The long speak: The wild fable of Americas energy revolution, and the cowboy who made and lost billions on shale
Between 2006 and 2015, the vitality world was turned upside-down by an epic developed as the oil industry few had foreseen. From the low-toned time, in 2006, when it imported 60% of its oil, the US became an oil powerhouse- eclipsing both Saudi Arabia and Russia- and following the adjournment of 2015, was the world’s largest producer of natural gas.
This remarkable transformation was come about by American entrepreneurs who figured out how to literally thrust open stones often more than a mile below “the earths surface”, to produce gas, and then oil. Those boulders- announced shale, generator rock or close-fisted rock, and once believe to be impermeable- were opened by combining two technologies: horizontal drilling, in which the drill bit can travel more than two miles horizontally, and hydraulic fracturing, in which fluid is spouted into the earth at a high enough pressure to crack open hydrocarbon-bearing boulders, while a so-called proppant, generally sand, props the rocks open a sliver of an inch so the hydrocarbons can flow. A fracking entrepreneur likens the process to creating hallways in an office building that has none- and then calling a volley drill.
In November 2017, US production topped the 10 m barrel-a-day record set in 1970, back in the last gasp of the famed lubricant thunder. This year, it is expected to reach almost 11 m barrels per day, according to the US Energy Information Administration. The Marcellus Shale, which pulls through northern Appalachia, could be the second-largest natural gas field in the nations of the world, according to geologists at Penn State. Shale gas now accounts for more than half of total US production, according to the EIA, up from almost nothing a decade ago.
The apparent new period of American vitality abundance has already had a profound impact around the world. Economies that were dependent on the high price of oil, from Russia to Saudi Arabia, have begun to struggle. The situation would have been impossible in the pre-2 014 world of $100 -a-barrel oil, and is playing out in strange and erratic ways.
Since the 1970 s, US chairmen from Gerald Ford to both Bushes emphasised the importance of” intensity independence”, although the country had in fact become more and more dependent, particularly on the Middle East. Under the Trump administration, the longstanding dream of America’s energy independence has taken a grander, more muscular turn. Secretary of the interior Ryan Zinke talks about opening more federal grounds, including national park, to drilling in order to ensure” energy dominance “.
” We’ve got underneath us more lubricant than anybody, and nobody known to until five years ago ,” Trump told the press aboard Air Force One in the summer of 2017.” And I want to use it. And I don’t want that taken away by the Paris accord. I don’t want them to say all of that property that the United District has under its feet, but that China doesn’t have and that other countries don’t have, we can’t employ .”
But the shale success narrative nearly became a disaster. While to date, most of the complaints about fracking have focused on environmental concerns, there’s a bigger and far less well known reason to doubt the most breathless predictions about America’s future as an oil and gas giant. The fracking of lubricant, including with regard to, remains on a financial foundation that is far less secure than most people realise.
Because so few fracking fellowships actually make money, the most vital ingredient in fracking isn’t compounds, but capital, with corporations relying on Wall Street’s willingness to fund them. If it weren’t for historically low-spirited interest rates, it’s not clear there would even have been a fracking boom at all.
‘You can make an argument that the Federal Reserve is entirely responsible for the fracking boom ,” one private-equity titan “ve been told”. That look is resembled by Amir Azar, a fellow at Columbia University’s Center on Global Energy Policy.” The real catalyst of the shale revolution was the 2008 financial crisis and the age of unprecedentedly low-pitched interest rates it heralded in ,” he wrote in a recent report. Another investor put it this method:” If companies were forced to live within the cash flow they produce, US oil would not be a factor in the rest of the world, and would have grown at a part to half the rate that it has .”
Worries about the financial fragility of the fracking revolution have simmered for some time. John Hempton, who runs the Australia-based hedge fund Bronte Capital, echoes having debates with his partner as the boom was just getting travelling.” The oil and gas are real ,” his partner would say. “Yes,” Hempton would respond,” but the economics don’t work .”
Thus far, the fracking industry has been more resilient than anyone would have dreamed. But questions about the sustainability of the thunder are no longer limited to a small set of skeptics. Those mistrusts now extend to the boardrooms of some big investors, as well as to the executive suites of at least a few of the fracking firms themselves. The fracking boom has been fuelled largely by overheated investment capital , not by cash flow.
If the story of the fracking boom has a central character, it’s Aubrey McClendon, the founder of Chesapeake Energy, a startup that turn into a colossus. For a brief moment in biography, he most represented US fracking to the world. No one was more right and more incorrect , no one bolder in his prophecies or most spectacular in his outages , no one more willing to risk other people’s coin and his own, than McClendon; or, as one banker who knew McClendon well applied it:” The world-wide moves when people who like danger take action .”
” He was the good face of the industry- the passion, the imagination, the boldnes ,” another former investment banker told me.” But he was also the bad face .” And that duality constructs him a perfect epitome of the US fracking revolution.