Power Hungry
Page 25
In other words, Congress is now trying to find a cure for some of the very same maladies it helped to create. That can be seen by comparing the history of the global gas market with that of the U.S. gas sector. Between 1973 and 2008, natural gas’s share of the global primary energy market rose from 18 percent to 24 percent. Meanwhile—thanks to Congress’s illadvised intervention in the domestic energy market—natural gas’s share of the U.S. primary energy market fell from 32 percent to 26 percent.25
FIGURE 32 U.S. Electricity Generation, by Fuel Shares, 1973 to 2008
Source: Nuclear Energy Institute, “Resources and Stats: Generation Statistics,” http://www.nei.org/resourcesandstats/graphicsandcharts/generationstatistics/.
In his 1996 book Oil, Gas & Government, an exhaustive history of the regulation of the U.S. oil and gas business, author Robert L. Bradley Jr. wrote that the result of federal regulatory forays into the natural gas market was that the electricity industry had to substitute “the most pollutive fossil fuel (coal) for the cleanest fossil fuel (gas).”26
The thicket of regulations on the gas sector eventually became so onerous that Congress finally had no choice but to repeal most of them. And much of that deregulation occurred during the administrations of Ronald Reagan and George H.W. Bush. But even as the natural gas business was being gradually deregulated, many analysts continued to claim that America was running out of natural gas.
For instance, in 1983, the U.S. Office of Technology Assessment (a now-defunct arm of Congress) predicted that by 2000, U.S. gas output would likely be no more than about 19 trillion cubic feet per year.27 The reality was quite different. By 2000, total production was almost 24.1 trillion cubic feet.28 After declaring that existing proved gas reserves would only provide marginal amounts of gas after the year 2000, the analysts at the Office of Technology Assessment said, “All other domestic production must come from gas which has not yet been identified by drilling.”29 Or, as former defense secretary Donald Rumsfeld might have put it, that yet-to-be-found gas was an “unknown unknown.”30
FIGURE 33 World Primary Energy Mix, 1973 to 2008
Source: BP Statistical Review of World Energy 2009, http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2009_downloads/renewables_section_2009.pdf.
FIGURE 34 U.S. Primary Energy Mix, 1973 to 2008
Source: BP Statistical Review of World Energy 2009, http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2008/STAGING/local_assets/2009_downloads/renewables_section_2009.pdf.
Federal analysts weren’t the only ones grappling with the unknown unknowns of U.S. gas resources. Top executives at Exxon were also convinced that the United States was running out of natural gas. In 1984, Charles B. Wheeler, a senior vice president at the oil giant, told a Senate committee that the yet-to-be-discovered gas resources in the United States likely amounted to about 300 trillion cubic feet. Given that small resource base, Wheeler said, the United States should “conserve our scarce gas resources.”31
But that mindset ignores one of the great paradoxes of the past century of natural gas exploration and production in the United States: The more gas the nation produces, the more gas it finds. It sounds odd, but the numbers tell the story: In 1989, the United States had about 168 trillion cubic feet of proved gas reserves.32 By the end of 2008, proved gas reserves had increased by 41 percent, to some 237 trillion cubic feet.33 But here’s the amazing thing: Over that twenty-year period, U.S. gas wells produced more than 390 trillion cubic feet of gas—that’s more than two times as much gas as was foreseen in the proved reserve estimates put forward back in 1989.34
Despite those huge gas withdrawals, U.S. natural gas production, and natural gas reserves, have increased. Why? The answer is that technological advances in the oil and gas sector are continually unlocking resources that were unavailable just a few years earlier. And the keys needed to unlock natural gas from shale were cut in the state that has been on the forefront of oil and gas technology for more than a century: Texas.
Stripper Power!
Strippers don’t get much respect.
In the energy business, the sexy projects nearly always involve expensive wells, huge dams, giant electricity plants, or sprawling arrays of wind turbines and solar panels. Those headline-making projects are invariably designed to produce big quantities of oil, natural gas, or electricity, and do so quickly. That leaves marginal oil and gas wells—commonly referred to as “stripper” wells—as something of an afterthought in the U.S. energy sector.
