The Shale Revolution is one of the biggest economic, environmental and geostrategic events of the last two decades. Shale oil and gas have changed the energy map of the United States and hence, the world. If you, like me, are not aware of the extent of change it has brought, this short article is for you. The article draws a lot from the excellent first section of “The New Map” by Daniel Yergin.
The shale revolution was launched by two technological breakthroughs. These breakthroughs allowed the United States to solve a big problem faced by its Oil and Natural Gas Industry. Oil and Natural Gas are formed when dead organisms are subjected to pressure. The organic matter is pressed in dense rock for millions of years. The oil and gas that gets ‘cooked’ in this dense rock, then migrates to reservoirs from where it is profitably extracted. It was generally believed that there was no way to extract the Oil and Natural Gas trapped in the rock itself. Innovations in two technologies changed this for natural gas.
Hydraulic Fracking (commonly fracking) involves injecting a cocktail of water, sand, gel and some chemicals under high pressure into rocks that breaks open the small pores so that the gas is released. The technique has been around for conventional oil wells since 1940 but it had never been used to recover gas from shale. In 1998, it was successfully used for shale gas. The other crucial technology in the shale revolution was horizontal drilling. Advances in measurement, directional drilling, seismic analysis, etc. allowed horizontal drilling to be carried out for much longer distances than before. In just a few years, these techniques were applied to Oil drilling too. Together they changed the energy landscape of the US.
By 2019, the estimates for recoverable NG in the US had become thrice the estimate in 2002. Companies that used to think in terms of billion cubic feet (bcf) of gas started thinking in terms of trillion cubic feet (tcf). From a position where it was contemplating LNG imports, the US became an exporter. The change in crude oil was no less dramatic. By 2014, the state of Texas was producing more oil than any OPEC country except Saudi Arabia and Iraq. One area — Spraberry and Wolfcamp — was deemed to be the second largest oil field in the world behind Ghawar, the supergiant Saudi field. The net US oil imports came down from 60% in 2008 to 3% in 2019.
Shale Natural Gas changed the electricity sector in the US. In the 1990s before shale, Natural Gas accounted for less than 22% of electricity generation in the US. As late as 2007, coal generated nearly half of US electricity. By 2021, coal was down to 19% and Natural Gas was up to 39% as this chart from Statista shows.
Note that NG based power plants also helped increase the share of intermittent renewable sources — wind and solar — from 8% to 23% over the same period. This is because gas turbines are best suited to compensate for the abrupt increase and decrease in generation from solar and wind.
The prices of energy fell and the cheap energy led to many new manufacturing plants. Also, abundance of gas meant cheap feedstock for chemical industries in addition to cheap energy. Investors from China, Germany and Taiwan, amongst others, have invested in petrochemicals, fertilizers and plastic manufacturing plants in the US. Yerrgin says that by 2019, unconventional energy was supporting 2.4 Million jobs. Did the benefit in trade and manufacturing come at environmental costs? The Shale Revolution has had both positive and negative impacts.
NG fired power plants have led to a decrease in share of coal fired power plants both directly and indirectly. This has reduced pollution as NG burns much cleaner than coal. These changes were also responsible for the reduction of the US’s CarbonDioxide emission. They are now down to 1990 levels. However, fracking can pollute groundwater and also cause Earthquakes. I must note here that Yergin believes that the chances of groundwater pollution from fracking are low because fracking happens at altitudes much lower than groundwater aquifers and that technological advancements have reduced the probability of Earthquakes.
Energy is tightly intertwined with global politics. Many major conflicts in the world are about energy. The shale revolution changed the US’s strategic position. The US became self-sufficient in energy. It is now one of the two powerful countries that are almost self-sufficient in food and energy. This is important as in any crisis, food and fuel are the two most important and urgent things needed by a society. Self sufficiency in food and energy is sure to have an impact on US’s thinking. The US may still intervene in world conflicts to maintain its dominance and to help its allies, but its motivation for such interventions has reduced.
Shale revolution reduced US’s imports, allowed it to phase out coal and has significantly reduced the country’s dependence on the rest of the world. It is truly one of the significant events of the twenty-first century.
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