Tuesday, December 3, 2013

Matt Ridley: The Frackers

This is a review of a book on the people who made the shale gas revolution: Gregory Zuckerman's, The Frackers.

In the long tradition of serendipitous mistakes that led to great discoveries, we can now add a key moment in 1997. Nick Steinsberger, an engineer with Mitchell Energy, was supervising the hydraulic fracturing of a gas well near Fort Worth, Texas, when he noticed that the gel and chemicals in the “fracking fluid” were not mixing properly. So the stuff being pumped underground to crack the rock was too watery, not as gel-like as it should be.

Steinsberger noticed something else, though. Despite the mistake in mixing the fracking fluid, the well was producing a respectable amount of gas. Over a beer at a baseball game a few weeks later he mentioned it to a friend from a rival company who said they had had good results with watery fracks elsewhere. Steinsberger attempted to persuade his bosses to try removing nearly all the chemicals from the fluid and using mostly water. They thought he was mad since everybody knew that, while water might open cracks in sandstone, in clay-containing shale it would seal them shut as the clay swelled.

Steinsberger was stubborn enough to persist, and got his way by pointing out how cheap water is. He could save more than $200,000 per well by leaving out the gels and about 95 per cent of the chemicals. “The idea was crazy at the time. He had guts, no one else would have even thought of doing it,” said a colleague. Three wells were fracked with “slick water” in May 1997. The results were only mediocre at first, but gradually the recipe got better and better and once the new watery mixture was combined with horizontal drilling and “multi-stage” fracks, astonishing quantities of gas began to pour out of the shale.

The world energy scene was transformed. In America, gas is superabundant and getting cheaper; it’s not running out any time soon; it’s taking market share from coal, thus cutting carbon dioxide emissions; chemical and manufacturing industries are “re-shoring” from overseas at a breakneck pace; Russia and Iran are no longer able to push up gas prices; the same technology applied to oil is reducing America’s thirst for oil imports, possibly to zero within ten years. A few years ago I could not interest editors in shale gas: now it’s all the rage.

The Frackers documents the bloody-minded stubbornness that made all this possible. Steinsberger’s refusal to accept conventional wisdom was one of many such stories. His boss George Mitchell tried for years and years, in the teeth of often fierce opposition from his own board, to prove that he could get gas out of shale in Texas. A similarly stubborn self-made Oklahoman named Harold Hamm did the same for oil from shale in North Dakota, once again having to stick to his guns for years before the breakthrough came.

At the other end of the social scale, an aristocratic Lebanese immigrant named Charif Souki, bored of starting fashionable restaurants and aware that American gas was running out, set out to raise billions to build a terminal to import liquefied gas from the Middle East. When shale gas came along, he then abruptly about-turned to spend billions switching the facility into an export terminal. Though not directly about fracking, Souki’s tale is about its far-reaching implications.

This is a story of innovation as perspiration. There are few Eureka moments, just lots of incremental steps. The people who created the shale gas revolution, and their gutsy backers in the financial markets, sank billions of dollars into often fruitless gambles over long periods before eventually reaping rich rewards. It is a reminder that innovation is neither easy nor cheap nor inevitable. To do what these wild-catters did against the background of expensive and hyper-cautious regulation, as envisaged here in Europe, would have been utterly impossible.

Yet we in Europe can now benefit from their efforts. They reduced the use of chemicals by 95 per cent to very low levels; they proved that significant earthquakes or the contamination of aquifers by fracking are both almost impossible; that methane leakage is no worse than in conventional gas drilling; that the time and cost spent in fracking a well can be greatly reduced with experience. We can come in, in other words, when others have shown how effective, safe and affordable slick-water fracking in shale is. And we in Britain have thicker, richer shales than perhaps anybody else in the world.

Gregory Zuckerman tells the story of the shale revolution well. He has an eye for detail and a flair for narrative that makes it highly readable. He is a financial reporter by trade, so the book focuses more on the financing of the gas industry than I would have liked and less on the geology and technology. His geological weakness is illustrated by a line where he implies that coal is derived from marine life, rather than from terrestrial forests.

And at the end of the book, there is a sudden and rather hurried account of the environmental opposition to shale gas that, in attempting to show “balance”, gives the protesters far too much credit. He fails to challenge many of the myths they have promulgated about water contamination, gas leakage and other problems. It is as if he came back to New York from Texas and Oklahoma to be told by a green-tinged editor in a restaurant (air-conditioned with electricity made from gas) to please put in some anti-fracking stuff so she could stay socially acceptable at (gas-cooked) dinner parties in (gas-warmed) duplex apartments on the (gas-lit) Upper East Side.

We are living through a disruptive innovation as far-reaching as the steam engine or the discovery of petroleum. It deserves a detailed chronicle of who made it possible and how, with all the twists and turns along the way. Zuckerman’s book, despite some minor flaws, is an excellent first draft of the history of shale.

Matt Ridley, a member of the British House of Lords, an acclaimed author who blogs at www.rationaloptimist.com. This article was first published in The Times.

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