Natural Gas Revolution Part IV – How Big Is This?

Our hosts drilled a total of 239 wells in South Texas, which at $7 million per drilled well would indicate a $1.7 Billion investment in drilling wells alone by this one company.  They also report a $440 million investment in a fracking team, plus major investments in building collection points for their product and pipelines to move it.  Given that they are only the 12th biggest independent operator in the area, it’s easy to see how companies have invested over $100 Billion the Eagle Ford shale play alone.

Nationwide, industry author Daniel Yergin reports an estimated 1.7 million jobs will be created in the natural gas revolution, with an estimated additional $62 billion in Federal and State taxes collected in 2012 as a result of this activity.

The New York Times reports that the largest 50 oil and gas companies spent $126 Billion per year in the United States, over the last six years, in new oil and gas drilling and land acquisition.

For my friends who look in dismay at the drilling industry and fracking in particular I’m compelled to point out that this kind of money doesn’t scare easily.  The anti-fracking folks are working hard to find evidence of environmental and health damage as a result of the fracking revolution, and will no doubt do their darndest to keep the pressure on, but they have a tough fight on their hands with this kind of major capital.

 

A Silver Lining on this Massive Scale, Maybe

There is one silver lining, however, to this kind of massive, money-intensive operation.  From a safety and environmental perspective, paradoxically, huge scale could be seen as good news.  Big, corporate, capital intensive businesses are all about reducing risks, which will make them extremely sensitive to environmental liabilities and public relations liabilities, in a way that wildcatters simply won’t be.  That’s the theory at least.

Of course, our host company gives the State Rep and me the pitch on how safe fracking really is, and the safety mechanisms involved to prevent ground-water contamination.

The gist of his presentation, since you’re curious, is that a series of concrete tubes in overlapping layers prevents fracking fluids, and the eventually extracted hydrocarbons, from leaking into our groundwater.  We hope.

See also Part I – Mad Max Bizarro World

Part II – Big, Corporate, Well Capitalized

Part III – The Drilling and Fracking Scene

Part V – The Labor Market in the Eagle Ford

 

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Natural Gas Revolution Part III – The Drilling and Fracking Scene

If you’re a boy, and you like big powerful tools, you might like the next part of our tour.

Early on in our tour of the drilling pad, we entered the air-conditioned trailer where the head driller directs the drill bit.  For the uninitiated viewer (for example, me), the seat of power is not unlike Han Solo’s seat in the Millennium Falcon.  Large, flat-screen monitors with custom drilling software ergonomically surround the drill master’s elevated LA-Z-Boy-style throne with smooth swivel capabilities.  A joystick and keyboard accompany the cushioned seat which also faces a wind-shield view of the outdoor drill rig.

The State Rep and I each insist on mounting the throne, if only for a few moments, to feel the power of the master driller.1  Drilling teams, we learn, work 24 hours a day in 12-hour rotating shifts until the work is complete.

The fracking site which we visited after lunch had a whole different look to it.

Unlike the drilling site, dominated by a tall metal and plastic rig for punching a hole in the ground, giant green sand storage tanks and tubing dominate the fracking site.

Two dozen green urns elevated on stilts hold about 500 of tons of sand each – literally trainloads full brought from quarries in Wisconsin or Minnesota.

[A buddy of mine, not on site with me at this time, is in the frack-sand provision business, shipping those trainloads of sand from the North into South Texas.  I interviewed him here and here.]

Conveyer belts stretch from the colon of the urns to an unseen area.  Twelve-inch wide jointed metal tubes run from there to entrance points near the well head.  These overgrown green aliens arrived from the Planet Arachnid, and now are poised, abdomen down, to blast their chemicals deep into the ground.2

At our feet we examine blasting tubes manufactured in Fort Worth, TX specifically to provide explosive charges to break open the rock.  All of this equipment allows the operators to force a slurry of water, sand, guar, and chemicals deep into the earth at extraordinary pressure – enough to smash open dense rock formations and then keep them open for the oil and gas to flow.

The engineering and custom-manufacturing of the outdoor structures, and the custom software and computing power indoors, reinforced our strong impression of the massive scale of investment in Eagle Ford.  Some of the workers may look rough, but the equipment is brand new and highly specialized.

See Also:Part I – Mad Max Bizarro World

And Part II – Big, Corporate, Well Capitalized

Part IV – How Big is the Natural Gas Revolution?

Part V – The Labor Market in the Eagle Ford

 

 

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  1. I don’t know about my State Rep friend, but I know for me, sitting up there, I wanted to blast a hole two miles deep into the fucking earth, while simultaneously laser-rocketing Tie Fighters with pinpoint accuracy.
  2. I would have accused the Wachowskis of copying these shapes for those Nebuchadnezzar search-and-destroy insects, but The Matrix came out before fracking really took off.

