Natural gas is the cleanest and most desirable of fossil fuels. And hydraulic fracturing has emerged as the premier production enhancement technique to ensure that gas remains in abundance.
But those facts have not stopped the claims of some special interest groups opposed to the resource, and to the fracturing (or “fracking”) technique, in which fluid is pumped into the well at very high pressure to create cracks in the reservoir rock, thereby releasing the gas. For example, in the documentary Gasland, which was nominated for, but did not win, an Academy Award, it is claimed that hydraulic fracturing can contaminate drinking water aquifers.
Gasland features a scene of a man lighting his faucet water on fire, claiming that natural gas drilling and fracturing is responsible for the problem.
After a public uproar, the Colorado Oil and Gas Conservation Commission investigated the incident and found: “Dissolved methane in well water appears to be biogenic in origin . . . There are no indications of oil and gas impacts on the water well.” (http://cogcc.state.co.us/, document #200190138.)
There is another reason why contamination is unlikely: Several thousand vertical feet of impermeable rock separate drinking water aquifers and reservoir targets for gas production. Any interchange between the two, if it were even possible, would have already occurred tens of millions of years ago, not in recent history.
‘Fracking’ chemicals singled out
It is also claimed that chemicals used in the fracturing fluid can themselves contaminate drinking water aquifers. But as fracturing itself occurs thousands of feet below the drinking water aquifers, the probability of this happening is remote.
The only way drilling and fracturing could create such contamination is through the vertical wellbore itself, which is cemented and cased. And yet, after the drilling of millions of wells throughout the world, only a handful has experienced accidental leaks into water aquifers. Statistically, being struck by lightning occurs more frequently (19 fatalities already in 2011 according to struckbylightning.org/).
What exactly is hydraulic fracturing? Historically, when a well is drilled in an oil and gas reservoir, the resource flows outward into the well. There are inefficiencies to this process: there is damage to the rock near the well because of drilling and other work associated with well construction.
The fracturing technique was developed more than 60 years ago to address this problem. It alters the way fluids enter the wellbore, from near-well outward flow to the far more efficient linear flow from the reservoir into the fracture, perpendicular to the fracture plane, and then along the fracture into the well.
In fracturing, fluid is injected at high pressure into the rock, breaking down the formation. Because of the way the rock is stressed at depth, one dominant crack is almost always created (and not multiple cracks like the spokes of a bicycle wheel; it should be noted, however, that the frac operation also finds planes of weakness or pre-existing fractures and opens them as well. For almost all oil and gas reservoirs, the depth is such that the fracture is vertical and grows away from the well along a relatively well-defined plane.
The created fracture has a “half-length” which can be several hundred metres long, perhaps even a kilometre. By half-length is meant that, to be symmetrical, a similar branch is on the other side of the well. But the fracture can also be just a half a centimetre wide. The height at a minimum is invariably equal to the reservoir height – e.g. 20 metres – and can be more than that – twice or more. Engineers like to contain fracture height to prevent any mingling with other formations. Fracture height contains naturally near the top or bottom of the formation, tending to minimize the potential to mingle with other formations.
Hydraulic pressure critical
The hydraulic pressure provided by massive pumping units on the surface keeps the fracture open during the creation of these passages. The injected fluid fills the fracture but some of it leaks off in the formation, perpendicular to the created fracture faces through the porous rock. Proppants, which are often mined and sieved natural sand particles or manufactured ceramics, are injected with the fracturing fluid to prevent the fracture from closing. The fracture closes on the proppant, leaving a conductive path for reservoir fluids to be produced.
The fracturing fluid, mostly water, contains some additives to ease its function, the most important of which is to transport the proppant. The fluid is thickened by adding natural starches and other chemicals. . Other additives include chemicals to prevent the fluid from damaging the rock, to allow for flow-back after the treatment is over and to prevent excessive leakage during the operation. A typical vertical well fracture may require 150 tons of proppant and 200,000 gallons (750 cubic metres) of fracturing fluid.
Although fracturing has come under attack for its “chemicals” by certain environmental groups, there is one thing that must be made clear: Unconventional natural gas cannot be produced economically in the United States and Canada without hydraulic fracturing.
