase out this decade after frequent earthquakes in the past damaged homes in the area.

After years of debates and measures to curb production at the field, the Dutch government decided in 2018 that output at Groningen would be terminated by 2030, with a reduction by two-thirds until 2021-2022 and another cut after that. The authorities had already limited production from the field because of the earthquakes, but they decided in 2018 that the risks and costs were no longer acceptable.

Now the government says that more gas needs to be extracted from the Groningen gas field in 2022 to ensure supply because of long-term export contracts with Germany and a delay in the commissioning of a facility in the Netherlands to treat imported gas for use for Dutch households.

The government is expected to make a final decision by April 1 on how much gas will be extracted from Groningen this year.

“I realize it really is a disappointment for people in the quake region that it has indeed proved necessary to extract more gas,” Dutch Economic Affairs Minister Stef Blok said on Friday, as carried by Associated Press.

The Groningen Earth Movement, a group of residents who have suffered damages from earthquakes, slammed the plan for more gas extraction at the field.

The Ministry of economic affairs and climate policy is playing with the safety of people in Groningen, the movement said, adding that “a government should not and cannot treat the safety of its citizens so lightly.”

In Brief: Fracking back, new weather warnings, lockdown by any other name

In Brief: Fracking back, new weather warnings, lockdown by any other name

Fracking back

Anti-fracking campaigners like to flatter themselves by claiming that it was their protests which finally brought UK fracking to an end.  The reality though, is that the price at which UK shale gas might be recovered was far higher than the prevailing price of gas from the North Sea.  The UK’s tortured geology and its lack of unpopulated open space meant that UK fracking could never match the relatively low prices of its US counterpart.  And a few years ago, when government had to decide whether to give UK fracking the green light, there was enough surplus gas on the wholesale market to justify a moratorium.

Several gigawatts of intermittent wind farms and an insane German decision to phase out nuclear, later, and Western Europe finds itself desperately short of the gas supplies required to keep the lights and heaters running this winter.  The UK – which failed to model the future strength of the Gulf Stream correctly – is particularly vulnerable as it depends upon gas power stations to iron out the intermittency from its over-deployment of wind turbines.  One result – which the establishment media is being surprisingly quiet about – is that the wholesale price of gas has rocketed past October’s record price of £2.93 per therm.  As of this afternoon, the price is £3.49, and may well reach new highs later this week (see below).

The issue here is whether the current price increases are here to stay.  Some commentators suggest that the shortage is due to Russia cutting its supply to Europe in order to pressure Germany to finalise the Nord Stream 2 pipeline…

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

Here’s the Fracking Truth About America’s Last Fossil-Fueled Hurrah

Here’s the Fracking Truth About America’s Last Fossil-Fueled Hurrah

In order to recover the abundance of these fuels that the EIA claims will be there for the taking, between now and 2050 the industry will need to drill something on the order of 700,000 new wells at a total cost of over $5 trillion.

As global leaders struggle to tackle the climate crisis, and as ordinary people worldwide are increasingly whiplashed by high fuel costs, the US government is promising policymakers, industrialists, and investors that there will be decades of growing supplies of fracked oil and natural gas. However, an independent earth scientist with 32 years of experience with the Geological Service of Canada is using the industry’s and government’s own data to show why that’s a dangerous fallacy.

Hughes has just issued his latest, Shale Reality Check 2021, and it provides an invaluable, comprehensive, yet detailed view of the past, present, and future of tight oil and shale gas.

During the past decade, Post Carbon Institute has published a series of reports by earth scientist J. David Hughes on the status of US shale gas and tight oil resources and production (i.e. natural gas and oil that are extracted using hydraulic fracturing, also known as fracking). These reports are remarkable for their technical depth and thoroughness, and are frequently referenced by climate activists, energy investors, and industry insiders. Hughes has provided a necessary counter to the US Energy Information Administration’s (EIA) typically over-optimistic projections, which often echo hyperbolic claims by the industry. Indeed, Hughes’s reports, which address forecasts contained in the widely-cited EIA Annual Energy Outlook, may justify calling him “the people’s shadow EIA.” Hughes has just issued his latest, Shale Reality Check 2021, and it provides an invaluable, comprehensive, yet detailed view of the past, present, and future of tight oil and shale gas.

