Shale gas is a kind of natural gas found quite deep in the ground. Shale gas can be used as fuel to operate thermal power plants, as well as for other purposes. Shale is a type of rock formed by layers of mud with gas trapped in cracks. Some experts say there is enough shale gas underneath the United States for more than 100 years' consumption. It has been confirmed that there are numerous underground shale gas deposits in many parts of the world, including China, North and South America and Australia. [Source: Yomiuri Shimbun, February 14, 2012]
In the past, it was difficult to extract shale gas as it exists in the clefts of rocks located very deep underground. In recent years, however, technological advancements have made it easier to extract shale gas. The gas oozes out of cracks in shale when high-pressure water is sprayed onto the rocks' surface, creating extra clefts.
Tatsuya Watanabe and Tamaki Aikyo wrote in the Yomiuri Shimbun: “Shale gas can be extracted from shale formations at far deeper levels than formations containing conventional types of natural gas. The prohibitive costs of extracting such deposits had previously scared developers away. Experts believe the world has shale gas reserves that may yield as much as 3.2 quadrillion cubic feet of gas, about half the estimated conventional natural gas reserves.
With the new technology, a vertical well is drilled to reach the level of the shale formation and then the bore turns 90 degrees to drill horizontally. High-pressure water or gel is pumped into the well to break up the rock and extract the gas. [Source: Tatsuya Watanabe and Tamaki Aikyo, Yomiuri Shimbun, October 5, 2010]
The Economist reported: “In the late 1990s, a now-fabled Texan oilman, George Mitchell, developed an affordable way to extract natural gas locked up in shale rock and other geological formations” by “fracking”. America’s shale-gas industry has since drilled 20,000 wells, created hundreds of thousands of jobs, directly and indirectly, and provided lots of cheap gas. This is a huge advantage to American industry and a relief to those who fret about American energy security. [Source: The Economist, June 2, 2012]
The petroleum and natural gas industries has been dramatically altered by hydraulic fracturing ( “fracking”), a process that involves hydrocarbon deposits locked up in shale rock them with water, sand and chemicals. Juan Forero wrote in the Washington Post: “By blasting water, chemicals and tiny artificial beads at high pressure into tight rock formations to make them porous, workers have increased oil production in North Dakota from a few thousand barrels a day a decade ago to nearly half a million barrels today. Conservative estimates are that oil and natural gas produced through could amount to 3 million barrels a day by 2020. “We have a revolution here,” said Larry Goldstein, director of the Energy Policy Research Foundation in New York. “In 47 years in this business, I’ve never seen anything like this. This is the equivalent of a Category 5 hurricane.” [Source: John Forero, Washington Post, May 25, 2012]
The Economist reported: “Fracking is more disruptive than hoicking other hydrocarbons out of the ground — far more wells must be sunk than are needed to produce the same quantity of conventional gas. Fracking requires oceans of water, brought in by fleets of noisy tankers. “Problems with fracking include the possible pollution of groundwater by the chemicals in fracking fluids, and the leakage of methane, a gas that aggravates global warming. Another fear is that fracking may cause earth tremors. Recent seismic activity near a test well in Britain has been linked to it. Such concerns are real and widespread — in August South Africa followed France’s lead and slapped a moratorium on fracking. More studies will be needed before the public is reassured. [Source: The Economist, November 26, 2011]
Fracking has been called the technology that will change the geopolitics of energy, boosting domestic North American gas supplies to such an extent that experts predict the net importing region will soon turn into a significant gas exporter. U.S. industry researchers reckon the global fracking business will grow to $37 billion in 2012, up $6 billion from a year earlier.
Shale Energy Triggers Guar-Gum-Producing Bean Rush in India
Guar gum, which is also used to make sauces and ice cream, is a main ingredient of hydraulic fracturing, or fracking. The powder-like gum is made from the seeds of guar, or cluster bean, which comes from northern India. Guar gum is used to increase the viscosity of proppants, materials which are forced into shale fractures to enlarge them so that the oil and gas can be extracted. It also helps reduce friction, which in turn decreases the energy consumed.
