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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.

Permian explorers drill deep into fraclog, leaving shelves bare

Permian explorers drill deep into fraclog, leaving shelves bare

(Bloomberg) — Shale explorers in the Permian Basin chewed further into their supply of ready-made wells for a 20th straight month, leaving the smallest inventory of low-cost wells in the biggest U.S. oil field in more than half a decade.

The number of wells that have been drilled and await a frac crew to complete them, also known as DUCs, stood at 1,309 last month, according to the U.S. Energy Information Administration’s drilling productivity report. The lowest number of DUCs in West Texas and southeast New Mexico since February 2017 could eventually lead to a lag on new oil output hitting the market as producers must now call on more drilling rig crews to start the new-well process.

Two years after the worst crude crash in history, producers are focused on completing existing wells to increase output, cutting further into the so-called fraclog. Now publicly traded explorers are hesitant to boost spending on drilling so that they can instead grow dividends and buy back shares even with oil trading over $100 a barrel.

The agency revised its estimates for oil production volumes from the Permian Basin to be lower than it thought last month.

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.”

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…

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…

North Dakota blues: The legacy of fracking

North Dakota blues: The legacy of fracking

When oil drillers descended on North Dakota en masse a decade ago, state officials and residents generally welcomed them with open arms. A new form of hydraulic fracturing, or “fracking” for short, would allow an estimated 3 to 4 billion barrels of so-called shale oil to be extracted from the Bakken Formation, some 2 miles below the surface.

The boom that ensued has now turned to bust as oil prices sagged in 2019 and then went into free fall with the spread of the coronavirus pandemic. The financial fragility of the industry had long been hidden by the willingness of investors to hand over money to drillers in hopes of getting in on the next big energy play. Months before the coronavirus appeared, one former oil CEO calculated that the shale oil and gas industry has destroyed 80 percent of the capital entrusted to it since 2008. Not long after that the capital markets were almost entirely closed to the industry as investor sentiment finally shifted in the wake of financial realities.

The collapse of oil demand in 2020 due to a huge contraction in the world economy associated with the pandemic has increased the pace of bankruptcies. Oil output has also collapsed as the number of new wells needed to keep total production from these short-lived wells from shrinking has declined dramatically as well. Operating rotary rigs in North Dakota plummeted from an average of 48 in August 2019 to just 11 this month.

Oil production in the state has dropped from an all-time high of 1.46 million barrels per day in October 2019 to 850,000 as of June, the latest month for which figures are available. Even one of the most ardent oil industry promoters of shale oil and gas development said earlier this year that North Dakota’s most productive days are over. CEO John Hess of the eponymous Hess Corporation is taking cash flow from his wells in North Dakota and investing it elsewhere.

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

Why Fracking Activity Hasn’t Increased As Oil Prices Recovered

Why Fracking Activity Hasn’t Increased As Oil Prices Recovered

It’s been a long dry spell in the Permian. Shale drilling and completions activity has collapsed to levels not seen since before 2000 (as far back as records are kept). That was the year shale activity first began to pick up from essentially nil and hit all-time peaks in 2008. With occasional ebbs and flows, it had gradually drifted down to the start of the current calamity, where active rigs stood at a somewhat healthy 805 rigs turning to the right. 

Fracking has also taken a commensurate dive over the last eight months, defying the conventional wisdom that as prices began to improve, activity would increase. It hasn’t happened in either case. Why?

Driven by low prices not seen much in modern history, formerly high-flying shale drillers like Chesapeake Energy have gone bankrupt. The service providers who do the actual work like Halliburton, (NYSE:HAL), Schlumberger, (NYSE:SLB) have written off tens of billions worth of fracking-related equipment, closed facilities and laid off thousands of workers.

Much of the expansion from 2016 onward was fueled by growth at any cost mindset in the drillers, and aided by bankers willing to accept ever-increasing estimates for the value of reserves. In 2018 much of that laissez-faire mentality in the boardrooms of the drillers and in the vaults of the bankers came to an abrupt halt as profits and cash flow were demanded. That was the moment shale activity began to falter numerically, while at the same time, a miracle was taking place. Production grew from advances in technology and a deeper understanding of key reservoirs to record levels.

EIA-STEO

Peaking at nearly 13 mm BOE in March of this year, a failure of OPEC+ nations to agree on production cuts that same month, led oil to begin a precipitous decline in price.

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

Thousands of Quakes, Tied to Fracking, Keep Shaking the Site C Dam Region

Thousands of Quakes, Tied to Fracking, Keep Shaking the Site C Dam Region

Several recent reports on the tremors add to concerns about the mega-project’s stability.

Building the Site C dam in northeastern British Columbia is proving more difficult than officials predicted due to unstable ground on the northern bank. Adding to concerns: myriad earthquakes.

For nearly a decade, The Tyee has reported on a rising number of earthquakes caused by the hydraulic fracturing of shale formations in the region. Now, new studies put the number of such tremors in recent years in the many thousands, raising more worries about the future of the mega-project.

Researchers warn the shaking could become strong enough to crumble critical infrastructure such as roads, high-rise buildings — and dams.

B.C.’s regulatory practices try to limit fracking after small earthquakes have been triggered. But that’s “not sufficient to protect critical or vulnerable infrastructure that have unacceptable failure consequences,” noted seismic hazard expert Gail Atkinson in the May 7 issue of Nature Reviews.

