Project Management Institute

Back to Frack?

The Boon of Hydraulic Fracturing Projects in Certain Regions Might be Short-Lived

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Cuadrilla's Preese Hall site, Lancashire, England

PHOTO COURTESY OF CUADRILLA

Fracking is having another moment. While public outcry against hydraulic fracturing, or fracking, has remained strong, organizations continue to launch projects.

Hydraulic fracturing

is the process of drilling deep wells that fracture shale rock. Machines then inject a mixture of water, sand and chemicals to force oil deposits to the surface.

Largely because of fracking, oil production in the United States is expected to increase nearly 30 percent by 2023. Fracking will also position the country to overtake Russia as the largest oil producer in the world this year, according to the International Energy Agency. While the U.S. is the global fracking leader, organizations in other countries are pushing forth their own initiatives. In October, fracking resumed in the United Kingdom for the first time in seven years, as Cuadrilla launched a pilot project in Lancashire, England. In September 2017, BP began production at its US$16 billion fracking project in the Khazzan gas field in Oman. It includes around 200 wells targeting gas up to 5 kilometers (3.1 miles) below the earth's surface.

Innovation is helping drive new fracking projects, says Carl Larry, market commodity specialist with Refinitiv, a financial data and service company, Houston, Texas, USA. For example, in the past, project teams made educated guesses about where deposits would be, which meant less than half of drilled wells would deliver results. “Now there is a lot more accuracy,” he says. By using regional surveys, past performance and geographic data, organizations have improved their ability to validate the existence of resources before breaking ground. This lowers the time, cost and risk on these projects, and ensures a more predictable return, he says.

Companies have also developed new technology to tap multiple shale layers at a time. The process extends existing wells in multiple directions, allowing companies to “refrack” existing wells and draw more oil in a single drilling effort, Mr. Larry says. “It's making these projects more efficient.”

In Texas last year, Concho Resources implemented this approach with 10 wells that dive underground and also spread roughly 2 miles (3.2 kilometers) horizontally. “We have just started to get into the manufacturing and harvest mode of the shale revolution,” Concho Resources CEO Tim Leach told Bloomberg.

Dry Run

Environmental concerns haven't dissipated—and public stakeholder backlash is still affecting where and when projects move forward. Fracking can cause a serious strain on water supplies, and oil companies are secretive about the chemicals they inject into the ground. Wells have also been linked to tremors and water pollution.

Largely because of fracking, oil production in the United States is expected to increase nearly 30% by 2023.

The Cuadrilla project has already run into trouble. The company has had to stop fracking four times for breaching the current tremor magnitude limit of 0.5. A total of 36 tremors have been recorded since the fracking project started. Cuadrilla is working to lobby for looser standards while also developing new methods to avoid future tremors.

The fracking boom is unlikely to be widely replicated outside of North America, according to a 2018 United Nations report. In the Middle East, traditional methods are still producing enough oil to curb fracking's appeal. In Europe, regulations and limited access to reserves in highly populated regions make these projects harder to deliver. Even Argentina, which was once thought to be the next fracking hot spot, has fallen short of production expectations. The country holds some of the largest shale reserves in the world, but public opposition over environmental concerns has stalled progress. Last April, the province of Entre Ríos banned fracking, and many other municipalities have implemented similar laws.

Concerns exist in the United States, too, as reserves may be depleting at a higher rate than once expected. “Companies are starting to see the limits,” Mr. Larry says. As oil prices trend down, he predicts companies may put off new drilling efforts in New Mexico, Oklahoma and Wyoming. “The better we get at delivering these projects, the less impact they will have,” he says. “Until the industry finds a better way to access this oil, the No. 1 solution is to achieve more with less.”—Sarah Fister Gale

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—Carl Larry, Refinitiv, Houston, Texas, USA

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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