Meenakshi Sharma and Selam Gebrekidan wrote in Reuters: In India's northern desert states, farmers are scrambling to harvest as much as they can of a bean with the power to lift them out of poverty. In the United States, the multi-billion dollar shale energy industry is banking on their success. U.S. companies drilling for oil and gas in shale formations have developed a voracious appetite for the powder-like gum and the boom in their business has created a bonanza for thousands of small-scale farmers in India who produce 80 percent of the world's beans. [Source: Meenakshi Sharma and Selam Gebrekidan, Reuters, May 28, 2012]
“Guar gum has become a precious commodity farmers now call "black gold". In the Rajasthani city of Jodhpur, under the shadow of an ancient fort, traders buy guar seed at 305 rupees ($5.5) a kg, a 10-fold increase from a year ago."Guar has changed my life," said Shivlal, a guar farmer who made 300,000 rupees ($5,400) - five times more than his average seasonal income - from selling the beans he planted on five acres (two hectares) of sandy soil in Rajasthan state. "Now, I have a concrete house and a color TV. Next season I will even try to grow guar on the roof.”
“India, on average, produces more than 1 million metric tons (1.1023 million tons) of guar beans annually, the biggest crop in the world. It exported more than 400,000 metric tons of guar products, including gum, in the fiscal year that ended in March 2011. Exporting beans is prohibited.
“U.S. energy firms, however, will need nearly 300,000 metric tons of guar gum this year, energy investment banking firm Simmons & Company International said in a February report. Last year, the guar shortfall forced some U.S. firms to halt fracking, it said. "There is a shortage of seeds. Last year, good quality seeds were available at around 60 rupees a kilo but now, traders are demanding over 500 rupees per kilo for the same seed," said Shyam Lal, a farmer based in the Churu district of Rajasthan.
“In March 2012, the United States bought 33,800 metric metric tons of guar gum from India, the highest amount ever. Last year, U.S. firms bought an average 22,000 metric metric tons from India a month. About nine metric tons of guar gum are used per well. Some companies are also fracking wells several times to squeeze out as much as possible, which means using even more guar. As a result, guar prices in India has risen rapidly, so fast that the local commodity exchanges halted trading in guar futures in late March amid a ministerial inquiry.
Expanding Guar-Gum Supplies and Looking for Alternatives
David Lesar, CEO at market leader Halliburton, recently said the cost of the guar gel now accounted for up to 30 percent of fracking costs to customers in some basins. "The problem with guar is it is probably the fastest-moving commodity price that I have ever seen," Lesar said.
“To cash in on the guar rush, Vikas WSP, India's largest producer of guar gum, is distributing, free of charge, seeds worth more than 900 million rupees to 100,000 farmers and giving them guaranteed returns, said B.D. Agarwal, its chairman and managing director.
“The United States produces guar, but only on 40,000 acres, an area that pales in comparison with the more than 10 million acres (4 million hectares) Indian farmers are expected to plant this year in the Thar desert. In 2011, about 20,000 acres were planted with guar in Texas but only 5,000 acres were cultivated as the crop was hit by drought, said guar supplier Cowan. He estimates the planted acreage might be twice as much this year.
“With the North American shale boom expanding to China, South America and Eastern Europe, oil field services firms around the world are poised to gobble up guar. But the rising prices and tight supplies are spurring a search for alternatives. "Guar substitutes become attractive at a certain guar price. We're at that price right now," said Tim Probert, Halliburton's president of strategy and corporate development. Halliburton touts its "CleanStim" technology as a possibility while Schlumberger (SLB.N) points to "HiWay," which it says will cut back on the water and sand use in fracking.
“Both firms did not provide specific details about their products, which they said can replace proppants. CleanStim technology has been used effectively in a number of basins, including the Eagle Ford prospect, and will essentially create a ceiling on guar prices, Probert said. Other industries that use guar, such as paper, food processing and textiles, have already turned to alternatives.
“For fracking, replacing guar will only make sense if prices continue to rocket. But guar producers expect prices to ease by 2013 as the new crop comes to market and supplies increase from all the extra acreage planted. Guar merchants say prices, like those of many agricultural commodities in India, will hinge on the monsoon rains. The rains are expected to arrive on time at the beginning of June and progress as normal.
“But even if guar eases from its current levels, prices would still be highly profitable for farmers who cultivate the crop at very little cost. And the robust demand from the U.S. shale oil and gas industry shows no sign of abating. "We're out desperately trying to find more of this product to process for the market, because we could sell all we can find," Jim O'Brien, chief executive officer of U.S. chemical maker Ashland Inc, said.