No one can yet predict frack-triggered quakes before they happen, and “hazard forecasting” remains a “critical area of research.”

Another study, released this week by researcher Ben Parfitt at the Canadian Centre for Policy Alternatives, took data from federal earthquake catalogues to show how many tremors the fracking industry is producing near the Site C dam.

The numbers are staggering. Between 2017 and 2018 alone, the industry triggered 6,551 earthquakes greater than 0.8 magnitude in the region near the troubled mega-project with a price estimate of $12 billion and rising.

Drilling by Canadian Natural Resources Ltd., for example, triggered a magnitude 4.6 earthquake in November 2018 that forced the evacuation of the Site C Dam site. It was followed by magnitude 3.5 and 4 events after the fracking ceased.

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

New Satellite Data Reveals Dangerous Methane Emissions in Permian Region

New Satellite Data Reveals Dangerous Methane Emissions in Permian Region

New research based on satellite data confirms that the oil and gas industry in the Permian region of Texas and New Mexico is leaking record amounts of methane. The new research published in the journal Science Advances found that methane emissions in the Permian Basin were equivalent to 3.7 percent of the total methane produced by the oil and gas industry there.

In December DeSmog reported on the work of Robert Howarth, a biogeochemist at Cornell University, who has been studying the methane emissions of the oil and gas industry. Howarth’s latest research estimated that 3.4 percent of all natural gas produced from shale in the U.S. is leaked throughout the production cycle, which appears to be confirmed by this new research.

Methane is a powerful greenhouse gas and makes up approximately 90 percent of what is known as natural gas. It’s a major contributor to global warming.

The oil and gas industry has long tried to sell the idea of natural gas, which is, again, primarily methane, as a clean energyclimate solution. However, with a leakage rate of 3.7 percent, natural gas is actually worse for the climate than coal.

Advertisements for natural gas from the industry trade group the American Petroleum Institute have claimed, “Thanks to natural gas, the U.S. is leading the way in reducing emissions.”

This new satellite data confirms that simply isn’t the case. When the methane leaks from oil and gas production are taken into account, natural gas is unquestionably a dirty fossil fuel.

This new research also helps explain why methane emissions rose at such a high rate in 2019.

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

U.S. Shale Faces Largest Ever Drop in Fracking Activity

U.S. Shale Faces Largest Ever Drop in Fracking Activity

The Covid-19 crisis combined with the oil price war is about to trigger the largest ever monthly drop in U.S. fracking activity.

The Covid-19 pandemic has ravaged global oil demand and, coupled with the extremely low price levels brought on by the wide supply surplus, is likely to cause the largest monthly drop in fracking activity ever recorded in the US, a Rystad Energy analysis shows.

We estimate that the total number of started frac operations will end up below 300 wells in April 2020; close to 200 in the Permian and less than 50 wells each in Bakken and Eagle Ford. This translates into a 60% decline in started frac operations between the peak level seen in January to February 2020 and April 2020, as the majority of public and private operators implement widespread frac holidays.

In March we observed an extreme 30% monthly decline in the number of started frac jobs in these three major oil basins, a fall from 807 in February to just 550. Also, nationwide fracking activity, on a completed jobs basis, might have already declined by around 20% in March 2020, according to our estimates.

“With such a rapid decline in fracking already visible, very little activity will be happening in the oil basins during the remainder of the second quarter of 2020. The natural base production decline, which we have seen as an absolute floor for production, therefore becomes an increasingly relevant production scenario,“ says Rystad Energy Head of Shale Research Artem Abramov.

If we assume that no new horizontal wells are put on production from April 2020 onwards, total LTO production will decline by 1 million barrels per day (bpd) by May, 2 million bpd by July and by 3 million bpd by October to November, with the Permian Basin accounting for more than half of nationwide base decline.

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

Peak Permian Oil Production May Arrive Much Sooner Than Expected

Peak Permian Oil Production May Arrive Much Sooner Than Expected

Ad in Houston Airport mentioning declining Permian oilfields

In mid-January, Adam Waterous, who operates the private equity firm Waterous Energy Fund, made a prediction about the crown jewel of the U.S. shale oil industry, the Permian shale play that straddles Texas and New Mexico.

“We think we are at or near peak Permian,” Waterous told Bloomberg. “The North American oil market has been grossly overcapitalized, which is not sustainable.”

Bloomberg reporter Simon Casey goes on to qualify that “[p]redicting peak Permian output for 2020 isn’t a mainstream view.” However, evidence is piling up that the U.S. shale industry may indeed be close to peaking as it runs out of the two things required to continue increasing oil production: money and what’s known as “tier one acreage.”

Tier one acreage is the term for the areas that produce the most oil per well. It’s also known as “sweet spots,” “core acreage,” or “good rock.”

The idea of the U.S. shale revolution peaking long before either the broader oil and gas industry or the Energy Information Administration expects isn’t a popular one. And the idea was even less popular when DeSmog started detailing why it was likely all the way back in October 2018, and even when the Wall Street Journal made the case a year later.

Today, as more and more Permian oil companies go bankrupt and wells in the nation’s most prolific oil patch turn out less and less, one early warning nows seems especially prescient. In 2018, Paal Kibsgaard, the CEO of Schlumberger — one of the largest oil services providers — cautioned about declining well productivity in the Permian Basin, pointing to increasing “child wells” and to the boom-gone-bust Texas oilfield, the Eagle Ford Shale. 

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

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