Monday, December 03, 2012

Fracking in the USA

Good article in today's WSJ on why the US shale energy boom may not be so easy to replicate in other parts of the globe. Global Gas Push Stalls:

The shale revolution began in the late 1990s when the first modern shale well was drilled a few miles north of Fort Worth, Texas. The technology was pioneered by small, independent companies willing to take enormous financial risks, and helped along by landowners who owned their mineral rights and were ready to sell for a share of the profits. Wall Street eagerly financed shale exploration efforts. The industry also benefited from a large existing pipeline network and ample number of drilling rigs.

This combination doesn't exist elsewhere in the world. "The mineral rights, the availability of small players to enter the market, the availability of geological data, these things are all part of an entrepreneurial model that is unique to the United States," says Julio Friedmann, the chief energy technologist at Lawrence Livermore National Laboratory in California.

A key, but often overlooked, ingredient to the success of shale development in the U.S. is private ownership of much of the underground gas. That means that environmental concerns about drilling are countered by a built-in constituency of landowners looking to profit.

It is a "marvelously elegant system that ensures that all natural resources are fully developed," says Rex Tillerson, chief executive of Exxon Mobil, which produces more gas in North American than any other company. Outside the U.S., mineral rights are typically owned by governments, leaving locals with little reward for putting up with large-scale industrial drilling.

A marvelously elegant system indeed. Let's hope that it remains so.