0.15 Natural capital: energy  (Page 9/15)

New technologies: horizontal drilling and fracking

For oil wells drilled in the 20 ^th century, going back a hundred years, 60-70% of oil has been left behind . Recovery of oil in reserves ranged from 25% to 40%.

There are thousands of these older wells all over the world, especially within U.S. and Mexico – 23% of abandoned wells are in Texas. Under the technology of the 60s, 70s and 80s it was not worth going after left-behind oil. These old wells need 21 ^st century technology to cough up their treasure. That is happening on a major scale, owing to technological change.

Contrast old technology with new drilling technology. Bear in mind that subsurface oil does not lay below the surface in pools, but is contained in rock and or sand. In 1950s, 60s, 70s and 80s virtually all drilling was vertical. The wellstring would penetrate a hydrocarbon deposit in one location only (see Figure 15-2 ).

Recoveries of available hydrocarbons in such deposit were 25%-40% at best. But then two technologies in use before 2000 were combined in 2003. These were:

• Directional Drilling (Includes Horizontal Drilling) (See Figure 15-3)
• Fracturing (“Fracking”, to break open deposits so that the contained oil (or natural gas) will flow more readily to the well string).

It helps to understand directional drilling and fracking if one knows that the success of these technologies is heavily IT based, with very advanced graphics. Directional (horizontal) drilling made it possible to extract oil from the entire length of the deposit, rather than one or two spots in the vertical plane.

It is easy to see that with horizontal drilling much more of the reservoir is accessible to the driller.

Now combine fracking with directional drilling. Fracking has been used for decades in some formations, but on a limited basis. Only in about 2007-09 did drillers begin to use it together with horizontal drilling. The shale revolution now underway consists of tapping “tight” shale rock with directional drilling and hydraulic fracturing to yield substantial oil and gas not available with previous technology.

In fracking, the operator pumps at extremely high pressure, water (fresh or saltwater) and sand into the formation (see Figure 15-4 ). This breaks up the rock, so as to initially free the oil (or gas) to flow to the wellstring. As discussed later in this chapter, very large quantities of water are required for fracking each well.

A proppant is then added in the water, sand is added to the fluid in increasing amounts to “prop open” the fissures caused by fracking. One well may require as little as 7 million or as much as 20 million pounds of sand. The mix of water and sand allows more oil (or gas) to flow up the well string to the surface.

Fracking on a large scale first became feasible when international oil prices exceeded $75 per bbl. Technological progress in 2013-2014 has sharply improved the productivity of fracking. For example, in June 2013 average fracking operations needed a crude oil price of $70 per barrel to be profitable. By October 2014, the average well required only $57 per barrel to be profitable. Financial Times, October 23, 2014, p.18.