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Why Fracking Is Here to Stay


Photo: politico.com

By THÉRÈSE MARGOLIS    

Napoleon Bonaparte once said that an army marches on its stomach.

Similarly, in today’s world, an economy advances on its energy supply.

And while oil and natural gas prices are down – and likely to remain down for a very long time, despite attempts by the OPEC fraternity to manipulate prices to the whims of Saudi Arabian sheiks as a global political tool – hydraulic fracturing, or fracking (a process that produces fractures in subsoil shale rock formations to stimulate the flow of natural gas or oil, thus increasing the volumes of hydrocarbons that can be recovered), is here to stay, whether the environmentalists like it or not.

On Monday, Feb. 4, Mexican President Andrés Manuel López Obrador (AMLO) made it clear in his daily early morning press conference that he was not a fracking fan.

“There will be no fracking in Mexico,” he said emphatically. “Fracking, in Mexico, never.”

But unless he can get a financially moribund Petróleos Mexicanos (Pemex) out of the red and making money, he may have to reconsider his definition of “never” before his six-year term is over.

To begin with, the United States – where modern-day fracking technology was first developed in the 1990s and where about 90 percent of the world’s current hydraulic fracturing fossil fuel extraction takes place – is desperately seeking energy autonomy, and while food security may have been the ultimate social and economic goal of nations during the 20th century, this centennial is all about energy security.

There is no denying that the shale boom has moved the United States closer to its energy independence goalpost, adding much-needed jobs, helping to revive manufacturing and lowering gas bills.

Most economic analysts project that the Land of the Red, White and Blue – which is, thanks to fracking, now the world’s largest oil and gas producer – will gain full energy independence by the year 2020.

As of 2017, the United States was already producing more than one million barrels of shale oil per day, and fracking now represents nearly 30 percent of Mexico’s northern neighbor’s total oil production and 40 percent of its gas output.

And while the rest of the world has been slow to follow in the United States’ fracking mania pursuit, countries like China (with the largest known shale gas reserves on Earth. estimated to be the equivalent of 212 billion barrels of oil) and Russia (with an estimated 75 billion barrels worth of shale gas) are now beginning to jump on the fracking bandwagon.

Argentina, Australia, Poland, Libya and Algeria – all with considerable shale energy reserves – are also eying the fracking energy bonanza.

The international shale commercialization race is already on.

Royal Dutch Shell recently teamed up with China National Petroleum Corp. to explore shale reserves in the province of Sichuan, which accounts for 40 percent of that nation’s unexploited hydrocarbon reserves.

And Argentina’s state-run oil corporation Yacimientos Petrolíferos Fiscales (YPF) has signed an agreement with Chevron to tap deposits in the South American country’s vast Vaca Muerta formation.

But, like Mexico, not every nation is enamored with the fracking genie.

France and Bulgaria, countries with the largest shale-gas reserves in Europe, have banned the practice.

And several U.S. states – including New York and Maryland – have also barred or at least placed a moratorium on fracking.

Still, a total of 21 U.S. states – from California to Texas, Michigan to West Virginia – currently employ this high-intensity form of hydrocarbon extraction, and five others may soon follow.

The truth is, fracking oil and gas extraction activity has lowered energy costs in the United States, as well as prices for a wide range of goods and services.

According to the independent consultancy and economic research firm HIS Global Insight, lowered energy costs as a result of fracking produced financial benefits to U.S. consumers to the tune of $1,200 in 2012, and by 2020, as many as 250,000 new jobs may be directly created due to the shale boom.

In North Dakota, where natural gas withdrawal tripled and crude oil production increased fivefold between 2007 and 2012, real per capita GDP skyrocketed by nearly 11 percent.

Moreover, the United States, which for decades had been a net importer of energy, has now become a net exporter, also thanks to fracking extraction.

In the end, it all comes done to money, and energy, which is the lifeblood of every modern economy.

There are still many well-founded concerns regarding hydraulic fracturing, not least of which are the practice’s potential to contaminate soil and freshwater aquifers, divert hydraulic resources from other uses and destabilize seismic cracks leading to earthquakes.

But fracking is big business, and it is raking in big profits.

At the end of the day, fracking is more economical than most alternative energy sources and much more reliable for investors.

In simple economic terms, with fracking, companies know exactly where the oil is, how to get at it and how much the process will cost.

As the University of Texas Energy Institute’s Michael Webber put it: “What makes more sense in this environment, drill a $100 million well in the deep water gulf that might come up empty, or poke lots of holes in west Texas, where you already know there’s oil, for a few million apiece?”

Fracking productivity is on the rise, and its production costs are declining at the same time as funding for developing new alternative energy sources is being slashed.

Sooner or later, the giant fracking bubble may burst.

But, in the meantime, the great fracking digathon will continue, and the controversial practice will inch ever closer to becoming a globally accepted form of energy production.

Thérèse Margolis can be reached at therese.margolis@gmail.com.

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Categories: energy, Environment, Latin America, Mexican politics, Mexico, Opinion, PoliticsTags: , , , , , , , , , ,

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