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May 12 - July 6, 2024
For decades, prospectors had fractured, or broken up, rock formations by pummeling them with various liquids, creating pathways for natural gas to flow to the surface. The process was called hydraulic fracturing, or fracking.
American oil production peaked in 1970 at 9.6 million barrels a day, and imports began to soar as the country scrambled to get enough crude to meet its growing demand.
America already is the world’s largest producer of natural gas, thanks to shale drilling, and the country sits on two of the world’s largest gas fields.
China, Russia, Argentina, and Mexico are among the countries with their own deep pockets of shale that may be tapped in the years ahead, while government officials in the United Kingdom and elsewhere have urged their countries to embrace shale drilling.
George Mitchell, who discovered a novel way to extract gas from shale formations, pocketed more than $2 billion.
A wildcatter is an independent operator who searches for oil or natural gas in areas that can be miles from the closest producing well.
Within Chevron, he preached that energy companies, like other kinds of businesses, were better off betting on improved technology than on the price direction of the products they produced.
In 1859, Edwin L. Drake drilled a well at a depth of less than seventy feet near natural oil seepages in the tiny town of Titusville, Pennsylvania, becoming the first to drill for oil in the United States.
Oil shale holds high concentrations of kerogen, a precursor to oil that some liken to teen age crude because it hasn’t experienced the millions of years of pressure needed to become oil.
But fervor for this rock has petered out time and time again in the United States due to the imposing cost of heating it to get the kerogen out, as well as the environmental damage that usually results from this extraction.
“Colonel” Edwin L. Drake, a retired and near-penniless train conductor who had earned his distinctive nickname despite lacking any military experience, was the first to drill for oil in the United States in Titusville, Pennsylvania, in 1859.
The supercooling process converts the gas to a liquid form that’s one six-hundredth its original volume.
Devon mixed the two methods—horizontal drilling and fracking—and began to see a surge of gas production in its Barnett acreage.
In December 2005, Conoco-Phillips agreed to pay nearly $36 billion to buy smaller oil and natural gas producer Burlington Resources, which owned shale acreage in the Barnett. It was the biggest acquisition in the energy industry in years.
Back in 1956, an irascible but brilliant Texas-born geologist working for Shell named Marion King Hubbert had created a model that seemed to prove the world was running out of oil and natural gas. Hubbert, who at one time called for democracy to be abolished and power given to scientists, had predicted that oil production would peak in the United States by the early 1970s and global oil production would level out around 2006.
Less than 5 percent of the nation’s gas production came from shale fields in 2005.
Around the same time, specialists were developing ways to drill horizontally for as much as two miles, or about twice as long as they had been doing, without losing track of the shale layer. This “long lateral” was a perfect complement for the new, multistaged fracking.
Nicholas Steinsberger and his colleagues at Mitchell Energy had developed the ideal fluid to fracture shale and other tough rock a few years earlier in the Barnett. Others, including specialists at Oryx Energy, had perfected methods to drill horizontally to get more oil and gas from shallow, wide rock formations. By combining fracking and horizontal drilling techniques, early adopters like Devon and Continental saw oil and gas production soar.
“It’s not the critic who counts. … The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood.”
Pegula sold about one-third of his company to leveraged-buyout giant KKR, pocketing a hefty $350 million. A year later, Pegula and KKR flipped the entire company to Royal Dutch Shell for an even heftier $4.7 billion, turning heads in Pennsylvania.
By 2010, Continental had figured out how to drill four wells from a single drilling “pad,” an approach that allowed the company to simultaneously tap oil from the Bakken formation as well as from layers of the Three Forks formation below it, another technological innovation that pushed crude production higher.
In fact, U.S. energy-related emissions of carbon dioxide fell 12 percent between 2005 and 2012 and now stand at the lowest levels since 1994, according to the U.S. Energy Department’s Energy Information Administration.
Early predictions pointed to an estimated 187 trillion cubic feet of proven, recoverable shale reserves in Poland, enough to satisfy the nation’s needs for three hundred years at current levels of demand.
Foreign nations lack perhaps the key element behind the U.S. energy revolution: an entrepreneurial culture and ample incentives for the years of trial and error necessary for shale breakthroughs.
The U.S. legal system gives individuals ownership of mineral rights under their land and the ability to lease the rights to others.
It’s a stark reminder that breakthroughs in the business world usually are achieved through incremental advances, often in the face of deep skepticism, rather than government-inspired eureka moments.