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

The U.S. Shale Revolution Has Surrendered to Reality

Fracking companies aren’t drilling as investment continues to dry up.
Oil well.
Image: Fossil fuel oil well. Credit: CL Baker. CC BY 2.0

“Drill, baby, drill is gone forever.”

That was the recent assessment of Saudi Prince Abdulaziz bin Salman of the American oil industry’s future potential. As Saudi Arabia’s energy minister, Prince Abdulaziz is one of the most influential voices in the global oil markets. Fortune termed it a “bold taunt,” and a warning to U.S. frackers to not increase oil production.

The response by the U.S. producers — to shut up and take it — quietly confirms this reality. Shale oil’s era of growth appears to be over. The reason is that even as global oil demand and prices rise, the economics of the shale oil business model continue to not work. The U.S. shale industry has lost hundreds of billions of dollars in the past decade producing oil and selling it for less than it cost to produce.

This was possible because despite the losses, investors kept giving the industry money. But now investors appear to have grown tired of losing money on U.S. shale companies and new lending to the industry has dropped dramatically.

As reported this month by The Wall Street Journal, “capital markets showed little interest in funding expansive new drilling campaigns” for the U.S. shale industry. Shaia Hosseinzadeh, a partner at investment firm OnyxPoint Global Management LP,  told The Journal that the problem facing fracking companies is that “they can’t access cheap capital any longer.”

Without new infusions of money, the industry can’t drill for more oil, and that is why the Saudis feel confident taunting the U.S. oil industry. Prince Abdulaziz’s confidence is based in the financial realities of U.S. shale.

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

Change BC Fracking or Expect Damaging Earthquakes: Report

Change BC Fracking or Expect Damaging Earthquakes: Report

The new warning comes from a former senior scientist with the province’s oil and gas commission.

Since 2005, British Columbia’s experiment with hydraulic fracturing of gas wells has changed the geology of the province’s northeast. It is now home to some of the world’s largest fracking-induced earthquakes outside of China.

In 2018, one magnitude 4.6 tremor tied to fracking even rattled buildings in Fort St. John and stopped construction on the Site C dam. It was followed by two strong aftershocks.

Now, a comprehensive new scientific study warns that stress changes caused by the technology could trigger a magnitude 5 earthquake or greater in the region, resulting in significant damage to dams, bridges, pipelines and cities if major regulatory and policy reforms aren’t made soon.

Allan Chapman, the author of the paper served as a senior geoscientist for B.C.’s Oil and Gas Commission and as its first hydrologist from 2010 to 2017. Prior to working for the commission, he directed the Ministry of Environment’s River Forecast Centre, which forecast floods and droughts.

Chapman, now an independent geoscientist, said that he felt compelled to write the paper because researchers have concluded that fracking “induced earthquakes don’t have an upper limit” in terms of magnitude.

In addition, “there is a clear and present public safety and infrastructure risk that remains unaddressed by the regulator and the B.C. government.”

B.C.’s Oil and Gas Commission rejected Chapman’s conclusions in a statement to The Tyee, saying his study contained “speculation.”

Recent events in China’s Sichuan province prove that fracking can trigger large and destructive earthquakes.

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

The Brutal Legal Odyssey of Jessica Ernst Comes to an End

The Brutal Legal Odyssey of Jessica Ernst Comes to an End

The Alberta landowner fought an epic battle against fracking interests.

After 14 years of battling Alberta regulators and the fracking industry over a water well contaminated with methane and chemicals, Jessica Ernst says she feels incalculable grief and anger.

On April 1, 2021, her tortuous legal crusade — which included a controversial detour to the Supreme Court of Canada — came to an end with no resolution. What one Alberta lawyer dubbed “the legal saga of the decade” is over.

Court of Queen’s Bench Judge J.T. Eamon accepted applications from Encana and the Alberta government to dismiss the case due to inactivity on the file for three years.

“It was inevitable,” says Ernst who was informed three weeks after the dismissal. “The rules are the rules.”

After Toronto lawyers Murray Klippenstein and Cory Wanless quit the case in August 2018 without warning, Ernst was left hanging.

“My lawyers knew I couldn’t find a replacement lawyer in Alberta when they quit,” said Ernst. “They even wrote me that and added that I would fail as a self-represented litigant.”

