There's some data that indicates volumes drop off pretty dramatically over time at the individual well level. If this is true, then it requires perpetual investment of new capital in new wells just to maintain constant production volumes.
The public data isn't great because old wells are mixed in with new wells and so it's hard to see how production changes with the age of the well.
Here's an example from Bakken https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats...
You can see that in 2016 the total number of producing wells didn't change much, which probably means new wells weren't being drilled, so the data is mostly from older wells. Daily production per well drops quickly from month to month.
Then in 2017 and 2018 the growth rate in total wells more than doubles, and the production per well also increases, probably because new wells produce much more than existing wells.
If this is true, then it looks like the shale boom is sustained by heavy investment of fresh capital. When interest rates rise or credit dries up, the shale boom could quickly turn to bust.
I can say that:
First of all the picture is quite complex, and of course not all wells are the same.
Second - talking "in general" - the break-even oil price for shale oil wells has declined quite dramatically, from around $80-100 in 2014 to $40-50 today, with current wells costing less and producing more than wells of 4 years ago.
However, third: The improved economics are not primarily a result of technological advances. Rather, the lower well cost is largely due to lower rig rates and cheaper and more efficient labour. The lower rig rates are not sustainable in the long term, they are low only because it is better to have the rig working and earning at least a little money (not enough to justify buying a new one in the future) than rusting away in a yard. Labour productivity gain is partly explained by the fact that the only the most experienced and efficient crews are now working, and higher well productivity is partly due to only drilling the very best prospects. The quality of crews and prospects is a barrier to raising production further.
In summary, I believe the shale boom is an economic oddity. Whether it continues for any length of time depends on the oil prices. At the current prices, it is not sustainable.
Corollary: If the oil price is effectively set by the true cost of shale oil, we should expect that the price of oil will rise to $80-100/bbl in the medium term.
I’m trying to figure out whether the current situation is likely to grow prices relatively linearly or more suddenly - if technological improvements aren’t possible.
I don't think the ageing workforce is a huge problem, if that is what you are asking. The labour pool can smoothly absorb new entrants to replace the retirees.
The problem is that if a rapid expansion of workforce is needed - eg in response to increased demand for rigs if oil prices jump into the $80-100/bbl range - the quality of the labour pool will suffer, the productivity will decline and costs will increase.
Are the prices likely to grow suddenly? In some scenarios (eg effective OPEC action, ME conflicts) - certainly. More interesting is what ought to happen in a "business as usual" scenarios. I see it as a race between the decline in production from major "conventional" fields, the growth in energy demand esp from India, China and the "little tigers", and the transition to renewable energy and the "electric economy". My pick is that the speed of the transition to renewable energy will not be sufficient to compensate for the other two factors, and that we will see an increase in the oil prices to $80-100/bbl by 2020, which will enable new production to be brought on stream profitably.
- yes decline curves are fairly steep, requiring constant investment to maintain production (often referred to as the drilling wedge) see pg.20-21 
- However, almost all of a new well's cost is the drilling and completion costs on the front end vs the lease operating expense to produce oil/gas once the well is online
-IRRs are pretty high on individual wells (see. pg. 15 )
- since decline curves are so steep the pricing environment when the well comes online is tremendously important to well economics
> The once-powerful partnership between fracking companies and Wall Street is fraying as the industry struggles to attract investors after nearly a decade of losing money.
Is that inaccurate?
I'm guessing that fracking was profitable until oil prices crashed. So is the financial debate about if, when and how much oil prices will increase?
So I'd guess that the "decade of losing money" is due to poor economics of individual wells, where production dramatically falls over time.
That requires more and more capital for new wells just to maintain constant volumes.
If you only look at aggregates it can appear there's a boom, when in reality it's a bit of a shell game that only works as long as you're constantly drilling new wells.
True. But I think that fracking only became financially viable (or at least, plausibly so) when oil prices were at historic highs. Similarly for tar sands.
But there have also been subsidies, to help ensure adequate domestic production. For the oil and natural gas industries overall.
And this will be the go-to technology as traditional oil and gas reserves dwindle. At least for petrochemicals.
I discussed a few years ago this with my brother who's working in the oil industry. And he said that much, this type of well have much shorter lifespan than traditional oil well and new wells are required every few years. Of course it's just an anecdote from someone who's not even involved in that part of the industry, so take it with a grain of salt.
Perhaps the biggest hidden cost has no price tag, which is the damage to democracy in the form of bad precedent that occurs when a big corporation steamrolls local governments, gets itself declared as a public utility, and begins to eminent domain and wreck everything in sight, literally bulldozing through suburbs. These are homes and businesses a dozen feet from the line: [3,4,5,6]. This is not CNG, it's other more explosive fractions. It's a travesty of injustice.
What I wanted to emphasize was, (1) we never had that tradeoff discussion at any level of government or community; it was forced on us, (2) there was substantial undisclosed activity that investors are probably not aware of, and (3) the overall shitty behavior by the company will have many long term negative effects on how we do public works.
I am under the impression that this field has pretty well paid jobs. How is there a labor shortage in a mature industry with high pay?
