This article presents discussions conducted in an event held in Washington, D.C., dedicated to the topic of the international shipment of energy. The session was called, ‘The Geopolitical Implications and Mutual Benefits of U.S. LNG Exports.’ The broad consensus was that, to create greater stability in international energy markets, United States should increase its exports of liquefied natural gas. The panelists also had a view on the fact that there also are many concerns about the environmental impact and ultimate costs of the practice. Hydraulic fracturing certainly has extended the Oil Age, but it does not assure a supply of gas and oil forever. The industry is being confronted with bans and moratoria that must be resolved. The new abundance and the costs in achieving it have created euphoria in some quarters and deep concerns in others.
LAST FALL, OFFICIALS FROM AROUND the world attended a gathering in Washington, D.C., dedicated to the topic of the international shipment of energy. The House Energy and Commerce Subcommittee on Energy and Power hosted the event, and panel members listened to diplomats and energy experts from the Czech Republic, Hungary, Haiti, India, Japan, Lithuania, Singapore, South Korea, Thailand, and the Commonwealth of Puerto Rico.
The session was called,“The Geopolitical Implications and Mutual Benefits of U.S. LNG Exports.” The broad consensus was that, in order to create greater stability in international energy markets, the U.S. should increase its exports of liquefied natural gas.
Not imports. Exports.
The past half century has been a whipsaw for U.S. energy policy. Fifty years ago, the country was a confident exporter of petroleum. By the early 1970s, it suddenly had become dependent on oil imports and suffered at the hands of its suppliers. Ever since, U.S. energy policy had been a balancing act between reducing oil consumption, cultivating friendly oil-exporting nations, and developing substitutes for petroleum. Indeed, the last time liquefied natural gas received interest in Washington, it was as a means to import gas as a supplement for dwindling domestic supplies
Today, the U.S. is on a track to resume its role as a top producer of gas and oil once more.
One way to understand the changing fortunes of American petroleum is to look at the activities of two men. Each man looked at the petroleum industry and saw not just what was happening, but projected what would—or could—happen. And each man was right in his way, although their respective influences represent a sharp contrast.
Geologist Marion King Hubbert surveyed oil field production in the mid-1950s, when gasoline sold for 30 cents a gallon and U.S. petroleum production had never been higher, and predicted that within 15 years the entire situation would reverse. Hubbert’s prediction of a peak in U.S. oil production came true in 1970, and the consequences of Hubbert’s Peak, as it is known, have affected almost every aspect of American life since.
Oilman George Mitchell started working to unlock the gas sealed in the Barnett Shale of Texas in the early 1980s, when declining domestic oil and gas production had begun to leave a permanent mark on the American imagination. It took took nearly two decades and a sizable Mitchell fortune to profitably commercialize these techniques, but the shale gas and shale oil “boom” of the past few years would have been impossible without his advances.
Natural gas production has never been higher, and last year U.S. oil production grew to the same level as 1956—the year Hubbert made his peak production prediction.
The story of these two men is the story of the forces that have shaped the last half century.
RISE AND FALL
King Hubbert, as he was known, was a polymath, having studied geology, physics, mathematics, and economics. His geology Ph.D. thesis was on “Theory of Scale Models as Applied to the Study of the Geologic Structure of the Earth.” He spent the 1930s teaching at Columbia University. At the beginning of World War II Hubbert served with the Board of Economic Warfare.
In 1943, shortly before his 40th birthday, Hubbert joined Shell Oil. At the time, large companies were seeing the benefits of giving their brightest independent thinkers open-ended opportunities. Hubbert became Shell’s consultant for general geology and helped to expand the Shell research laboratory in Houston
In time, Hubbert's research addressed the long-term prospects for oil production. Up to that point, the simplest forecasting methods in the oil business had been to graph production versus time and then extrapolate the data. These techniques had worked over the limited time frame they had been applied.
Hubbert understood the Earth as a composite of a range of interacting phenomena: chemical, mechanical, thermal, gravitational, electrical, magnetic, nuclear, and biological. He knew that there was no reason why oil production should behave differently from the mining of other minerals.
Hubbert plotted historic rates of discovery and rates of production as a function of time for a variety of minerals including gas and oil. The resulting bell-shaped curves showed a slow rise, followed by a more rapid rise, and then a slowing until a peak, and then a symmetric decline. Data for oil showed a 35-year delay between the years of peak discovery and peak production. The rate of discovery of oil in the United States had peaked in about 1935, so Hubbert concluded the country could expect production to reach its peak by 1970 at the latest.
Extending this model to the entire globe, Hubbert forecast a global peak in oil production in 2000.
Hubbert’s predictions were contained in a 1956 paper presented to the American Petroleum Institute. In spite of the hue and cry over "peak oil" about a decade ago, Hubbert's paper was not alarmist. As could be guessed from its title, “Nuclear Energy and Fossil Fuels,” the paper presented the case that a decline in oil production could be more than made up by a build-out in nuclear power plants.
Hubbert calculated there were sufficient uranium and thorium deposits that, together with breeder reactors, nuclear power could last 5,000 years. The API article was ignored when it came out. Hubbert retired from Shell in 1964 and worked for the United States Geological Survey and taught at Stanford and Berkeley.
Then, in 1970, U.S. oil production stopped growing. U.S. oil consumption, on the other hand, did not slow down, meaning ever-larger quantities had to be imported from the international market. This left the country vulnerable to price shocks, such as those that followed the Arab Oil Embargo of 1973 and the Iranian Revolution in 1979.