Natural Gas Revolution Part I – Mad Max Bizarro World

There’s a Mad Max quality to the back roads and blue highways of South Texas these days. I’d been hearing about this strange phenomenon almost since I arrived in Texas 3 years ago, but only recently did I get an invitation to see it for myself.

I hopped in a car with a Texas State Representative this month to tour a drilling site with an independent oil and gas company in the Eagle Ford shale in South Texas.

As the State Rep and I zoom past empty acreage – not unlike Mel Gibson’s Australian outback – we spy on the horizon a small caravan of specialized tricked-out trucks approaching menacingly.  As they roar past us, we observe flatbeds full of monstrous piping overflowing with weaponized-looking plumbing on their backs.  Ironically these Mad Max vehicles forecast not the last known energy reserves on the planet, but rather the opposite – nearly a century worth of abundant, cheap, domestic energy.

As a relative newcomer to Texas I carry all my prejudices and misconceptions about oil and gas drilling with me.  Most of what I knew before my Eagle Ford visit I learned from Hollywood, via Giant and There Will Be Blood.

I found crucial differences between my preconceptions and what we saw there.

Foremost in my mind is that most people I speak with in San Antonio, not to mention the rest of the country, do not understand just how big the Eagle Ford operations are.

If my estimates of investment are anywhere near correct – something on the order of $100 Billion – the Eagle Ford dwarfs USAA, HEB, or Rackspace[1] as an economic driver of the South Texas region.

Second, the scale of financial investment forces a corporate, risk-mitigating approach to operations down there, which is a good thing when it comes to environmental risks, a major concern about Eagle Ford.

Third, the employment boom in the South Texas region is palpable.  They need more people than they have right now.

 

What is fracking and what is the Eagle Ford Shale play?

So here is as good a time as any to explain what I’ve learned about how the Eagle Ford shale ‘play’[2] works, as opposed to oil and gas operations in other times and other regions of the world.

Historically, exploiting oil and gas reserves in many places on the earth has required sophisticated geological and engineering search techniques, seeking large hidden pools of hydrocarbons that can be extracted from a vertical drill in the ground.

A ‘shale’ play like the Eagle Ford, however, is the kind of seemingly un-exploitable geological formation that oil engineers and geologists skipped over for the past century, in their search for large underground pools.  Oil and gas trapped in small bubbles between tightly packed shale rock could not be released using traditional techniques until the last decade or so.[3]

A combination of two techniques changed all that: horizontal drilling and hydraulic fracturing (fracking).[4]  The horizontal drilling allows above-ground rigs to exploit a much broader underground area from which to extract hydrocarbons, and the fracking involves the use of underground explosive charges to blast open tight rock formations, followed by high pressure water, sand, guar[5], and chemical combinations to keep rock formations open long enough for oil and gas to flow and eventually to be extracted by the horizontal pipe.

Suddenly – and by suddenly I mean in the last 10-15 years – exploitation of shale oil and gas deposits trapped in shale formations has become economically viable.  And by “economically viable” I mean the oil and gas industry has suddenly found 15 years’ worth of profitable drilling in South Texas and maybe 90 years’ worth of U.S. domestic energy underground in the Bakken, Marcellus, and other major shale regions.  Horizontal drilling and fracking has caused an oil and gas revolution.

This revolution is what the State Rep and I have come to see in Bee County, Texas.

 

Up Next Part II – No Dry Wells in the Eagle Ford

Part III – The Scene at Drilling and Fracking Sites

Part V – The labor market in the Eagle Ford

[1] To name a few overly-referenced economic engines of South Texas.

[2] ‘Play’ in this context is what oil and gas folks call it.  Also, I’ve learned that if you’re a Yank and not from around these here parts, Eagle Ford is pronounced as one word: “Eagleferd.”

[3] A little online research reveals that fracking techniques were known and used in the oil industry as early as the late 1940s, with additional advances in the technology in the 1970s, but commercially successful exploitation of shale-trapped gas, using the sand and chemical mix, dates only to 1997.

[4] I only got through one season of the Battlestar Galactica redo that came out a few years back.  I think it’s important to acknowledge the rise of their particular Galactica method of swearing (“Frack!”) and the concurrently perfected process of releasing hydrocarbons from closed shale rock.  For linguists, this may represent an important example of “multiple independent discovery” in the development of the English language.

[5] I hadn’t heard of guar either, but it’s a common cheese and ice cream-additive, derived from beans in India and Pakistan, lately applied to the fracking process.

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