Companies in the United States who are drilling for shale oil have had to respond to the sudden low price of oil.
Saudi Arabia decided to maintain production rather than cut production to maintain the price of oil, and this has sent the price of oil plummeting.
The reasons for this change in tactics are unclear. Some have said it was to force the curtailment of shale oil development.
Another reason could be their desire to minimize the amount of money Iran can receive from its oil if the nuclear negotiations result in the lifting of sanctions.
Whatever the reason, companies involved in shale oil development have had to scramble to stay alive.
Initially, these companies took four actions:
- Reduced new drilling investments to save cash
- Shifted drilling activities to each area’s sweet spot
- Delayed finishing wells to save cash and store oil in the ground
- Reduced service and supplier costs
Now they are pursuing new techniques that will improve the amount of oil they can obtain from their wells.
Their entrepreneurial spirit, an American trait, has turned the tide from possible disaster to an improving future.
The sudden drop in oil prices can be seen as a blessing in disguise.
As usual, the peak oil theorists have been proven wrong again.
As recently as late last year, they were bemoaning the supposed shrinking of sweet spots, the rapid decline in production rates, and predicting the demise of shale oil development.
Radical environmentalists who have railed against fracking may achieve some short term prohibitions, such as the fracking regulations issued by the Interior Department for Federal Lands, but fracking is here to stay because it’s important to America.
The continued march towards energy independence is strategically important, even vital to the United States, when the dangers in the Middle East are fully understood. Saudi Arabia, the other Gulf oil producers, such as Qatar and the UAE, and Egypt, are being surrounded by ISIS and Iranian surrogates.
Here are two new developments that will, over the long term, improve shale oil production.
Until now, parallel horizontal wells have been kept a thousand feet or more from existing wells.
Now, horizontal wells are being drilled only 500 feet from existing parallel wells. This alone will increase the output from shale formations.
Wells are also being stimulated by refracking, which opens new fractures and extends existing fractures in the shale, thereby restoring production levels.
It’s been estimated that only 8% of the available oil within two or three hundred feet of a horizontal well, is being extracted.
Both these new techniques will increase the amount of recoverable oil.
Other experiments are taking place.
One of these is the use of coated propants rather than sand alone. Resin-coated sand that expands after lodging in fractures helps to keep fractures open, and by expanding after reaching the farthest point in the fracture helps to maximize the fractures size.
The entrepreneurial spirit of America’s shale oil drilling companies will keep the shale oil revolution alive. Ultimately shale oil and natural gas development using fracking will proceed worldwide.
Everyone around the world will benefit from developing these fossil fuel resources.
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