Shale Gas and Fracking Revolution
The Economist reported: “In the late 1990s, a now-fabled Texan oilman, George Mitchell, developed an affordable way to extract natural gas locked up in shale rock and other geological formations’ by “fracking”. America’s shale-gas industry has since drilled 20,000 wells, created hundreds of thousands of jobs, directly and indirectly, and provided lots of cheap gas. This is a huge advantage to American industry and a relief to those who fret about American energy security. [Source: The Economist, June 2, 2012]
The revolution should continue, according to a report published this week by the International Energy Agency (IEA). At current production rates, America has over a century’s supply of gas, half of it stored in shale and other “unconventional” formations. It should also spread, to China, Australia, Argentina and Europe. Global gas production could increase by 50 percent between 2010 and 2035, with unconventional sources supplying two-thirds of the growth.
“Factors behind America’s gas boom have included liberal regulation of pipelines (which encouraged wildcat exploration by small producers), a well-aimed subsidym abundant drill-rigs, and strong property rights, whereby landowners own the rights to minerals beneath their holdings.
“Between 2005 and 2010 the country’s shale-gas industry grew by 45 percent a year. As a proportion of America’s overall gas production shale gas has increased from 4 percent in 2005 to 24 percent today. America produces more gas than it knows what to do with. Its storage facilities are rapidly filling, and its gas price (prices for gas, unlike oil, are set regionally) has collapsed. Last month it dipped below $2 per million British thermal units (mBtu): less than a sixth of the pre-boom price and too low for producers to break even. America’s gas boom confers a huge economic advantage. It has created hundreds of thousands of jobs, directly and indirectly. And it has rejuvenated several industries, including petrochemicals, where ethane produced from natural gas is a feedstock.
“This is astonishing. Barely five years ago America was expected to be a big gas importer. Between 2000 and 2010 it built infrastructure to regasify over 100 billion cubic metres (bcm) of imported liquefied natural gas (LNG). Yet in 2011 American LNG imports were less than 20 bcm. Efforts are now under way to convert idle regasification terminals into liquefaction facilities, in order to export LNG.
“The shock waves of America’s gas boom are being felt elsewhere. Development of Russia’s vast Shtokman gasfield, in the Barents Sea — a $40 billion project which was intended to supply America with LNG — has stalled. Qatari LNG, once earmarked for America, is going to energy-starved Japan. Yet a bigger change is expected, with large-scale shale-gas production possible in China, Australia, Argentina and several European countries, including Poland and Ukraine.
Impact of the Shale Gas Boom
An increase in the amount of extracted shale gas may lead to a surplus in the global supply of natural gas. This may lower gas prices. The Economist reported: “Shale gas has turned the American energy market on its head. Production has soared twelvefold since 2000, to 4.9 trillion cubic feet, or a quarter of the country’s total gas output. By 2035 the proportion could rise to half. As the shale gas flows, prices have come crashing down. Not long ago, America depended on imports of liquefied natural gas. Now it is likely to become a gas exporter.
Tatsuya Watanabe and Tamaki Aikyo wrote in the Yomiuri Shimbun: “Since the United States developed the current method of extracting shale gas about 10 years ago, natural gas prices have fallen sharply, while countries that produce conventional natural gas have become more amenable when negotiating with other nations or firms over drilling rights.
Despite higher costs to extract shale gas than conventional natural gas, many shale gas production centers are near industrial sites such as Houston. Considering the time and cost of importing natural gas from the Middle East and other areas, purchasing shale gas from the United States makes economic sense.
“The United States produced 1.7 trillion cubic feet of shale gas in 2008. In 2009, the United States overtook Russia to become the world's largest natural gas producer. The price of natural gas in the United States has fallen to about 5 dollars per 1 million British thermal units from about 8 dollars in 2008. [Source: Tatsuya Watanabe and Tamaki Aikyo, Yomiuri Shimbun, October 5, 2010]
Problems with Fracking
Newsweek reported: “Opponents, including actor Mark Ruffalo, say the spray is poisonous, leaching radioactive and carcinogenic substances into the soil and water supply. Josh Fox, who directed the 2010 documentary Gasland (much challenged by the gas industry), says that the health risks of fracking include brain damage, respiratory problems, and cancer.”