On the other hand, as long as new infrastructure is built, the ample supply of gas can play a big role in areas other than power generation and space heating, such as in transportation, either in compressed natural gas (CNG) vehicles or by being converted to ethanol through a process recently developed by Dallas-based Celanese.
Shale gas is abundant
In November 2009, the International Energy Agency (IEA) in Paris released its world outlook report http://www.worldenergyoutlook.org/ and it contained a bona fide shocker: “The long-term global recoverable gas resource base is estimated at more than 850 tcm (trillion cubic metres).” That translates to just more than 30,000 trillion cubic feet (Tcf) of gas, which means that in just one year the IEA doubled its estimate of 400 tcm contained in its 2008 report.
The enormous difference in the IEA estimates is almost singularly because of shale gas, which, for decades, was labelled unconventional gas. It is now the shiniest recent success in the petroleum industry.
Shale gas in the United States, and slightly later in Canada, went almost instantly from a practically invisible resource to massive reserves that challenge the largest conventional gas accumulations in the world. Greg Wrighstone, an analyst with Texas Keystone, a Pennsylvania-based, privately owned, vertically integrated oil and gas company, revised upward the estimated reserves of the Marcellus Shale, a formation that spans almost the entire U.S. states of West Virginia and Pennsylvania. In four years, he has written, from 2005 to 2009, the recoverable gas increased from about 1 Tcf to more than 500 Tcf. There has never been such an upgrade of reserves in such short time in any reservoir of any kind in the history of the petroleum industry.
Similarly, the Haynesville Shale, which straddles Texas and Louisiana, is estimated at 300 Tcf. These volumes put the Marcellus and Haynesville in the number 2 and 3 positions of gas accumulations in the world, right behind the contiguous Iranian South Pars (yet to be exploited) and the Qatari North fields, holding together more than 1500 Tcf of gas.
Gas held in pores of rock
Contrary to frequent misconception, oil and gas reservoirs are not underground caves with pools or lakes of hydrocarbons. Instead the rocks consist of tiny pores, invisible to the naked eye.
Gas in a shale formation does not inhabit the pore space the way it does in conventional reservoirs or in even tight (low-permeability) rocks. In shale gas reservoirs, the rock has special properties which cause gas molecules to adhere to it in “molecular stacks.” This is known as “adsorption” (Adsorption is the adhesion of molecules of liquids, gases, and dissolved substances to the surface of a solid) and the gas shrinkage can be 10 times more than the gas in conventional reservoirs. The effect of this phenomenon is that just two per cent actual shale rock porosity can have the same amount of gas as a 20-per-cent porosity conventional reservoir.
While porosity is small, massive quantities of gas exist in the form of adsorbed gas, which accumulates as molecules adhering to the rock surface. The obvious way to allow the gas to desorb is by providing massive areas connected to the wellbore.
This is very effectively done by drilling horizontal wells and then, with proper zonal isolation (i.e. keeping zones completely separated from each other) between treatments, executing a very large number of hydraulic fractures, all intersecting the well at right angles. (See Figure 2). A horizontal well length would be 1,000 metres long. Only a couple of years ago, the typical number of fractures was 10 only, but today has grown to 25, in some cases 50.
With extremely small rock, permeability interference among the fractures is very small, which calls for an increase in their number. A simple calculation helps to understand the surface area provided by the fractures: Assuming 25 fractures with a fracture half-length of 1,000 metres and a reservoir height of 30 metres, the total flow area would be 1.5 million square metres (remembering that the fractures have two branches and two sides).
A horizontal well in a shale formation with multiple hydraulic fractures may require five million gallons of water. This volume of water may appear a lot, but it is about what a 1000-MW coal power plant consumes in 11 hours and what a 1000-MW nuclear power plant consumes in six hours. (For the full report on water consumption in coal-firedplants, see the U.S. Department of Energy’s National Energy Technology Laboratory’s August 2010 report: http://www.netl.doe.gov/technologies/coalpower/ewr/water/pdfs/DOENETL-2010-1429%20WaterVulnerabilities.pdf )
Fracking’s financial impact
I have been tracking the industry for more than a decade and, in 2008, I issued a report entitled The International State of Hydraulic Fracturing, which I updated in February 2011.