One of them is that domestic oil and gas production was on the decline until the tech for horizontal drilling and fracking started the shale boom of the last 10-12 years. Combined with demographics (big boomer generation, small generation X, big millennial generation) this means you have to find and train all these millennials who probably had other plans. And then, I'm told, the highly cyclical dynamics of the industry make any kind of long-term investment difficult, so there's high overhead for a labor market that still relies on fax machines.
If you're macro-minded and you want policies that keep that labor price high so alternative energy becomes more attractive, something like the Green New Deal is probably a good bet.
The largest land owners in the Permian are now: Occidental, Exxon and Chevron. Ten years ago it was a very diverse ownership group of independent operators and speculators. The majors will keep buying until there are few small players left. Exxon doesn't need to go begging to Wall Street to give it a few hundred million dollars to finance more frack wells.
For example, the richest oil wildcatter in the US might soon be this man:
Royal Dutch Shell, Exxon and Chevron would love to acquire his 329,000 acres in the Midland Basin in the Permian. Estimate on the price tag: ~$10-$15 billion.
In mid 2017, Exxon bought 250,000 acres in the Permian from the Bass family for $5.6b to $6.6b.
Over the last four quarters, Exxon + Chevron have produced $40 billion in operating income. And that's with modest oil prices.
The fourth largest land owner in the Permian, is Apache, with 1.6 million acres (with ConocoPhillips in fifth). Apache's market cap is a mere $12b. It's obvious what's going to happen there. Exxon's market cap is $332b - they're just going to keep on acquiring the fracking industry (they used their well-valued shares - high for the energy industry - for the Bass deal). Companies the size of Exxon and Chevron can trivially afford to explore and prime wells in price downturns, then unleash them in upturns.
Not that your friend and family are wrong, I've just worked in extraction companies that were expanding and short on labor, then 12 months later were reviewing their options for bankruptcy. That isn't a great metric for corporate health.
US oil output is projected to rise to 16-18 million barrels per day over the next decade approximately, from 12.x million expected in 2019. At 16m barrels per day, the US will be producing 50% more oil than Saudi Arabia. To do that WTI oil merely needs to remain above roughly $50. At $70+ sustained oil, US production will add a million barrels per day per year.
On the flip side, sustained $30-$35 oil would be a catastrophe for OPEC and Russia. They'll cut and or restrain production expansion as necessary to keep oil over a minimum price. Saudi needs $65-$70+ oil to avoid epic budget shortfalls going forward. Russia needs it for spending to placate domestic popularity re Putin. They don't like giving up demand growth to the US, however for now they're not really net suffering a loss of output so much as ceding global growth to US shale. They'll keep doing that for quite a while yet, while hoping US output plateaus in the coming years.
The reason investment has died off even with the price of oil rising, I'm guessing (based on the book) is because of the slight increase in interest rates.
Personally, I'm not for an outright ban, but 100% public disclosure of the fracking chemicals used should be required at the very least
While I'd love for more people to embrace the urgency of climate change, using economic self-interest is just as good.
Humanity lucked out that solar and wind costs were driven down as rapidly as they were through manufacturing scale. We'd be screwed otherwise ("ie business as usual carbon output estimates").
Somewhat related but unrelated: it's not bad if fracking goes south. It'll drive the price of natural gas up, which will make existing nuclear and existing/new renewables more cost competitive. It'll also drive adoption of energy storage faster. We want natural gas prices to rise, since we're not going to internalize the CO2 emission cost through regulation. This allows for market forces to kick in that are beneficial to climate change mitigation.
Disclaimer: I have brokered one tax equity partnership arrangement for a solar plant rated @ >1MW (Indianapolis suburbs), and have done my research.
All the green energy we've added so far is only in addition to burning fossil fuels, it hasn't replaced any yet.
Humanity didn't luck out. The Chinese communists invested heavily in solar while the US was wasting money on fracking.
Solar is amazing, but isn’t the be all end all.
Mind you, some of these graphs are four years old. So we are really doing a lot better.
Heat pumps aren’t sufficient in the northeast without a substantial ($50k+) investment in a ground loop. Many homes require significant retrofit to even use one.
Guaranteed operating range (outdoor):
Heating: -28 to +21
Domestic hot water: -28 to +35
On page 108 you can find the actual co-efficient of performance (COP) for different outside temperatures and inside water heating temperatures.
As an example: at -10 and an water temperature for heating at 25 you still get a COP of 3+ (which are the average low temperatures in Maine). That means that 100% electricity moves 300% of heat into your house.
No, heat pumps (which take energy; duh) and "weatherizing" are not going to heat houses in Canada or Maine.
I’ve never lived in California.
Hot water is another huge use — it’s really expensive to use electricity for that purpose.
"Heat pump water heaters use electricity to move heat from one place to another instead of generating heat directly. Therefore, they can be two to three times more energy efficient than conventional electric resistance water heaters. To move the heat, heat pumps work like a refrigerator in reverse."
Yeah I just put one of those in, mostly because I didn't want to run a gas line. And feel a lot more competent running a 30amp circuit than cutting and sealing a hole in the roof.
Also friend in Florida says she has a heat pump with an air handler. It produces heat in the winter and cooling in the summer.
Not the end of the world.
They also called for a plan to retrofit existing housing.
Considering global warming, not natural gas or fuel oil.
At the same time the US spent a $1T on fracking. And a couple of $T on pointless wars.
Citation? I suspect this a grossly over stated figure.