The future of fracking: Thanks to the vastness of the oil resource and the stinginess (for now) of the shale, that future is bright
When you finish reading this story about fracking and you turn the page, Prairie Business hopes you remember three things:
One hundred percent.
And Julian Simon.
Five percent is the amount of oil that current technologies can coax out of Bakken rocks far underground. One hundred percent is how much of that oil comes oozing out those rocks in the laboratory, when engineers bathe samples of the rocks in CO2.
And Julian Simon is the thinker who best explains why the difference between those percentages will be a dominant force – maybe the dominant force – in North Dakota for decades to come.
In a nutshell, Simon says that oil companies and petroleum engineers are destined to spend thousands of hours and billions of dollars in trying to squeeze ever-higher percentages of oil out of that rock. In fact, they’re already cracking and fracking and refracking the rock, and have been spending big on such advancements for years.
What’s more, according to Simon, the drilling, testing and research are almost certain to succeed. The recovery rates, in other words, will rise.
That’s happening, too.
So if you want to buy land in Williston, N.D., now might be a good time. Because there’s an excellent chance the city’s population will, as North Dakota Department of Mineral Resources Director Lynn Helms predicts, reach 60,000 by 2050, up from 30,000 today.
“I strongly urge your city leaders to plan for growth,” Helms said in September at a meeting of the Williston Basin Chapter of the American Petroleum Institute.
“The price will come back. The growth will come back.”
He’s right, and Julian Simon’s writings show why.
Search for solutions
Until he died in 1998, Simon taught business at the University of Maryland, but his writings on economics drew students worldwide. And critics: Simon is best remembered for a bet he made with Paul Ehrlich, a Stanford biologist who wrote the 1960’s gloomiest book, “The Population Bomb.”
Simon bet Ehrlich that the price of any five commodities would decrease over 10 years, not increase as Ehrlich’s theories of overpopulation, mass starvation and global scarcity would predict.
Ehrlich took the bet and chose the commodities.
Ten years later, Simon – nicknamed The Doomslayer – won in a walk.
Simon’s core insight recognized the key roles that prices and human ingenuity play in solving resource problems. Consider the Bakken, empty and echoing as much of it was after the earlier oil bust of the 1980s.
Back then, oIl prices rose as worldwide demand for oil climbed. In such scenarios, “the higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves.
“But in a free society, solutions are eventually found. And in the long run, the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.”
Simon wrote those words in 1998, long before most Americans had heard the word fracking. But the quote is uncanny in the way it anticipated Bakken events – and in the perspective that it offers on the developments that are happening today.
Those developments include rigorously focused, sustained and high-level attention on North Dakota’s key opportunity: the chance to pull ever-more oil out of the “tight” but gigantic (think 200,000 square miles) formation of Bakken rock.
At the University of North Dakota, the eight-year-old Department of Petroleum Engineering specializes in that work, said Vamegh Rasouli, professor and department chair.
“We are proud to be the lead researchers in unconventional shale oil,” Rasouli said.
“That’s how we want to be known. We don’t want to compete with programs that have been around for many years; besides, we are in the center of unconventional oil in the world, and this is what we want to focus on. This is our major area of focus.”
The program’s 35 graduate students all study the technologies that are needed to extract unconventional, Bakken-style oil. They’re aided by state-of-the-art mock-ups modeled after Bakken rigs, with working controls that are accurate in every detail (except that the controls drive digital rather than steel drills).
Refracking and EOR
LIkewise, students use the department’s labs to test enhanced oil recovery and refracking, the two most promising technologies for boosting recovery of Bakken oil.
Those technologies also are the focus of intense research at UND’s Energy and Environmental Research Center, a few blocks away.
“There’s this huge amount of oil remaining there, and you’ve touched on both of the things that have a real opportunity of fundamentally changing that,” said John Harju, vice president for strategic partnerships at the EERC.
“One is enhanced oil recovery; that’s injecting something to mobilize the oil. The other is refracturing,” or returning to older wells that had been fracked in the recent past.
Those technologies haven’t revolutionized Bakken drilling yet. “Both are very much in their nascent stages,” Harju said.
Meanwhile, oil companies have coped with the lower price of oil by becoming more efficient. While it used to cost $11 million to drill and complete a well, now it costs $6 million, for example. What used to take 40 days now can be done in 15.
As a coping mechanism, “spending less seems to work pretty well,” Harju joked.
But through it all, the research by UND, the EERC, private companies and other parties continues.
Now, tantalizing results are starting to show: “Williston Basin refracturing pilot shows promise for older Bakken wells,” read a NaturalGasIntel.com headline in April.
Expect such advances to continue, especially when the global price of oil climbs. Because the tiny percentage of oil given up by the Bakken rock is a problem; and as Julian Simon wrote in 1998, “in a free society, solutions are eventually found.”