The Economist reported: “Extracting shale gas is more disruptive than hoicking other hydrocarbons out of the ground — far more wells must be sunk than are needed to produce the same quantity of conventional gas. Fracking requires oceans of water, brought in by fleets of noisy tankers...Problems with fracking include the possible pollution of groundwater by the chemicals in fracking fluids, and the leakage of methane, a gas that aggravates global warming. Another fear is that fracking may cause earth tremors. Recent seismic activity near a test well in Britain has been linked to it. Such concerns are real and widespread — in August 2010 South Africa followed France’s lead and slapped a moratorium on fracking. More studies will be needed before the public is reassured. [Source: The Economist, November 26, 2011]
The greatest threat to the fracking revolution “stems from environmental protests, especially in some European countries, which could kill the shale-gas industry at birth. France and Bulgaria have banned fracking. Greens in America and Australia are also rallying against the industry. The anti-frackers have reasonable grounds for worry. Producing shale gas uses lots of energy and water, and can cause pollution in several ways. One concern is possible contamination of aquifers by methane, fracking fluids or the radioactive gunk they dislodge. This is not known to have happened; but it probably has, where well-shafts passing through aquifers have been poorly sealed. [Source: The Economist, June 2, 2012]
“Another worry is that fracking fluids regurgitated up well-shafts might percolate into groundwater. A graver fear is that large amounts of methane, a powerful greenhouse-gas, could be emitted during the entire process of exploration and production. Some also fret that fracking might induce earthquakes — especially after it was linked to 50 tiny tremors in northern England last year.
“But the risks from shale gas can be managed. Properly concreted well-shafts do not leak; regurgitants can be collected and made safe; preventing gas venting and flaring would limit methane emissions to acceptable levels; and the risk of tremors, which commonly occur as a result of conventional oil-and-gas activities, can be contained by careful monitoring. The IEA estimates that such measures would add 7 percent to the cost of the average shale-gas well. That is a small price to pay for environmental protection and the health of a promising industry.
Human-Made Earthquakes and Fracking
Deborah Zabarenko of Reuters wrote: “The number of earthquakes in the central United States rose "spectacularly" near where oil and gas drillers disposed of wastewater underground, a process that may have caused geologic faults to slip, U.S. government geologists report.The average number of earthquakes of magnitude 3 or greater in the U.S. midcontinent - an area that includes Arkansas, Colorado, Oklahoma, New Mexico and Texas - increased to six times the 20th century average last year, scientists at the U.S. Geological Survey said in an abstract of their research. [Source: Deborah Zabarenko, Reuters, April 17, 2012]
“The abstract does not explicitly link rising earthquake activity to fracking - known formally as hydraulic fracturing - that involves pumping water and chemicals into underground rock formations to extract natural gas and oil. But the wastewater generated by fracking and other extraction processes may play a role in causing geologic faults to slip, causing earthquakes, the report suggests. "A remarkable increase in the rate of (magnitude 3) and greater earthquakes is currently in progress," the authors wrote in a brief work summary to be discussed Wednesday at a San Diego meeting of the Seismological Society of America. "While the seismicity rate changes described here are almost certainly manmade, it remains to be determined how they are related to either changes in extraction methodologies or the rate of oil and gas production," the abstract said.
“From 1970 through 2000, the rate of magnitude 3 or greater quakes was 21 plus or minus 7.6 each year, according to USGS figures. Between 2001 and 2008, that increased to 29 plus or minus 3.5.But the next three years saw the numbers increase "much more spectacularly," said Arthur McGarr, of the geologic survey's Earthquake Science Center in California: 2009 had 50, 2010 had 87 and 2011 had 134 such events. "We don't know why, but we doubt that it's a natural process, because in nature, the only time you see such a big increase is during an aftershock sequence (with a series of quakes) or in a volcanic setting where you often get swarms of earthquakes due to magmatic activity," McGarr said by telephone.
“When swarms of quakes occurred in Colorado and Oklahoma last year, the U.S. Environmental Protection Agency asked the geologic survey to investigate possible links to energy extraction in the area.Among other sites, they examined an August 2011 earthquake centered around Trinidad, Colorado, near the New Mexico border, that registered a magnitude of 5.3, said McGarr, a co-author of the abstract. That quake "turned out to be really close to two of the highest injection volume waste water disposal wells in the field," McGarr said. "So that gives us quite a strong hint that these earthquakes are being triggered by these wastewater disposal facilities." There were different responses on either side of the Colorado-New Mexico line, he said. New Mexico, where the policy was to inject all wastewater underground, experienced more earthquakes than Colorado, where some wastewater is disposed at the surface.
