We can take pride in more than tech prowess

Posted on 02 November 2012

By Mike Killalea, editor & publisher

We congratulate ourselves on the step changes in technology that have made possible the boom in shales, first in North America, now spreading across the globe. But we fail to do ourselves justice. Beyond techno-marvels, industry has contributed mightily to the overall economy. Sure, we’ve driven incredible job growth, quite notable in today’s laggard economy. North Dakota, the bosom of the Bakken, was No. 1 in the US for job growth back in March, registering a hefty 6.3% increase in employment, compared with the year before. (See QR code below for web link.)

But wait, there’s more! Industry shores up the limping economy in ways beyond job creation.

$250 billion in the tank

“There’s a broader context in which we need to think of technology,” explained Tom Bates of Lime Rock Partners, speaking at a recent IADC Houston Chapter luncheon. Mr Bates estimates that activity in the shales – driven by horizontal drilling and, of course, multistage hydraulic fracturing. These technologies, says Mr Bates, have put “$250 billion in the gas tank of the American economy.”

Despite borderline paranoia among a skeptical public, the success of shale gas has significantly depressed the cost of electricity and energy in general in the USA, he noted. In 2008, for instance, wholesale electric power was $68/megawatt hour (MWh). Currently, it’s $28, a $40 plunge. Not bad. The electric power market is huge — $4 billion MWh per year. Do the multiplication and get a $160 billion savings just on electric power.

Take the analysis a step further. While producers are not happy about the decline in North American natural gas prices – a creature, of course, of our own efficiency – it should make consumers smile. Prices have fallen about $5/Mcf over the last four years or so. Multiply by annual production and – voila! – another $90 billion consumer victory.

$160 B + $90 B = $250 B. That’s a big number. So when you hear an otherwise literate member of America Publica gripe about the greed of oil and gas producers, you’ve got a couple of user-friendly numbers to present.

Ending hand wringing

The other mythical bugaboo is the “running out of resources” trap. These pernicious prognostications have clung to us like dirt to a boot heel since before the 1859 Drake well. One of the earliest bright predictions was an 1855 advertisement urging consumers to buy an oil-based patent medicine “before this wonderful product is depleted from Nature’s laboratory.” (OK, so maybe the snake-oil purveyors in question presented a less-than-impartial view.) Still, in 1874, the studiously unbiased state geologist for Pennsylvania, then the USA’s leading oil-producing state, estimated that the nation’s kerosene lamps would wink out for lack of fuel within four years. In 1919, the US Geological Survey told us that world oil production would peak in nine years. And so it goes. (See QR codes for more dead-wrong predictions.)

So much for foresight. My old chem-engineering professor taught me to be wary of extrapolating curves – especially into the future. So, get thee behind me, Crystal Ball.

But, now that I am in non-predicting mode, I predict that, through improved performance and brainstormed technology, industry will continue to confound the hand wringers indefinitely.

Besides turning source rock in the shales into reservoir rock, industry continues to confound conventional wisdom – drilling in undrillable depths and formations; uncovering commercial reservoirs in East Africa, where half a decade ago, the consensus was that none exists. And so on.

Improving performance

IADC is doing its part to catalyze improved performance in well construction. Just a couple of examples. On 30 October, just before this book hits the streets, we convene in Stavanger, Norway, the IADC Subsea BOP Workshop, under the auspices of the IADC Advanced Rig Technology (ART) Committee. (See QR code to access presentations.) That event will be reprised in Houston early next year. Also early next year, IADC plans an ART workshop on rig equipment reliability and NPT. More to follow.

Ingenuity and improved performance have proven wrong generation after generation of hand wringers. The conclusion is it’s just not smart to naysay the well-construction biz.

North Dakota leads USA in job creation.

Wrongheaded predictions about oil and gas have a long history.

View presentations from the 30 October IADC Subsea BOP Workshop.

Mike Killalea can be reached via email at mike.killalea@iadc.org.

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