Forget what you know about hydraulic fracturing; in all likelihood, it's outdated. Fracking is experiencing technological leaps that will likely lower its cost and reduce its environmental footprint.
In a presentation to the U.S. Energy Association (USEA), Dr. S. Julio Friedmann pointed out that fracking is not new; it's been around since the 1970s to extract coal-bed methane, among other things.
Friedmann, by the way, is chief energy technologist at the Lawrence Livermore National Laboratory (LLNL), which ensures the safety, security and reliability of the nation's nuclear weapons, and solves other nationally important problems, including energy and environmental issues. Decades of public and private research led to incremental fracking improvements, said Friedmann, which ultimately allowed the economic extraction of natural gas and oil from shale rock.
George Mitchell of Mitchell Energy used some of that research to make a technological breakthrough: He built the world's first economical shale gas well in 1998. In 2002, Mitchell Energy was sold to Devon Energy (DVN) for $3.5 billion. Since then, public and private research improved fracking methods, reduced production costs and reduced environmental impact.
While many were focused on fracking in the New York and Pennsylvania portion of the Marcellus Shale region, companies were busy in other states. Places like Bakken, Barnett, Montney and Haynesville are producing not only natural gas, but also oil. Jim Cramer previously reported about the huge opportunities in North Dakota's Bakken fields. The Ohio Oil and Gas Energy Education Program (OOGEEP) is reporting similar opportunities. Ohio's fracking of oil and gas from the Utica Shale is proving to be a bonanza for job creation, local taxes and energy security. New technologies are making energy supplies accessible and safe.
New fracking technologies are being adopted by Exxon Mobil (XOM), Chesapeake Energy (CHK), EQT Corp. (EQT), Cabot Oil & Gas (COG), and Range Resources (RRC). One widely adopted technique is to recycle fracking water. As part of that process, some producers are using a new technology developed by privately owned Powell Water Systems, which calls the technology electrocoagulation, and it's been reviewed by LLNL. Electrocoagulation can purify produced water rapidly and economically.
Another new technology is called green fracking fluid. This technology was developed by Halliburton (HAL) and it is called, CleanStim. It is so safe that Halliburton's CEO David Lesar felt confident enough to drink a full glass of CleanStim.
For higher population areas, such as the Marcellus region, exploration companies have discovered new technologies that will allow them to reduce the number of vertical wells and achieve equal or better yields. Previously, drillers needed 16 vertical wells and 77-acre total disturbance to develop 640 acres. Today, that same 640 acres requires only one vertical well and 7.4-acre total disturbance.
Friedmann presented important points about the potential of the technology. First, traditional fracking is only 8% to 13% efficient. This means there are huge opportunities for secondary and tertiary recovery of the remaining 87% to 92%. As technologies are developed, these retained reserves may prove to be a growing resource for new sources of domestic oil and gas.
Second, water is not the only resource that can fracture shale. Researchers are now looking at down-hole explosives. Like demolishing old buildings, controlled explosives can direct fracturing to maximize production and increase environmental stewardship. Computer-designed explosive packs can also dilate existing fractures.
Third, the industry already found ways to reduce "induced earthquakes." Dr. Friedmann notes that most of these earthquakes are rarely caused by fracking. Instead, most outsized events occur where wastewater is injected into pre-existing, low-strength zones and ancient faults. The industry's solution is simply to refer to state geological maps and avoid the known faults.
A final point offered by Friedmann is the importance of public and private research. The Department of Energy's research and development budget for fracking technologies has been declining every year, while the Environmental Protection Agency's budget has been growing. Worse, this year the DOE's budget was reduced while the EPA's increased. Nevertheless, research results have been proven to have profound results. Companies have benefitted, and the returns on research dollars have been impressive.