But when it comes to the Four Imperatives, stripper wells are awfully impressive, particularly when they are compared to wind and solar. Let’s consider the first of the Four Imperatives: power density. It ranks first in the Four Imperatives because energy sources with high power density nearly always prevail over those with low power density as they require less land and fewer resources. And that usually translates into advantages when it comes to two of the other imperatives: cost and scale. So what qualifies as a stripper? The industry defines a gas stripper well as one that produces 60,000 cubic feet of gas or less, and an oil stripper well as one that produces 10 barrels of oil or less per day.35
Basic math shows that a gas stripper well, covering 2 acres, has a power density of about 150 horsepower per acre, or about 28 watts per square meter, which is about twenty-three times as much as the average wind turbine. 36 (Recall that the average wind turbine has a power density of about 1.2 watts per square meter.)
Meanwhile, an oil stripper well producing 10 barrels of oil per day has a power output of about 150 horsepower per acre, or 27 watts per square meter.37 Again, that’s about twenty-three times as much power as is produced by a wind turbine. Even if we reduce the stripper well’s output to just 2 barrels of oil per day—the average output for that type of well, according to the Interstate Oil & Gas Compact Commission—it will still produce about 30 horsepower per acre, or 5.5 watts per square meter. That’s about four times as much power density as the average wind turbine.38
Stripper wells are a critical source of U.S. energy production, accounting for about 9 percent of domestic gas production and about 16 percent of oil production.39 In 2007, U.S. oil stripper wells produced about 800,000 barrels of oil per day.40 That’s more oil than was produced that year by a number of other oil-producing countries, including Argentina, Colombia, Ecuador (which is a member of OPEC), Oman, Syria, Egypt, Australia, India, and Malaysia.41
The high power density of oil and gas wells—and in particular, the marginal production that comes from stripper wells—provides yet more evidence in favor of hydrocarbons. The real-estate footprint of oil and gas—particularly when compared with those of wind power—is small. And, as E. F. Schumacher made clear nearly four decades ago, small is beautiful. But future unconventional gas production may require an even smaller footprint than modern wells. Gas producers are now drilling multiple wells from one location. For instance, in 2009, the Denver-based Bill Barrett Corporation announced that it was planning to drill forty-seven gas wells on a single 8-acre site in western Colorado.
As those Colorado wells go into decline and become, by definition, stripper wells, their power density will make wind turbines look positively puny by comparison. If we assume six gas wells per acre, all producing 60,000 cubic feet per day, their collective power output will total 168 watts per square meter, or about 140 times as much as that of a wind turbine.
Call it stripper power.
CHAPTER 23
It’s a Gas, Gas, Gas
Welcome to the “Gas Factory”
You will not find a single cubic foot of natural gas unless you drill more wells.
TEXAS WILDCATTER FRANK PITTS, 19771
YOU CAN’T COAX NATURAL GAS out of shale deposits unless you have a lot of sand. And you can’t manage that sand without a sand chief, or, better yet, a couple of sand chiefs.
That was one of the first lessons I learned during a visit to a frac spread located a few miles west of Hillsboro, Texas, on a soggy day in March 2009. The term “frac spread” is oil-field lingo for the collection of trucks, trailers, pumps, hoses, pipes, personnel, sand chiefs, and tanks that are needed for the hydraulic fracturing (“frac” or “frac job”) of a particular subsurface geologic zone. On this particular day, a crew of about two dozen men backed by dozens of trucks and more than 10,000 dieselfueled horsepower were working on two wells, the Padgett #1-H and the Greenhill #1-H. The wells were operated by Houston-based EOG Resources, one of the most aggressive drillers in the Barnett Shale. Randy Hulme, an affable EOG petroleum engineer, explained the layout. The company had drilled the two wells within a few yards of each other. Both were drilled to a depth of about 8,000 feet, and when that level was achieved, the roughnecks and tool pusher working on the drilling rig had angled the drill bit sideways and sent it clawing into the shale on a horizontal tangent for another half-mile or so, all of it, the company hoped, in the sweet spot of the Barnett Shale. That half-mile section, called the lateral, was the objective of the frac job.
