North Sea oil prices will boom as fracking faces three insurmountable barriers

160324104559-fracking-oil-drill-780x439

(c) cnn.com

Currently, massive supplies of shale oil from the USA are holding back a boom in prices for North Sea crude though the latter is nevertheless recovering to around $50 per barrel. However, the shale oil boom cannot last, for three reasons.

First, the supplies are actually quite limited:

Shale’s best days are coming to an end. U.S. shale oil production, which reshaped the global energy equation, will begin to wane in less than a decade as reserves are drawn down and well output decreases, the [US] Energy Department reported.’

http://www.houstonchronicle.com/business/article/Shale-s-best-days-are-coming-to-an-end-10942307.php

Second, fracking requires vast quantities of ‘frac sand’ to be pumped along with other materials into wells to break up shale rock and produce oil. Fracking needs a small uniform round form of sand that is not common, is rarely found anywhere near the oil basins, and it’s running out fast. Already, costs are climbing to levels that could easily send fracking from boom to bust even before the oil runs out:

‘I think people are looking at the potential demand numbers, and, for the first time, people are scared that there will not be enough sand to meet the demand…… The increased demand will push sand prices up by 60 percent, hitting the $40 per ton range over the next 18 months…..the real concern is the logistical challenges that come with moving high volumes of sand. Some producers are using a unit train – roughly 75 or more rail cars in a line – on each well…that presents some significant logistical challenges that could hamper production.’

http://www.businessinsider.com/morgan-stanley-forecasts-sand-demand-growth-2014-9?IR=T

Third, fracking kills workers and people living near the pipelines or wells. See this most recent example:
‘Two months after a Colorado home exploded near an Anadarko Petroleum Corp. well, the reverberations are still rattling the oil industry, driving down driller shares and raising fears of a regulatory backlash. The April 17 blast, which killed two people and injured a third, was followed a month later by a second deadly explosion at an Anadarko oil tank in the state.

https://www.oilandgaspeople.com/news/14435/blast-backlash-hangs-over-drillers-as-fractivists-seek-limits/

Activists in the USA have failed to stop fracking on safety grounds but this will matter little as compensation and insurance costs rise driving prices up and investors away.

So, one way or another the glut produced by US shale oil cannot last and we can look forward to lucrative increases in the export value of North Sea oil as Asian demand soars and we increasingly power our own economy with renewable energy. See:

All of Scotland could have been renewables-powered in May

Advertisements

3 thoughts on “North Sea oil prices will boom as fracking faces three insurmountable barriers

  1. Contrary June 16, 2017 / 8:12 am

    The little bit of study I did into on-shore fracking made me conclude that safety concerns (and unknown consequences) would never be allayed by the UK government, and that it would not be as economically profitable in the UK as it was in the US – they already had on-shore drilling infrastructure & was a lot less costly set-up than it would be here. There are indications that the reserves in the UK are not great, either. (Or throughout Europe. I think it was Nigeria or one of the larger northern African countries that has potential worthwhile reserves).

    In effect, it is not worth it in the UK, or particularly Scotland – that still has oil off-shore! And off-shore infrastructure!

    In the US, it is the individual States that legislate on safety of the fracking, and they have wildly diverse policies, it is not surprising that some will have wrecked their own environment. Do you trust the UK government to put in the strictest legislation to control the fracking companies? I don’t. And there is unlikely to be much benefit to local communities except a one-off bribe – if it was good for locals, they wouldn’t need bribes. Goodness knows how much the politicians allowing it to happen are getting out of it.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s