The Great American Fracking Bubble

The Great American Fracking Bubble

Something I was not aware of was that these shale spot supposedly dry up and you need to drill elsewhere again...

As a whole, the American fracking experiment has been a financial disaster for many of its investors, who have been plagued by the industry’s heavy borrowing, low returns, and bankruptcies, and the path to becoming profitable is lined with significant potential hurdles. Up to this point, the industry has been drilling the “sweet spots” in the country’s major shale formations, reaching the easiest and most valuable oil first.

But at the same time energy companies are borrowing more money to drill more wells, the sweet spots are drying up, creating a Catch-22 as more drilling drives more debt.

“You have to keep drilling,” David Hughes, a geoscientist and fellow specializing in shale gas and oil production at the Post Carbon Institute, told DeSmog. But he also noted that with most of the sweet spots already drilled, producers are forced to move to less productive areas.

The result? “Productivity goes down and the costs remain the same,” he explained.

While Hughes understands the industry’s rationale for continuing to drill new wells at a loss, he doubts the sustainability of the practice. “I don’t think in the long-term they can drill their way out of this,” Hughes told DeSmog.

U.S. oil produced via fracking is priced as West Texas Intermediate (WTI), which averaged $41 a barrel in 2016 and $51 in 2017. The consensus is that WTI should average over $50 a barrel in 2018, thus providing the industry another reason to keep pushing forward. However, even in 2017 with the average over $50 a barrel, the industry as a whole was not profitable.

See https://cleantechnica.com/2018/05/21/the-great-american-fracking-bubble/

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The Great American Fracking Bubble | CleanTechnica
In 2008, Aubrey McClendon was the highest paid Fortune 500 CEO in America, a title he earned taking home $112 million for running Chesapeake Energy. Later dubbed “The Shale King,” he was at the forefront of the oil and gas industry's next boom, made possible by advances in fracking, which broke open fossil fuels from shale formations around the U.S. What was McClendon’s secret?

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