Over the roar of the diesel pumps, Hulme pointed to an 18-wheeler loaded with sand that had just pulled into the frac spread and parked next to the sand chief: a Winnebago-sized metal box with a big conveyor slung under its belly. “We blow the sand from the trucks into the chief, from there it goes into the blender, and then gets pumped into the well,” he said. A few minutes later Hulme led me into a cramped trailer loaded with electronics, video readouts, and gauges, where several technicians monitored the equipment involved in the fracturing process. Pointing to one of the dozen flat-panel video screens, Hulme said, “We’re now pumping 45 barrels of water per minute into the well at a pressure of 6,500 pounds per square inch.”
EOG was doing what’s called a “multistage frac” on both of the wells. The idea was to create multiple 250-foot-long segments on the laterals of the wells. Each segment, or stage, would be individually fractured to allow the maximum recovery of gas from the lateral. One of the laterals was going to have twelve stages, the other, fifteen. And for each of those stages, the massive pumps—powered by five roaring V-8 diesel engines, each rated at 2,000 horsepower—were going to slam about 300,000 pounds of sand into the well. By the time they were finished with the two wells, EOG was going to pump a total of 8 million pounds (4,000 tons) of sand into the two holes.
Hulme explained that the goal of all that pressure and sand was simple: to pulverize a large section of the shale and create a network of fractures. The sand gets pumped into the fractures and holds them open to provide a system of channels that are similar to the air-conditioning ducts in a house. After those sandy channels are opened, tiny pores in the shale—some of them just a few nanometers (a nanometer is 1 billionth of a meter) in diameter—release the methane molecules that have been trapped inside. The gas then flows through the sand, into the well bore, and to the surface, where it is put into a local pipeline. It then goes to a processing plant where any water or natural gas liquids—such as propane, butane, or ethane—are removed. The gas is then fed into an intrastate or interstate pipeline.
By themselves, the wells near Hillsboro were not that important; they were just two of the thousands of wells that have been drilled in the sprawling Barnett Shale. But the Padgett and Greenhill wells are emblematic of the shale gas revolution that has changed the global natural gas business. The key technologies used on the two wells near Hillsboro—horizontal drilling and multistage hydraulic fracturing of wells with long laterals—have become standard for producing gas from shale. But it took years to perfect them. Over the past decade or so, the Barnett has been one of the most intensively drilled pieces of real estate on the planet. Between 1997 and 2005, the number of producing wells in the region jumped tenfold. And with that increase in drilling came huge increases in production. By the end of 2008, there were more than 12,000 producing gas wells in the Barnett Shale with a total production of over 4.8 billion cubic feet per day, the equivalent of about 875,000 barrels of oil per day.2
The intensive drilling and huge gas production from the Barnett has vaulted it from obscurity into one of the ten most prolific gas fields on the planet, ranking on par with Iran’s giant South Pars field.3 And all of that gas has been produced from the Barnett because a Texas energy baron named George Mitchell, who owned a lot of leases in the region, kept looking for ways to wring gas out of the shale. During the 1990s, Mitchell spent millions of dollars before his drilling crews discovered the right recipe for hydraulic fracturing. In 1997, they found that water injected under extremely high pressure was the winning formula, and that technique quickly spread. In 2003, horizontal drilling became widespread in the Barnett. The combination of the two techniques broke the code. A frenzy of leasing and drilling began that continues to this day.
And that leads me to an essential point: The Barnett Shale is the single most important hydrocarbon development in North America since the discovery of the East Texas Field in the 1930s. The East Texas Field was a big deal. It led to the empowerment of the Texas Railroad Commission, which would go on to control world oil prices for the next four decades.4 The massive oil field helped transform Texas from a provincial backwater into what Republican political strategist Karl Rove has dubbed “America’s Superstate.”5 The money from the East Texas Field turned Dallas, the nearest major city, into a thriving metropolis. The gusher of money that came out of the field allowed arch-conservative wingnuts such as H. L. Hunt to fund Joe McCarthy, the John Birch Society, and other right-wing politicians and groups.
