Will Fracking be the next Fischer-Tropsch?

Rigzone has posted an interesting article on the US drilling industry’s reaction to the drop in crude oil prices: US Drillers Scrambling To Thwart OPEC Threat

Exxon says it has cut the time it takes to drill a well in North Dakota’s Bakken formation by one-third over the past four years. It has also cut by half the cost of fracturing the rock and preparing the well for production. Exxon will run 13 rigs in the Bakken this year, the same number it did last year, despite the low prices.

Companies will save money in the coming months because service companies, rig operators and other suppliers to the industry will lower rates to keep business. Oil companies have been telling investors in recent weeks they expect to see cost reductions of 10 percent to 40 percent, depending on location and type of service.

Drillers are also focusing on the wells in the parts of formations that they know to be the most prolific, and cutting back drilling in places where they aren’t quite sure what’s below. That reduces overall spending without dramatically decreasing production.

U.S. shale drillers will never push costs as low as OPEC countries. But the U.S. industry may be able to survive — or even thrive — if drillers can learn to quickly adapt.

The conventional wisdom in the energy depletion punditry seems to be that hydraulic fracturing is doomed unless Brent and WTI prices push back to $75 per barrel, or more. But the ‘OPEC threat’ tenor of the Rigzone piece reminded me of the oil-stranded Third Reich’s efforts to produce gasoline from coal – despite the costs – during World War II.

I am wondering if a serious enough Middle East war might increase the WTI price enough to make fracking financially feasible – if only for a few more years. Because with the Ukrainian situation, ISIL, and Netanyahu’s right-wing swerve, a serious proxy war in the Middle East is looking more and more possible.


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