“The disposal of wastewater underground, called injection, has long been known to have the potential to cause earthquakes, the Interior Department said in a blog post here . What is new is the ability to precisely locate earthquakes of magnitude 3 or greater (magnitude 3 is recognized as the threshhold for detection) and a signature shape of the waves on a seismogram indicating a shallow quake, McGarr said. Human-induced quakes are typically quite shallow, he said.
Obstacles to Developing Shale Gas Outside the United States
The Economist reported: “Europe has a good pipeline network, which in theory is open to all. Yet the pipes get tied up years in advance. European landowners typically do not own the minerals under their land, so they have little incentive to encourage exploration. Also, Europe is crowded, so its NIMBYs are noisy. [Source: The Economist, June 2, 2011]
China has a different sort of problem: a shortage of water, of which millions of gallons can be required to frack a single well. The Argentine government’s recent decision to grab control of the country’s largest oil firm, YPF, will scare off the foreign investment its shale industry needs.
“Shale-gas producers also face opposition from greens, who object to the industry’s heavy water usage and a small risk that fracking could lead to contamination of aquifers and even to earthquakes. There is also a risk that large amounts of methane, a powerful greenhouse gas, could escape during shale-gas exploration and production. The IEA estimates that shale-gas production emits 3.5 percent more than conventional gas, and 12 percent when it involves venting excess gas. France and Bulgaria have banned fracking; American and Australian anti-frackers are also rallying.
“The greens have a case, but they exaggerate it. So long as well-shafts are properly sealed, there is hardly any risk that fracking will poison groundwater. By eliminating venting, methane emissions can be kept to an acceptable minimum. And the risk of earthquakes, which has long been present in conventional oil-and-gas extraction, is modest and mitigated by monitoring. The IEA says such precautions would add 7 percent to the cost of a shale-gas well — a small price for a healthy industry.
Shale Gas in Europe Versus Shale Gas in America
The Economist reported: “The old continent has nearly as much technically recoverable shale gas (natural gas trapped in shale formations) as America. Europe’s reserves are 639 trillion cubic feet, compared with America’s 862, according to America’s Energy Information Administration, a government agency. But technically recoverable does not mean economically recoverable, notes Peter Hughes of Ricardo Strategic Consulting. [Source: The Economist, November 26, 2011]
“Costs are higher in Europe, for several reasons. First, European geology is less favourable: its shale deposits tend to be deeper underground and harder to extract. Second, America has a long history of drilling for oil and gas, which has spawned a huge and competitive oil-services industry bristling with equipment and know-how. Europe has nothing to compare with that. In 2008, at the height of the gas boom in America, 1,600 rigs were in operation. In Europe now there are only 100. America’s more cut-throat market drives costs down. A single gas well in Europe might cost as much as $14m to sink, three-and-a-half times more than an American one, estimates Deutsche Bank.
“Third, America’s gas industry faces fewer and friendlier regulations than Europe’s. Call it the Dick Cheney effect. And fourth, in America wildcat drillers, if they strike it rich, enjoy access to a spider’s web of existing pipelines, so they can get their gas to market. Europe has no such network nor open-access rules.
“Some European countries are keen to replicate America’s shale-gas boom. Poland, which may have Europe’s largest deposits, has issued exploration licences to more than 20 firms. Test wells have been sunk. But Poland’s prime minister, Donald Tusk, reckons that commercial production will not get under way until 2014.
“Other European countries are less gung-ho about shale gas, often for environmental reasons. France has potentially abundant reserves, but has imposed a moratorium on hydraulic fracturing (“fracking”), the technique for winkling gas from rocks deep underground, while the dangers are assessed.
“Americans worry about the environmental impact of fracking, too. But Europeans worry more, not least because western Europe is far more densely populated than America. Extracting shale gas is more disruptive than hoicking other hydrocarbons out of the ground — far more wells must be sunk than are needed to produce the same quantity of conventional gas. Fracking requires oceans of water, brought in by fleets of noisy tankers. More people will live close to a typical European drilling site, so opposition to drilling permits is likely to be louder.
“The legal framework is different, too. In America, mineral rights belong to the landowner. In Europe, they usually belong to the state. So when American property — owners see drills, they see dollar signs. European landowners just see big, ugly drills. (The situation is different in America if the gas lies under federal land. If so, getting leases can be trickier.)”
Image Sources: U.S. Department of Energy; Wikimedia Commons
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, U.S. Department of Energy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.
Last updated August 2012