She not only had no lawyer, but incomplete legal files to work with, Ernst says. Klippenstein told The Tyee in 2019 that he would return them to Ernst, but she maintains his firm only returned some correspondence but not the complete files. And so the lawsuit languished.

Although Ernst tried to find another lawyer, she says that she couldn’t find a suitable candidate for various reasons, including conflict of interest. Most big law firms do business in or with the oil patch.

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

Struggling to Make a Profit, Fracking Investors are Searching for the Exit

Banks and investors have given up on the U.S. fracking industry, which is bad news for current investors who waited too long to get out.
Derricks Credit: Pay No Mind (CC BY-SA 2.0) and Going out of business sign Credit: Michael Steeber (CC BY-SA 2.0) Photos adapted by: Justin Mikulka

The outlook is increasingly bleak for oil and gas companies. The beginning of this year has seen the highest number of companies announce bankruptcy during the first quarter in five years. Eight oil and gas companies announced they were filing for bankruptcy during the first quarter of 2021.

Meanwhile, earlier this month The Financial Times noted that of 500 privately owned oil and gas companies in the U.S., 400 are losing money and unlikely to ever pay back their large debts. According to the Financial Times, the remaining companies are focused on a “last gasp” effort to look profitable to potential buyers in order to “secure a profitable exit.”

If they can’t secure a “profitable exit” that will help them pay back their debts, the most likely outcome is bankruptcy.

As Adam Waterous, head of the private equity group Waterous Energy Fund, told the Financial Times: “This business is broken. The industry is going through a multiyear process of wringing capital out of the sector, not bringing new capital in.”

Investors appear to be done with the fracking industry as they realize that the only people making money are the Wall Street banks and shale company executives. With investors losing interest in the fracking industry — and banks no longer interested in loaning money to fracking companies  —  there is a lack of new money available to prop up the struggling fracking business model.

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

Exclusive: Whistleblower Accuses Exxon of ‘Fraudulent’ Behavior for Overvaluing Fracking Assets For Years

Exclusive: Whistleblower Accuses Exxon of ‘Fraudulent’ Behavior for Overvaluing Fracking Assets For Years

ExxonMobil announced a $19.3 billion write-down on Tuesday, a big hit to a company reeling from depressed oil and gas prices and a rapidly changing global energy market.

The write-down reduces the value of the assets on Exxon’s books. The announcement comes as part of the company’s fourth quarter earnings for 2020.

The fossil fuel giant, however, may be understating the financial damage to its assets, according to a former ExxonMobil employee turned whistleblower, Franklin Bennett. The oil major has overvalued its assets for years, according to Bennett and a team of advisors, a practice he describes as “fraudulent and defiant behavior” in a January 31 supplement to a whistleblower complaint he filed with the U.S. Securities and Exchange Commission (SEC).

Bennett and his team argue that instead, the company has been overvaluing its U.S. oil and gas assets by as much as $56 billion, as of year-end 2019.

At the root of the SEC complaint is ExxonMobil’s 2010 purchase of shale fracking company XTO Energy, which it acquired at the height of the natural gas boom for $46 billion. In the months and years following the acquisition, natural gas prices collapsed, and never returned to previous heights, rendering much of XTO’s assets uneconomic to produce.

Until now, ExxonMobil largely refused to take a meaningful write-down on those assets, despite several downturns in oil and gas market conditions. In particular, a deep natural gas price slide in 2015–2016, and another in 2019, hollowed out the valuation of many high-cost shale gas assets. Through it all, Exxon never took a significant write-down, which Bennett and his team argue is illegal.

In accounting terms, Exxon essentially told regulators that they could still get full value from the assets that they paid for in 2010, despite the deterioration in the natural gas market, claims the SEC complaint.

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

New Harvard Study Finds “Elevated Radiation” Levels Near Fracking Sites

Fracking has been one of the keys to helping the U.S. achieve its energy independence and become the world’s largest oil and gas producer over the last ten years. But now, it looks like it may be coming with some unintended consequences, according to Reuters.

Researchers have found elevated radiation levels near U.S. hydraulic fracking drilling sites, according to a newly released study by Harvard researchers this week. The study looked at the U.S. Environmental Protection Agency’s radiation monitor readings nationwide from 2011 to 2017.

