“The American Shales”

2

February 2, 2015 by AK

I admire the creativity and effort of those who made possible the digital revolution of the past 25 years, most of these creators US-based. I am immeasurably greatful for the Internet, the e-book, and mobile communications. But I also have great appreciation for those who have continued to ply their talents in old, supposedly sunset industries, including the petroleum geologists, reservoir engineers, managers and investors who brought about the shale revolution.

Gas and especially oil production is an applied science and an applied art in one, yet the public’s limited imagination seldom places “oil” next to “innovation”.  Reports of “well construction time down 50% from 2011” leave most readers indifferent even if their gas bills and even employment in their state might have something to do with those advances.

The American Shales by Nissa Darbonne is a rewarding read, although by no means an easy one. To quote bits from my own review, the author’s approach is no-nonsense: who did what, when, why, and how, starting with Mitchell Energy’s first fracked wells in Wise County, Texas, in 1951. Some parts are as gripping, fascinating and, yes, inspiring as the best fiction.

I don’t know if Darbonne’s work takes account of all the important developments in shale exploration but it covers enough ground to highlight what made the shale revolution possible. Small entrepreneurial explorers; easy access to subsoil through leasing, not licensing; risk-loving capital looking for high returns. But even if other countries recreate these conditions, the experience of American shales suggests that the technology won’t transfer automatically: oil geology is unpredictable.

And yet it’s worth trying. I can understand English villagers clinging to their pristine greens but in coaldust regions like Poland and Ukraine, what is there to lose but the shackles of Russian imports?

[Updated Feb. 3. I have left out one more prerequisite: oilfield services.]


2 comments »

  1. Small entrepreneurial explorers; easy access to subsoil through leasing, not licensing; risk-loving capital looking for high returns.

    One crucial difference: in the US the landowner owns the mineral rights beneath his land, in the UK they belong to the Crown. The practical difference is that in the US an individual can drill his own well and sell the production, but in the UK the government licenses blocks and the landowner receives compensation only.

    Both systems have their advantages and drawbacks. One of the main drawbacks of the American system is a single reservoir can be exploited by several players, all of whom are interested in maximising their own short-term production often at the expense of the reservoir as a whole (e.g. by flooding it with water). A single operator can manage the whole reservoir more efficiently (although the Soviets wrecked their reservoirs by excess water flooding while chasing short-term production).

    I don’t know if you have read Daniel Yergin’s The Prize. I’m not sure I can recommend it as it is like a brick and probably only accessible to those who are really, really interested in the subject, but for me it was one heck of a read.

    • AK says:

      Yes, that’s what I meant by “lease not license”: your lease gives you the rights to the surface and the subsoil at once, to the whole cone with the surface acreage as the base and the center of the Earth as the apex. The problem with licensing, especially in places like Ukraine, is it takes ages to get the license and typically comes with activity requirements and a range of annual production, both of which are not great idea for high-risk shale projects.

      My job is not in O&G but closely related so the Yergin dilogy (The Prize + The Quest) has been on my reading list for years. 🙂

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