By then, Hubbert's forecast was renowned in geological circles. In 1981, he was awarded the Vetlesen Prize, which is described as the equivalent of a Nobel Prize for geology. By the time he died in 1989, Hubbert could look at a world that was running full steam toward his predicted peak in global oil production. His warnings seemed to go unheeded.
It should be noted, however, that Hubbert's career encompassed more than his oil production prediction. Hubbert developed an improved understanding of the underground flow of liquids, and in fact demonstrated that water pressure would fracture rocks in vertical planes.
Fracture and Flow
Oilmen have long known that fracturing the rocks within an oil or gas deposit can increase flow rates. As early as the 19th century, "shooting the well" was the method of choice for enhancing oil production. The method used a torpedo of nitroglycerine, which was lowered into a well and ignited from above. It was effective, but hazardous. Even the basic transport and handling of such a volatile explosive was highly dangerous.
By the mid-20th century, researchers upped the ante on shooting wells. As part of Project Plowshare in 1967, a nuclear device with the power equivalent of 29 kilotons of dynamite was detonated in a New Mexico gas well 4,200 feet beneath the surface. The explosion succeeded dramatically at stimulating gas flow, but the product was too radioactive for distribution. The explosion also caused a portion of the methane to be oxidized into carbon dioxide.
Attempts at hydraulic fracturing—using high-pressure water to fracture rocks—had met with moderate success in vertical wells in the 1940s. But the technique was expensive, and oil and gas was cheaply recovered using conventional methods.
By 1982, however, the incentives had shifted. Thanks to the supply disruptions predicted by Hubbert, oil and gas prices had skyrocketed. And the U.S. government was offering a tax credit for the development of unconventional natural gas.
Among those who responded to these incentives was George Mitchell. Mitchell was the son of working-class Greek immigrants in Galveston who parlayed a petroleum engineering degree from Texas A&M into a small oil and real estate empire. Mitchell had a long-term contract to supply pipeline gas to Chicago and desperately needed a better supply than what he could produce on his holdings in north Texas. Instead of buying up land elsewhere, he looked deeper to an underlying stratum called the Barnett Shale, which held its gas so tightly that conventional techniques couldn't extract it. Mitchell told his skeptical drilling team that, if they couldn’t find a way to draw the gas from the shale, he would find people who could.
What they needed was a way to increase the rock’s permeability, and do so cheaply enough to make the extracted gas profitable. After almost two decades of fits and starts, Mitchell's team eventually found a combination of existing techniques that would work. Drillers penetrate the relatively thin layer of source rocks with surgical precision, turning the drill head until it runs along the horizontal stratum. They then use directional explosions to puncture the pipe lining a well. High pressure fluids then fracture the rocks, and the fracturing liquid delivers proppants to keep the cracks open for the free flow of gas or oil. The fracturing fluid can be a gel, a foam, or chemically slicked water. The proppants can be hardened sand or ceramics.
The combination of techniques enabled Mitchell to do something many experts thought couldn't be done. Together, they gave industry the ability to profitably extract large amounts of gaseous and liquid fuels from tight formations.
Doom and Boom
When George Mitchell died last year at the age of 94, he was widely eulogized as the “Father of Hydrofracking.” His influence is seen not only in the shales of Texas, but also in the large gas-recovering operations from the vast Marcellus Shale formation that underlies a large portion of the Appalachian Basin in West Virginia, Pennsylvania, Ohio, and New York. The method has been applied to the previously forsaken Bakken oil field of North Dakota. Production there is now approaching 1,000,000 barrels a day. North Dakota may surpass Texas as the leading oil state.
Quite suddenly, the Oil Age seems to be extended well beyond Hubbert’s predictions because of the success of George Mitchell. Energy Information Agency data shows shale gas has increased from 1 percent of domestic production in 2000 to over 20 percent in 2010. The EIA predicts that share will rise to 46 percent by 2035. Production has risen so quickly—and the promise of future production is so great—that some analysts predict the United States could once again become a net exporter of gas and oil.
The techniques developed by Mitchell are now being aggressively pursued on every continent, so it is too early to predict how the spread of hydrofracking will transform or rebalance the global energy market.
There also are many concerns about the environmental impact and ultimate costs of the practice. One effect may be a delay in developing renewable energy technologies and in redeveloping nuclear power. Hydraulic fracturing certainly has extended the Oil Age, but it doesn’t assure a supply of gas and oil forever.
The industry is being confronted with bans and moratoria that must be resolved. New York State, which sits atop some potentially rich shale deposits, has a moratorium on drilling pending a comprehensive environmental review. The drilling boom has been linked to air and surface pollution and groundwater contamination in many areas. Even earthquakes are blamed on “fracking.”
As George Mitchell has shown with the development of hydraulic fracturing, it is hard to make predictions that stick. The ability to unlock shale to release gas and oil has blown away prior assumptions about the economics, the availability, and the politics of fossil fuels.
The new abundance and the costs in achieving it have created euphoria in some quarters and deep concerns in others. As with anything new and gamechanging, it will take time before we truly understand how good a thing this is.
And it must be remembered that even while these new resources are becoming recoverable, they are still part of a finite system, the kind that Hubbert based his forecast on. This may be Mitchell's day in the sun, but Hubbert cannot stay eclipsed forever.