I've been instinctively skeptical about the USA energy boom, but I had very little data to back up my feelings.
A year ago, I barely knew what fracking was.
Then suddenly, the USA is going to be the new Saudi Arabia, because of fracking!
How did all this wonderful news avoid me for the last 40 years?
The first thing that had me scratching my head was that oil had to stay above $80 a barrel for most fracking wells to be profitable.
The break even for many wells in Saudi Arabia is $10.
Next, I learned that the productive life time of most fracking wells is one year.
Well, that explained the $80/barrel break even figure.
Then, during the last cold spell, the price of natural gas and natural gas liquids went up 50%-100%.
Just a couple months before that I was reading articles that foreign manufacturers were moving to the USA because of cheap natural gas, that coal power generators were being converted to natural gas, and trucking companies were actively converting their trucks to natural gas.
So, maybe that price surge was just an infrastructure issue, but it still made me uneasy.
Now, this author rips the whole energy boom idea to pieces.
One bright note - the author “fears” climate change, which is still completely within historical norms, so perhaps his judgment on USA energy issues should be questioned, too.
Oil booms have different meanings.
It takes 2000 truck trips in North Dakota from day 1 of drilling to 365 days later to drill, frack and carry oil from a well in the Bakken. 2000 separate trips, and average distance of the trip is 15 miles, so that’s 4000 segments to and fro.
These trips are mostly because the wells die so fast that pipelines can’t be put into place fast enough to carry the oil before the flow rate is too low to pay . . . for the effort to put in a pipeline.
Note that about 140 wells are brought online PER MONTH there. So that is 140 X 12 X 2000 = 3360000 truck trips (X2 for segments) to service a year of Bakken new wells. Additional tanker truck trips go out to fill up on the wells 2 or 3 or 4 or 5 years old (and of course past 5 years the wells aren’t flowing much so one truck can service multiple wells). All this truck traffic is in an area of 4 counties of North Dakota. So it’s certainly a boom for truck drivers.
Think about that cost . . . not in terms of dollars . . . in terms of effort . . . just to get 900K bpd out of the ground. Contrast it with the early 1900s when you took some lumber out into a field, threw up a 20 foot high structure, drilled a hole and got 15,000 bpd to flow from just that one hole, it it would flow for decades. Contrast those two “booms” — today’s versus then’s.
Think of that difference in effort level and then try to re-convince yourself everything is fine.
Now, this author rips the whole energy boom idea to pieces.
One bright note - the author “fears” climate change, which is still completely within historical norms, so perhaps his judgment on USA energy issues should be questioned, too.
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Yeah, there’s several point on which I disagree with the guy. He says the Permian basin is not so hot. I think it is. But it won’t be much before the end of 2015 that it really takes off. Berman is right that reserves are just a small fraction of resources. But what he doesn’t say is that even that small fraction represents an enormous amount of oil. That is since the beginning of the oil age, oil men have extracted only about 10% of the oil in the ground. The fracking revolution enables them to only get at the next 10-20%. But that’s still an enormous amount of oil.
Natural gas production will go up when natural gas gets above $6. That’s going to happen in the next year or two.
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There is currently a parallel revolution in electricity. but it won’t affect oil for another five years or so.