Between 1999 and 2010, hydraulic fracturing grew from $2.8 billion to more than $13.5 billion, making it the second largest activity within the upstream enhancement and production industry. Only oil drilling is now larger. A clear indicator of the vital importance of fracturing to the industry is that while gas prices have yet to recover from their collapse in the summer of 2008, a very remarkable rebound was logged in fracturing activity.
The most dramatic recent activity has been in North American shale gas, which has had phenomenal production growth from 1.3 in 2007 to 3.4 Tcf in 2009 (http://www.eia.doe.gov/dnav/ng/hist/res_epg0_r5302_nus_bcfa.htm), representing 16.5 per cent of the 20.6 Tcf of total gas produced and marketed in the United States (http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_a.htm). Starting from essentially zero a decade earlier, this is a situation without parallel in the history of the oil and gas industry.
Fracturing spending dropped nearly 30 per cent, from $12.6 billion in 2008 to $9 billion in 2009. But the activity recovered with vengeance in 2010 to a record $13.5 billion. Figure 1 shows the growth in the fracturing industry over the last several years, and also shows clearly that North America represents almost 90 per cent of the international market value.
With the exception of China, Argentina and Western Siberia, the fracturing industry outside of North America remains relatively immature and underdeveloped. However, international activity will rise at a faster rate than in North America. It is predicted that fracturing will be increasingly applied to conventional gas formations – the sector of the international oil and gas industry that is expected to see the greatest expansion – which have traditionally not been seen as fracturing candidates. Expect to see strong growth in Brazil, the Middle East, North Africa (especially Tunisia and Libya, assuming recent political events do not interfere), West Africa (especially Angola) and Kazakhstan.
Recent reports (Song, B. et al.: Design of Multiple Transverse Fractured Horizontal Wells in Shale Gas Reservoirs, Paper SPE 140555, 2011) suggest that shale gas reservoirs, to be exploited properly, need horizontal wells, each of which may require 30 to 50 fracturing treatments. This, in itself, points towards a considerably further expansion of hydraulic fracturing.
China next frontier
Internationally, shale gas has yet to follow the trend in North America, because of much higher costs and lack of economy of scale. China, hungry for natural gas and concerned less about economics in increasing domestic production over looming massive imports, will certainly be the next area of shale gas activity.
Shale gas production is likely to boost natural gas prices rather than decrease them once the current international excess capacity, estimated by me to be about 10 Bcf/d that followed the 2008 economic crisis, literally and figuratively burns out.
By the years 2012 to 2013, natural gas prices are likely to become technology-driven rather than resource-driven, similar to oil prices. It is well known that some West Texas producers and certainly Saudi Arabia can produce oil profitably from existing fields at $25 per barrel but one does not see them selling oil at that price. Oil prices are uniform by and large throughout the world (with some minor disparity observed recently in benchmark prices).
But natural gas varies dramatically from as little as $1 per million Btu in Russia to almost $20 in some Japanese contracts and, routinely, over $10 in some reported future contracts for China. All these permutations are happening while North American prices languish at or below $4.
However, insatiable natural gas demand in China will likely unify international natural gas prices. The government in China has decreed that natural gas should account for 10 per cent of its energy mix, compared to four per cent today (which, coupled with expected total energy increase means quadrupling of natural gas demand) and plans to add modern and abundant connectivity through massive LNG liquefaction and re-gasification terminals.
U.S. an exporter?
It is not farfetched to think that the United States could export liquid natural gas (LNG) to Europe, which has been stifled under Russian energy dominance. The surfeit of gas from shale gas production has made such a change a compelling eventuality. At least two major LNG players, Cheniere in Houston, operators of the world’s largest re-gasification terminal at Sabine Pass at the Texas-Louisiana border, and Dominion, operators of the Cove Point LNG terminal in Maryland have announced plans to make their terminals capable for both importing and exporting LNG. I predict that natural gas prices three years from today will be $8 per million Btu, and remain that way for a long time. Such prices will make hydraulic fracturing even more widespread.
Fracturing will continue to grow for the simple reason that there are no alternatives to it. Especially for natural gas, fracturing is not just important, it is essential.