Shale oil is the most significant development in the energy industry ever since coal was replaced by oil as the principal fuel. The noteworthy rise of shale oil extraction over the last few years has taken the market by surprise. The combination of drilling techniques together with developed hydraulic fracturing and the rebound of oil prices have made large volumes of shale oil production possible.
Despite important innovations in green energies in recent years, fossil fuels like petroleum, natural gas, and coal represent the majority of the world's energy. Over the past decades, the nuclear and hydropower sources have augmented their contribution to producing energy. Going ahead, the extraction of shale oil is anticipated to keep on rising however it will be directly dependent on the cash in-flow to finance the investments in the new wells.
Since energy is the foremost necessary foundations of the modern economy together with the moderating global oil demand, there is a relative stability on high demands in the future.
Due to the innovations created throughout varied stages of oil and gas energy, the shale oil and different nonconventional reservoirs have become more economical. The investors who lost patience due to the lacklustre return of shale companies are getting hopeful since productivity increased for the same investment.
Last Friday (27 July 2018), BP unveiled a US$10.5 Billion deal to acquire 100% Petrohawk Energy Corporation, the BHP subsidiary that holds interests in the Eagle Ford, Haynesville and Permian basin shale assets. This new investment will probably ensure continued cash flow and higher yield, especially in the Permian Basin.
The changes in shale oil production and exploration will increase the energy security of the markets; however, it brings a complex set of challenges at global and local levels. The self-sufficiency ratio is projected to decrease significantly with energy import dependency. This might entail a reduction of oil trade.
Environmental and occupational hazards:
Utilization of a large amount of water and toxic chemicals used in the hydraulic process may not only become the cause of contamination but also a source of threat to drinking water.
The massive use of chemicals, associated emissions, and truck traffic have a considerable impact on the environment, biodiversity, and ecosystems.
A number of social, cultural and economic consequences for the local communities arise from the different factors like landscape impacts, high volume of truck traffic, and the consequences of an influx of new workforces into an area.
A lot of challenges are involved to operating companies pertaining to the scale and multiple operators and contractors working in a single area raising issues for coordination and the anticipation and management of risks, including accidents and occupational health hazards.
Water supplies might be polluted if the fracturing fluid contacts fresh groundwater supplies. The fracturing fluid contains many chemical additives including hydrochloric acid, heavy metals, and radioactive chemicals, which are all extremely toxic to living organisms.
Although the oil and gas industry has adopted the techniques to determine and evaluate risks and opportunities for conventional resources, there is no clear framework to characterize these unconventional methods. But many companies have put huge resources towards new methods and to better the quality.
In a country with weak governance and poor contractor management, the major concern is to provide effective oversight for considering all complex potential impacts.
Why is shale oil important?
The development and potential of shale oil and gas and the accessibility to huge resources in the world will have considerable political and economic changes as well and this might be bringing independence and affordability in the long term.
Nearly every major petroleum company has put together a shale department staffed by geologists and engineers. The energy crisis is expanding and has become a key issue due to the increased gap in demand and supply and this could be met by a sustainable development of shale resources.
Something interesting to share?
Join NrgEdge and create your own NrgBuzz today
This winter, natural gas prices have been at their lowest levels in decades. On Monday, February 10, the near-month natural gas futures price at the New York Mercantile Exchange (NYMEX) closed at $1.77 per million British thermal units (MMBtu). This price was the lowest February closing price for the near-month contract since at least 2001, in real terms, and the lowest near-month futures price in any month since March 8, 2016, according to Bloomberg, L.P. and FRED data.
In addition, according to Natural Gas Intelligence data, the daily spot price at the Henry Hub national benchmark was $1.81/MMBtu on February 10, 2020, the lowest price in real terms since March 9, 2016. Henry Hub spot prices have ranged between $1.81/MMBtu and $2.84/MMBtu this winter heating season (since November 1, 2019), generally because relatively warm winter weather has reduced demand for natural gas for heating. Natural gas production growth has outpaced demand growth, reducing the need to withdraw natural gas from underground storage.
Dry natural gas production in January 2020 averaged about 95.0 billion cubic feet per day (Bcf/d), according to IHS Markit data. IHS Markit also estimates that in January 2020 the United States saw the third-highest monthly U.S. natural gas production on record, down slightly from the previous two months.
IHS Markit estimates that U.S. natural gas consumption by residential, commercial, industrial, and electric power sectors averaged 96 Bcf/d for January, which was about 4.4 Bcf/d less than the average for January 2019, largely because of decreases in residential and commercial consumption as a result of warmer temperatures.
However, IHS Markit estimates that overall consumption of natural gas (including feed gas to liquefied natural gas (LNG) export facilities, pipeline fuel losses, and net exports by pipeline to Mexico) averaged about 117.5 Bcf/d in January 2020, an increase of about 0.2 Bcf/d from last year. This overall increase is largely a result of an almost doubling of LNG feed gas to about 8.5 Bcf/d.
Because supply growth has outpaced demand growth, less natural gas has been withdrawn from storage withdrawals this winter. Despite starting the 2019–20 heating season with the third-lowest level of natural gas inventory since 2009, by January 17, 2020, working natural gas inventories reached relatively high levels for mid-winter. The U.S. Energy Information Administration’s (EIA) data on natural gas inventories for the Lower 48 states as of February 7, 2020, reflect a 215 Bcf surplus to the five-year average. In EIA’s latest short-term forecast, more natural gas remains in storage levels than the previous five-year average through the remainder of the winter.
According to the National Oceanic and Atmospheric Administration (NOAA), January 2020 was the fifth-warmest in its 126-year climate record. Heating degree days (HDDs), a temperature-based metric for heating demand, have been relatively low this winter, which is consistent with a warmer winter. During some weeks in late December and early January, the United States saw 25% to 30% fewer HDDs than the 30-year average. This winter, through February 8, residential natural gas customers in the United States have seen 11% fewer HDDs than the 30-year average.
Source: U.S. Energy Information Administration, based on National Oceanic and Atmospheric Administration Climate Prediction Center data
Headline crude prices for the week beginning 10 February 2020 – Brent: US$53/b; WTI: US$49/b
Headlines of the week
Global liquid fuels
Electricity, coal, renewables, and emissions