Shale gas burned off to keep prices high

This picture, taken by Jim Wilson for the New York Times and published on September 3, 2011, shows a ground flare at a pad in Belfield, North Dakota.

The shale gas industry in America is running into trouble. US financial journalist Wolf Richter, writing in Business Insider at the year’s end, pointed out that production at any new fracking well ‘falls off a cliff from day one.’ After the gush of initial release, production levels out at roughly a mere 10% of the first flow. So in order to keep the income statements looking in any way feasible, companies are forced to keep drilling new wells to compensate for the dwindling productivity of existing ones.

This constant expansion threatens a gas-glut that will cause lower prices, and the big financial guns are not happy about it. Rex Tillerson, CEO of the giant oil company, Exxon, complained last autumn that the US natural gas glut was dramatically decreasing profits. Putting it even more bluntly at a meeting of the Council on Foreign Relations, he told them, ‘We’re making no money. It’s all in the red.’

The New York Times website carries a torrent of correspondence from experts in the field who offer evidence that fracking is a doomed short-term chase for easy profit. A sorry tale is emerging of hit-and-miss geological exploration and dangerous methodology. Nuclear explosive was used in one underground search, and the ‘slick water’ used to force the underground strata apart is a cocktail that contains hydrochloric acid. However, those at the top are not concerned about the environmental effect. It’s the financial double-bind that may in the long run put paid – or unpaid – to the fracking industry.

Right now, the only way for the frackers to stay in the black is to limit the public supply of shale gas so as to keep the price high. About 30% of the natural gas produced in North Dakota is burned as waste. It is a perfectly viable fuel, but the energy companies would rather see it go up in smoke than be sold at a low profit.

Shale oil and shale gas are two different things, but the breaking of underground seams in search of oil can often release near-by reserves of natural gas that are stored underground. Both the gas and the oil are regarded by the British Government as a great golden egg that will solve all energy problems. People in Lancashire have already felt earth tremors caused by exploratory drilling for shale oil and/or gas, but their fears are ignored. Perhaps the instability of fracking as a financial prospect may carry more weight.