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Hail Shale
Frackers Fix Their Fatal Flaw

Shale doubters invariably pin their pessimism to the high production decline rates of fracked wells—when compared to more conventional operations, shale projects see their output drop off quite quickly. Or, at least, that used to be the case. Now, as Reuters reports, the fracking industry is making remarkable progress in reducing those decline rates, fixing the “Achilles heel” of the shale boom:

According to data compiled and analyzed by oilfield analytics firm NavPort for Reuters, output from the average new well in the Permian Basin of West Texas, the top U.S. oilfield, declined 18 percent from peak production through the fourth month of its life in 2015. That is much slower than the 31 percent drop seen for the same time frame in 2012 and the 28 percent decline in 2013, when the oil price crash started. The change was even more dramatic in North Dakota’s Bakken shale, where four-month decline rates for new wells fell to 16 percent in 2015 from almost 31 percent in 2012.

Those are remarkable numbers, truly. So what’s at work here? Innovation, of course. Reuters continues:

Scott Sheffield, chief executive of Pioneer Natural Resources Co, a top Permian producer, credited improved fracking techniques for helping stabilize production, which shareholders rewarded by lifting Pioneer’s shares up about 9 percent over the past year. “We’re exposing more of the reservoir and breaking it up so we don’t get as sharp a decline,” Sheffield told a recent energy conference.

Words like shale and fracking have become household names at this point, so it’s easy to forget that this energy revolution isn’t even a decade old yet. As a technology, hydraulic fracturing has been around for more than sixty years, but its deployment in shale formations alongside horizontal well drilling is still very much a novel thing, and plumbing shale for its hydrocarbons is still a fledgling industry, hard as that may be to believe given the extraordinary production increases we’ve seen over the past seven years or so. As such, there’s still plenty of room for improvement, and shale producers have shown themselves to be well up to that task as they continue to refine existing processes and experiment with new ones in an unending search for better ways to drill more oil and gas quicker and more cheaply.

Even with steep shale well decline rates, America’s energy landscape was completely remade by fracking. Now that companies are finding solutions to that problem, well, our domestic energy sector is looking more solid than ever.

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  • Andrew Allison

    Just think how much more transportation costs could reduced if there were more LNG terminals on the West Coast (there’s currently one in Alaska and one under consideration in Oregon). Focusing on the Panama Canal might be a mistake (http://www.nytimes.com/interactive/2016/06/22/world/americas/panama-canal.html)

    • CaliforniaStark

      There is one coming at about 150 miles south of California, at Costa Azul near Ensenada, Mexico. It is an existing LNG import terminal which Sempra and Pemex are going to turn also into an export terminal. It is widely expected to ship mostly U.S natural gas.

      • Andrew Allison

        I wondered whether I should add “of the contiguous 48” but thought, obviously wrongly, that West Coast (as opposed to west coast) would suffice [grin]

        • CaliforniaStark

          Although located in Mexico, believe all the pipelines to the terminal connect to the U.S., and not the Mexican mainland. The owner of the pipelines as well as the LNG terminal is Sempra, a major Southern California utility. In a few years Costa Azul may become an export hub for American fracked gas going to Asia. Doubt the Oregon LNG terminal will ever be built, the opposition is to strong.

  • Blackbeard

    Except that Hillary has promised to choke off fracking with impossible to meet regulations. Do you think she’s bluffing? Do you think the Greens will let her forget her promise? Or are you betting on Trump?

    • CaliforniaStark

      Actually Clinton has been equivocating on fracking, and has not come out in support of a total ban, although in New York Clinton said that she would support local bans. Her campaign fact sheet about fracking states: “natural gas can play an important role in the transition to a clean energy economy, creating good paying jobs and careers, lowering energy costs for American families and businesses, and reducing air pollution that disproportionately impacts low income communities and communities of color.”
      .

      • Blackbeard

        Here’s the quote from Hillary:

        “by the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.”

        So if fracking is still widespread say a year or two after Hillary is inaugurated she will be seen to have betrayed this promise and, without doubt, the Greens will call her on it. Of course politicians who say anything they need to say to get elected and then don’t follow through are hardly rare. Still, considering where the Democratic Party is these days (far left and hard Green) I suspect this may be a costly promise to break. Do you believe Hillary is the kind of leader who will do the right thing for the country and politics be damned?