The study was published in Nature and found that areas within 12 miles downwind of 100 fracking wells had radiation levels that were about 7% above normal background levels. Readings can go “much higher” as you move closer to drill sites, the study reported. Radioactive particles can be inhaled and “increase the risk of lung cancer,” Reuters noted.

Petros Koutrakis, who led the study, said: “The increases are not extremely dangerous, but could raise certain health risks to people living nearby.”

He also said that further study is needed: “Our hope is that once we understand the source more clearly, there will be engineering methods to control this.”

He attributes the radiation to “naturally-occurring radioactive material” rising to the surface as a result of the drilling.

The study also found that the largest increases occurred in places like Pennsylvania and Ohio, where naturally occurring radioactive material is found in higher concentrations than other states.

It’s unclear whether or not this could become an election talking point with less than 3 weeks until the Presidential race. We already know where President Trump stands on fracking. If only Joe Biden and Kamala Harris could remember what, exactly their position is…

The US Oil and Gas Industry’s Methane Problem Is Catching up With It

The US Oil and Gas Industry’s Methane Problem Is Catching up With It

A laid-off oilfield worker's vest and gloves hang on a fence post in front of an idled pump jack in Eddy County, New Mexico
For years, the oil and gas industry has been able to downplay, or outright ignore, the problem of methane. Methane is an invisible gas, and lax state and federal regulations in the U.S. have allowed oil and gas producers to self-report how much of this potent planet-warming gas leaks from its supply chain, which researchers have repeatedly found is a lot more than the industry was admitting to.

But improved technologies, particularly from satellites, have allowed the world to increasingly fact-check industry numbers, shining a light on the true climate impact of natural gas, which is primarily methane. These days, methane emissions have become an industry black eye, to the point that major players are now clamoring for regulations after the Trump administration recently finalized the rollback of Obama-era rules meant to reduce methane leaks from oil and gas.

On August 24, the Houston Chronicle published an op-ed arguing for the United States to regulate methane emissions for the oil and gas industry, and it was co-written by two influential voices in the industry, Antoine Halff and Andrew Gould. Halff was formerly the head of oil analysis at the International Energy Agency, an independent, intergovernmental organization focused on energy research and policy — and notorious for its overly optimistic (and inaccurate) outlooks for fossil fuels and overly pessimistic views on renewables. Gould is the former CEO of Schlumberger, the world’s largest oilfield services company. Gould also currently serves on the board of Occidental Petroleum Corporation — one of the largest fracking companies among the Permian oilfields of Texas.

Halff and Gould were writing in response to the Trump administration’s repeal of existing methane regulations. However, as a sign of the changing times, they argued that regulating the greenhouse gas is simply good business for the oil and gas industry.

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

How much oil left in America? Not much

How much oil left in America? Not much

Preface. If you think we have no worries because we can get arctic oil, think again. We can’t because icebergs mow drilling platforms down in the ocean. On land, massive amounts of expensive new drilling rigs, roads, rail lines, platforms, buildings and other infrastructure need to be built, and maintained every year as permafrost soil bucks and heaves like a bronco trying to shake infrastructure off.

In the first two oil shocks in the 1970s, many intelligent people proposed we should buy oil from other nations to keep ours in the ground for when foreign oil declined. But hell no, Texas, Oklahoma, and other oil states said that we need jobs and CEO/shareholder profits more than national security. Over half of all remaining oil is in the Middle East, which China, Russia, and Europe are much closer to than the U.S.

What saved the U.S. and the world, from conventional peak oil and natural gas decline since 2005 is fracking. But fracking began to decline as early as 2020 according the first report below. The second article is about oil discoveries in the U.S. declining.

This just in: John Hess, CEO of Hess Corporation, told his audience that “key U.S. shale fields are starting to plateau” and will not the next Saudi Arabia. U.S. shale oil production has been a major driver in the growth of world oil supplies. Last year the United States accounted for 98% of global growth in oil production. Since 2008 the number is 73%. so a slowdown or decline in U.S. oil production growth would mean trouble for the whole world. With 81 percent of global oil production now in decline, even a plateau in U.S. production would likely result in a worldwide decline (Kobb 2020).

Peak Fracking in the news:

2020 U.S. Shale Oil Production – All That’s Left Is The Permian And That Won’t Last Forever Either.

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

Olduvai IV: Courage
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