As natural gas drillers turn to “supersize” fracking, natural gas supplies could be abundant and cheap for a long-time to come.
That is how the Wall Street Journal phrases what is going on in the natural gas industry, where gas exploration companies continue to innovate the same drilling techniques that sparked the original shale gas revolution.
By now we have all heard about fracking and horizontal drilling. But companies continue to expand these techniques and fine tune them. Now, according to Wall Street Journal, a few companies in Louisiana have begun using “supersize” versions of horizontal drilling. Comstock Resources and Chesapeake Energy, among others, have enjoyed huge successes by extending the lateral portions of horizontal wells far beyond what has been done in the past, adding thousands of feet to their lengths. Related: Is George Soros Betting on the Long-Term Future of Coal?
Then, they essentially do what they have done before, only on a larger scale. They pump these extra-long laterals with huge volumes of water, sand, and chemicals, fracturing a massive natural gas well. The practice allows a driller to produce much more gas from a single well.
Still, it is too early to tell whether or not this will result in another shale revolution of sorts. The successful results have only been achieved in one section of Louisiana in the Haynesville shale. But if it can be replicated, the ramifications would be profound. “There’s a large likelihood that the United States will be enjoying very low gas prices for a very long time, maybe 20 years,” Mark Papa, a partner at private equity firm Riverstone Holdings LLC, told the WSJ. Related: Global Demand Picture For Natural Gas Looks Increasingly Sour
Supersizing fracking operations would allow companies to be profitable producers of shale gas even at the incredibly low prices exhibited in today’s marketplace – below $3 per million Btu (MMBtu). Comstock Resources says it can earn an 8 percent return on gas produced from these wells even when prices are at $2.50/MMBtu.
Again, it is a little early to speculate, but if massive volumes of gas could be produced at consistently low prices, the impact would ripple across other sectors. The electric power sector would shift more rapidly away from coal and towards natural gas. The petrochemical industry would receive an enormous boost, keeping costs low for fertilizers, plastics, and other industrial materials and processes. LNG exporters from the U.S. would expand export capacity, pushing down LNG prices in certain markets and offering up stiffer competition to other LNG producers around the world.
It’s still early days, but keep an eye on this one.
By Charles Kennedy of Oilprice.com
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