By John Kemp
LONDON Oct 17 Sceptics are too quick to dismiss
the potential expansion of horizontal drilling and hydraulic
fracturing to other shale areas in the United States and around
Based on early setbacks and the slow rate of progress
outside Bakken and Eagle Ford, they doubt whether the revolution
can be replicated. But shale entrepreneurs are
investing heavily to prove them wrong.
So far, the North American shale revolution has been
confined to two states, Texas and North Dakota, at least as far
as oil is concerned.
U.S. crude output has jumped by 2.2 million barrels per day
(bpd) since 2008, the biggest five-year increase since 1970 and
the fastest two-year increase in history (Chart 1).
But Texas, where production is up 1.469 million bpd, and
North Dakota, where production has risen 671,000 bpd, account
for virtually all the increase (Chart 2).
Other states including Oklahoma, New Mexico, Colorado, Utah,
Wyoming and Kansas have achieved marginal production increases
totalling 400,000 bpd, but the rise has been offset by falling
output from California, Alaska and offshore fields in the Gulf
of Mexico (Chart 3).
The U.S. Energy Information Administration (EIA) has
identified 22 potential shale oil and gas prospects, known as
plays, across the continental United States, but so far all the
increase in oil production has come from just three: the Bakken
in North Dakota, and the Permian and Eagle Ford in Texas.
Substantial amounts of gas are being produced from a number
of other formations, including the Barnett in Texas and the
Marcellus in the U.S. Northeast, but oil production remains
confined to fairly small areas of south and west Texas as well
as North Dakota.
No significant quantities of either oil or gas have been
produced from shale anywhere outside the United States.
Small-scale drilling programmes in Poland and China have proved
disappointing. Only a handful of exploratory wells have been
drilled in the UK, Argentina and other countries identified as
having potentially substantial shale resources by the EIA.
Shale sceptics question whether the regulatory and
geological conditions which underpinned successful production in
the Bakken, Permian and Eagle Ford areas are replicated
elsewhere. If those conditions are unusual, they say it may be
hard to transfer the revolution to other parts of the United
States, let alone internationally.
Drilling in other parts of the United States has yielded
very low flow rates for crude and liquids, adding to the
pessimism, and causing major companies like Shell as
well as niche shale specialists like Chesapeake and
SandRidge to scale back their drilling programmes in more
speculative frontier areas.
Despite the disappointing results outside Texas and North
Dakota, sceptics may be being too quick to write off the
potential for new Bakken, Permian and Eagle Ford-sized plays
elsewhere in the United States and internationally.
Shale plays are enormously variable. The term "shale" is
applied to a wide range of different rock types that differ in
terms of porosity, organic content, thermal maturity, formation
thickness, buried depth, the pressure on them, and
susceptibility to fracturing.
Fracturing operations must be tailored to the specific play
to optimise flow rates. The length of the horizontal wells, the
number of fracturing stages, the amount of pressure applied, the
chemicals used in the fracking fluid, and the spacing of the
wells must all be customised.
Some lessons learned in one shale play can be applied in
others. But in practice much of the know-how can only be
achieved through experience operating in the specific play,
"learning by doing".
In most instances, dozens or even hundreds of wells need to
be drilled to acquire the necessary experience and prove the
potential of the play.
Developing a successful new shale play can take years. The
Bakken, Eagle Ford and Permian plays, as well as gas plays like
Barnett, have all taken many years to reach production maturity.
Fracking operations began in the Bakken around 2005.
Initially, however, drilling and output increased only very
The number of wells drilled into North Dakota's Bakken,
Sarnish and Threeforks formations climbed from 219 at the end of
2005 to just 834 by the end of 2008, before leaping to 5,047 by
the of 2012. Output grew from 4,000 bpd in December 2005 to
112,000 by December 2008 and then surged to 704,000 by December
Most of the sceptics who currently doubt whether the shale
revolution can be replicated outside Texas and North Dakota were
also very sceptical about whether it would really work in those
states, and have been repeatedly proved wrong.
They underestimate the perseverance needed to make a new
shale play work. George Mitchell's role in pioneering shale gas
production is rapidly becoming a modern parable, but the
technologies he employed had been around for decades. Fracking
has been around since the 1940s and 1950s. Horizontal drilling
is even older but has been in widespread use since the 1980s.
Mitchell's obsessive genius was to keep trying them for more
than a decade until he figured out how they could be made to
work successfully in the conditions that occurred in the play,
ignoring the sceptics who said it would never work. Harold
Hamm's Continental Resources has played a similar role
developing the Bakken and now dominates the play.
THE NEXT BIG PLAY?
Continental is investing heavily in part of the Woodford
shale it has dubbed the South Central Oklahoma Oil Province
SCOOP is a "world class resource shale" according to
Continental and an "excellent siliceous and highly fractured
reservoir". Production has already increased more than 400
percent since the end of 2012, according to Continental's
October 2013 investor presentation on its website.
Not all shale plays will prove successful or easy to
develop. Some will be failures. Some will require very different
approaches to drilling and fracturing the reservoir rocks.
But it would be wrong to focus on the setbacks and failures
to write off the potential to develop new shale provinces. If
Mitchell and Hamm had given up in the face of initial
difficulties, the Bakken, Barnett, Marcellus and Eagle Ford
would not exist today.
In a report published in June 2013, the EIA identified and
assessed more than 150 potentially oil and gas-bearing shale
formations around the world (including 137 formations in 41
countries outside the United States) and concluded shale oil and
gas resources were "globally abundant".
Even if only six to twelve are put into production and prove
as high-yielding as the Bakken, Eagle Ford, Barnett and
Marcellus, it would have a globally significant impact on oil
and gas supplies.
For that reason, the sceptics are wrong to bet against the
technology's long-term transformational impact.