All About Shale Oil and Gas

What source represents upwards of 25% of the energy mix in America? You would be right if you said shale oil and gas.

Around the world in shale

Located in places around the world, sources of shale oil and gas in the United States include Marcellus shale in northeastern states from New York through Pennsylvania, Ohio, West Virginia, even into Maryland, western parts of Virginia, and New Jersey. Shale occurs also in the Green River Formation, covering large expanses of Colorado, Utah and Wyoming.

And--good news from the rocks--most of the world over is awash in shale oil and gas.

U.S. reserves and consumption

Estimated U.S. oil shale reserves total 1.5 trillion barrels of oil. Not only is this a huge amount, it is thought to be five times Saudi Arabia's declared reserves.

Today, the United States consumes about 22 Tcf (trillion cubic feet) of natural gas per year. We hold reserves of approximately 2,000 Tcf, including the "unconventional" sources of gas coming from shale. At current rates of consumption, this is a 92-year supply.

Production

Shale deposits tend to lie under the earth down 1,000 feet or more. The shale needs to be crushed in situ--in the place where it is--to release the oil and gas embedded in the rock. It is understandable that bringing the shale to the surface for extraction would be too costly, with the added problem of what to do with the spent rock.

Two technologies enable the production of oil and gas from in-situ rocks: horizontal drilling and fracking. It's this hydraulic fracturing, or underground cracking of rocks for extracting embedded oil and gas, that has environmentalists up in arms.

Proprietary mix

To extract oil and gas from the pores of crushed rock so far down, a mix of fluids consisting of water and proprietary chemicals is injected into the formation at high temperature and pressure. If this sounds like squeezing liquid from a rock, it is. It's even harder than it sounds!

All kinds of unsubstantiated fears arise, including the fracking chemicals polluting water supplies and the process causing earthquakes. While they are just that--unsubstantiated fears--environmentalists trump up charges in opposition to any energy-production methods. In this case, water-bearing layers exist much closer to the surface than the thousand feet where the shale is. Also, of the earthquakes that occur in the U.S., no location has been associated with fracking operations.

While no energy production methods come without risk, environmentalists have slowed the development of shale oil and gas. They have prevented the utilization of U.S. resources and demanded alternative technologies before this one had much chance to begin. At the very least, they demand identification and disclosure of the fracking chemicals, thereby publicizing the substances that give trade-secret advantage to the producing companies.

Too big to ignore

But this is one instance where the abundance of the shale oil and gas resource is so vast and the current price of conventional crude oil supply (about $92 per barrel at this writing) is so high that oil companies and innovators alike seek ways to produce the shale resource economically.

Chevron staked a claim in Marcellus shale. Other integrated oil companies have make inroads in the Colorado play, but that resource basis awaits development in earnest.

Environment v. energy

We'll see how the battle between environment and energy plays out. The two need not be mutually exclusive. Shale oil and gas has the potential to put the U.S. back on the energy map with increasing independence from foreign sources...if sniveling public opinion and environmentalism at any cost don't get in the way.

Suffice it to say that shale oil and gas resources are huge, but exploiting them will be challenging.

Sources: embedded in the text.