Wednesday, December 16, 2009

Frac You

Hydraulic Fracturing has been in the news quite a bit lately.

Not quite.

Hydrofracing or fracing (rhymes with hacking) is a technique to complete a well that allows the well to flow much more than it would otherwise be able to. This Oil Drum tech talk give a good run through of perforating and fracing a well.

Fracing goes back to at least the early 80's. Everyone knew that more cracks = more flow, but the trick was how to achieve that. Early efforts resulted in additional cracks, but those early methods suffered from quick closure of the cracks. Later, companies added sand to prop the cracks open. That sand is called a "proppant" for its ability to keep the crack propped open. Most of the sand is dropped near the casing, so a small amount of polymer is added to "slicken" the water to allow the sand to slip further into the crack. This water is sometimes called "Banana Water."

Anyway, through much trial and error, fracing eventually evolved to be a highly reliable, repeatable, cost effective way to enhance your oil recovery. Schlumberger and Halliburton made boatloads of money off fracing. Fracing has been a key to unlocking vast deposits of shale gas in Texas, Louisiana, Pennsylvania, North Dakota, and New York. US natural gas reserves have grown significantly, thanks to the additions of shale gas deposits (collapsing natural gas prices in the process). New Orleanians should be very happy to see the "fuel adjustment charge" on their Entergy bills quite small lately.

So, fracing must be wonderful, right? Technology comes up with new sources of energy? Not quite. There have been a few problems with hydrofracing, especially in New York. You see, New York doesn't have much experience regulating oil companies and monitoring drilling activities. In Texas, the Railroad Commission (which also happens to have been the inspiration for OPEC) looks over every single drilling activity in the state and keeps close tabs on what's happening. Every single barrel of oil taken out and every chemical put into the ground must be accounted for.

In New York, state agencies are playing catch up. I've heard that until very recently, you didn't even have to report what your production rates were and there will be no audits until they can hire more personnel. This is important because the state gets a royalty for ever cubic foot of gas produced or barrel of oil produced. The companies are on the honor system to report (or at least were until recently).

The shale gas deposits in New York also seem to be in relatively close proximity to aquifers that quench the thirst of state. Also, there' s been concern about the panoply of chemicals used [PDF] to enhance the fracing method. While Louisiana has been quick to adjust, New York hasn't and it's led to calls to ban gas drilling in New York.

We'll see how this shakes out. Check out the Oil Drum for in-depth, accurate coverage of what happens with Shale Gas.

UPDATE- One more link I forgot to add: Exxon is so concerned about federal anti-frac laws that they put in a clause to nullify their merger with XTO if it goes through.

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