FIGURE 35 Barnett Shale Producing Wells, 1982 to 2008
Sources: Michael E. (Gene) Powell Jr., “Recent Developments in the Barnett Shale,” n.d.; International Energy Agency, World Energy Outlook 2009, 403–404.
The oil money that came out of East Texas and other fields in the Lone Star State played a critical role in the rise of numerous Texas politicians, including Lyndon Johnson, George H. W. Bush, and George W. Bush.6 The East Texas Field will always stand as a key marker in the history of U.S. energy and politics. But the East Texas Field didn’t have any children—that is, its discovery did not immediately lead to the discovery and development of other, similar-sized fields. The Barnett Shale has already had children, and those children have changed the global gas business.
In April 2009, the U.S. Department of Energy estimated the total amount of recoverable shale gas in the United States at 649.2 trillion cubic feet. That’s the energy equivalent of about 118 billion barrels of oil—or about four times America’s proved oil reserves.7 And though that quantity of energy is impressive, the even better news is that much of the available shale gas lies close to major population centers: The Marcellus Shale is relatively close to New York City and Philadelphia. The Barnett, as well as the Haynesville Shale in Louisiana, are relatively close to existing gas pipeline infrastructure. The Department of Energy estimated that the Barnett Shale alone contains some 44 trillion cubic feet of recoverable natural gas. That’s a huge volume of methane, but it’s a mere fraction of the size of the Marcellus Shale.
TABLE 4 The Barnett Shale and Its Children: Recoverable Gas in Major U.S. Shale Gas Basins
Shale Basin Recoverable Gas (in trillion cubic feet) Recoverable Gas (in billion barrels of oil equivalent)
Barnett 44 8
Fayetteville 41.6 7.5
Haynesville 251 45.7
Marcellus 262 47.7
Woodford 11.4 2
Antrim 20 3.6
New Albany 19.2 3.5
Total 649.2 118
Source: Energy Information Administration, “Modern Shale Gas Development in the United States: A Primer,” April 2009, http://www.fe.doe.gov/programs/oilgas/publications/naturalgas_general/Shale_Gas_Primer_2009.pdf, 17; author calculations.
The Marcellus Shale underlies an area covering about 50,000 square miles in a swath that runs from New York through Pennsylvania and sou
thward almost to North Carolina.8 If the Department of Energy’s estimate of the Marcellus resource is correct—262 trillion cubic feet of gas—then the shale contains the equivalent of 47.7 billion barrels of oil. The potential of the Marcellus is so great that Rick Smead, a gas analyst at Navigant Consulting in Houston, has dubbed it “Prudhoe Bay under Pittsburgh.”
Right behind the Marcellus is the Haynesville, with an estimated 251 trillion cubic feet of gas, the energy equivalent of 45.7 billion barrels of oil. For reference, the biggest conventional hydrocarbon discovery of the past decade is Tupi, the giant field located offshore Brazil. Tupi is estimated to hold about 8 billion barrels of oil equivalent, and most of it is in the form of oil, not gas.9 The Haynesville formation may hold more than five times as much raw energy as Tupi. But remember, Tupi is located offshore in about 7,000 feet of water. The oil itself is located another 17,000 feet below the muddy floor of the Atlantic Ocean.10 Developing Tupi will cost tens of billions of dollars. And that field is located in Brazil—which, given its enormous oil resources, is frequently rumored to be thinking of joining OPEC.
Meanwhile, the energy locked up in the Haynesville—as well as that in the Barnett, the Marcellus, and the other shale formations—is on land, right here in the United States, where it can be put into the existing pipeline network. Of course, there’s no way that all of the gas that’s in the Marcellus, the Haynesville, or any of the other shale plays will be produced. Much of that gas will be too deep, or too far from pipelines, or some unforeseen obstacle (or obstacles) will prevent it from being profitably developed. But even with that caveat, it’s abundantly clear that the United States has enormous quantities of natural gas—more gas than was ever thought possible. The gas resources are so big that some companies in the industry are now calling the business of drilling in shale the “gas factory.”11