Unpeak Oil? "SHALE 2.0: Technology and the Coming Big-Data Revolution in America’s Shale Oil Fields" by Mark P. Mills
This is a new essay [pdf] by Mark P. Mills of the Manhattan Institute. He wrote The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy in 2005, which I had thought was ridiculous, but has turned out to be more accurate than Twilight in the Desert (also from 2005).
- The time it takes to drill wells is a critical component of cost. On this front, the speed of improvement has been remarkable: with virtually no increase in capital costs (in some cases, costs are down), the three key measures of drilling—time to drill, wells per rig, and total distance drilled—have improved by 50–150 percent in less than five years.
- The number of feet of shale rock tapped is the first order determinant of how much oil and gas are produced. Here, the net result of technology and operational innovation is clearly visible: total footage drilled grows faster than the growth in rig count. The inverse is true as well: a forecasted 40 percent drop in rig count will have a more modest (35 percent) decline in total new footage drilled.
- The “walking rig” is one technological advance that has contributed greatly to gains in rig productivity. Rather than drill a single well from a well-pad, a walking rig can move around the pad, drilling multiple wells (sometimes dozens). Since 2006, the use of such so-called pad drilling has grown dramatically, from a few percent to over 50 percent of new wells, with the potential to rise higher.
- The consequences of a price and rig-count collapse have played out before. The shale revolution, in fact, began with the extraction of natural gas in the Texas Barnett shale. In 2008, after natural gas from this abundant new source flooded the U.S. market, gas prices plunged threefold. The gas rig count fell; but gas production kept rising and has been growing ever since.
- The U.S. currently has roughly 3,000 drilled wells awaiting completion—likely rising by the end of 2015, to more than 5,000. Given current market realities, many—if not most—such wells will remain idle. The amount of ready-to-flow oil stored in those 5,000 wells is at least four times greater than all the oil stored in steel tanks around the country. Because it takes only a few months to complete a well, such wells, once completed, could swiftly add 2–3 MMbd to U.S. supply.