        • CaliforniaStark

          That is a statement she made in a debate that she has since backed away from; in a subsequent New York debate she gave a more lengthy answer, which reflected the contents of her sheet sheet quoted above. Clinton supporters blocked the attempts to place a fracking ban in the Democratic Party platform. In the California primary Sanders attacked Clinton for her support of fracking; Clinton still won by a wide margin. After successfully riding out attacks by the anti-fracking zealots, doubt she will cater to them once elected.

          • Blackbeard

            I hope you’re right. I’ll vote for Hillary myself because I feel Trump is completely unfit but I am still deeply disturbed at the direction the Democratic Party is headed in and I have my doubts that Hillary is the person to reverse this slide.

          • CaliforniaStark

            Totally agree with you; and fear you could be right. I can never remember an election with candidates this awful.

          • Frank Natoli

            What is the most significant issue you believe Hillary would get right and Trump would get wrong? Please do not say “all”. Name a specific issue.

          • Blackbeard

            First, character comes before policy. No matter what Trump says about this or that issue, since I don’t trust or believe him it doesn’t matter. Now, you may counter that Hillary is a lying, hypocritical crook and you’d be right. In this terrible election both choices are bad but where I come out is that Hillary is marginally better.

            On specific policy questions, Trump has several clear themes: he is strongly anti-immigration, does not believe in trade and at least leans in the direction of isolationism. Granted, our country is headed in the wrong direction in many ways, particularly for the blue collar constituency Democrats used to serve. Nevertheless, I think his policy prescriptions are aimed exactly backwards. Yes, for example, we could enact huge tariffs on Chinese steel but what would that accomplish? Aside from the retaliation we would face, we would be raising the price of all the things we sell, such as cars, appliances and Caterpillar tractors, that use steel. I think trying to preserve those kind of low marginal value jobs is a losing fight.

          • Frank Natoli

            I suppose an assessment of character is hopelessly a matter of opinion, but Hillary Clinton has accomplished absolutely nothing in life, yet presents herself as the very essence of what America needs. What kind of “character” is that? Donald Trump has accomplished quite a bit. He’s the one flying around with his own air force with his name on it, not me, no matter how bright I think I am, and I presume not you. It’s NOT smoke and mirrors. He has multi-billion dollar commercial accomplishments. However difficult to swallow aspects of his personality and speech are, he can honestly say “see, I got that done, and I will also get X, Y and Z done for America”. To me, perhaps not to you, that gets more trust than her, not to mention that every single plan of hers would make Bernie Sanders both smile and ask “why didn’t they vote for me when this is what they wanted”.

            As for trade, everyone seems to be assuming either the U.S. takes zero action to ensure a two way trade street, or acts to shut down all trade. There is a middle ground, and I see no evidence that Trump has declared himself to be planning to implement the latter. China [and South Korea, and many other countries] impose huge restrictions on imports from the U.S., ostensibly to protect their own companies, i.e., protectionist in the extreme. Yet no one is supposed to call them on that. I say baloney. So does Trump. It needs to be a two way street, and nobody, yet, has done anything to force that. Trump will.

  • Jacksonian_Libertarian

    This increase in production indicates that old supposedly spent fracked wells are a resource that can be refracked with the new technology and without the expense of drilling.

    • Andrew Allison

      Would they be supposedly fracked wells? [grin]

  • FriendlyGoat

    One thing we don’t know yet about the long-term effects of the fracking revolution is whether it was more expensive to send too much money to the world of Islam——or whether it is more expensive to deal with Islamic chaos when oil revenues in the world of Islam are diminished.
    Seriously, we’re not in any sense “done” with side effects to come out of Iran, Iraq, Libya, Saudi Arabia and others. We have no idea what costs we have yet to expend on terrorism damage or on wars to fight or prevent it.

    • Josephbleau

      Millions for tribute, not a cent for defense? I think charity should be decoupled from the ability of the recipient to kill us.

      • FriendlyGoat

        Your sentiments don’t draw an argument from me, but we still don’t know the answer to what the costs of others’ anger can be. You know how mad the average Trump or Sanders supporter is, right? What happens when millions and millions of “left-out-of-the-pie” young men couple their frustration with radical Islam? I don’t know the answer. I doubt anyone does. But the loss of revenue in the Mideast due to fracking is bound to be a factor in the mix.

  • Frank Natoli

    our domestic energy sector is looking more solid than ever.
    And that’s still with Alaska ANWR, Pacific, Atlantic and much Gulf reservoirs being kept off limits by environmental extremists in Washington, the only country in the world to leave its own oil in the ground.

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