According to the numbers released at “The World Gas Conference” held in Buenos Aires, recent advances in shale oil extraction technology have manifested from wishful dream to physical reality much quicker than even the most positive optimists could have possibly imagined. These surprising advances in unconventional gas extraction have opened up 3 trillion barrels of shale oil, which can be cheaply converted to natural gas. This extraction has been enabled by a new form of three-dimensional seismic imaging that allows engineers to find the right spots to use hydraulic fracturing (or fracking), thus freeing up "tight gas" by smashing energy rich shale rocks.
This is good news. According to British Petroleum’s Chief Executive, Tony Hayward, the latest calculations show that natural gas reserves around the world have risen to the point where they equate the same amount of energy derived by burning 1.2 trillion barrels of oil, which is the amount of energy needed to fuel our needs for approximately 60 years into the future. The US Energy Department is now stating that it fully expects shale oil to efficiently meet 50% of US gas demand within the next 20 years. Projections from Texas A&M University state that the United States' latest processing methods could increase global gas reserves by 900% to an impressive 16,000 TCF (trillion cubic feet). Geopolitically, this new access to natural gas can potentially free the US from its dependence on the Middle East and Europe from its dependence on Russia.
One aspect of this new extraction method that is of rising significance is the role of water. Exxon Mobile's recent $31B acquisition of XTO Energy was a big endorsement of unconventional natural gas production in North America. XTO Energy is the nation's second-largest gas producer. By buying XTO, Exxon is increasing its natural gas reserves by 45 trillion cubic feet. And, as Exxon's Chairman/CEO Rex Tillerson said, “This is not a near-term decision; this is about the next 10, 20, 30 years,” underscoring the long-term implications of the new process. John H. Pinkerton, chairman and chief executive of Range Resources, called the acquisition "a paradigm shift for our sector."
There is one notable clause in the acquisition agreement. Exxon reserves the right to back out of the transaction if Congress makes fracking "commercially impracticable." This clause underscores the rising fear about fracking's effect on water reserves. Some argue the chemicals used in the fracking process can flow to aquifers and contaminate drinking water. There are increasingly strong grassroots movements actively lobbying against fracking. A good example of this movement is a new documentary called Gasland that premieres at Sundance Film Festival next month. A trailer on the film's website (www.waterunderattack.com) shows residents lighting their tap water on fire because it has become so toxic from fracking.
But contamination is not the only issue with fracking. Fracking as a process is very water intensive. It is not enough just to have shale reserves. One must also have access to water. This significantly constrains the application of the fracking process in some places, though geopolitically this is actually good for the US. As the following map shows, many countries unfriendly to the US have significant water problems, which will hinder their use of unconventional gas extraction.
The US is one of the few places with substantial shale reserves that has a relative abundance of water. Take China for example, China has an abundance of shale reserves which it can't access because of a shortage of water. Half of China's 617 largest cities face water deficits. Chinese experts warn that by 2030 when China's population reaches 1.6 billion, per capita water resources will drop to 1,760 cubic meters -- perilously close to 1,700 cu m, the internationally recognized benchmark for water shortages. Li Rui, head of the Soil Conservation Institute of the Chinese Academy of Sciences (CAS), said China's water consumption will peak by 2030 and if no effective measures are taken, the country is likely to suffer a serious water crisis in the future.
Personally, I think fracking is too powerful a tool to give up. Fracking is a great geopolitical advantage over China and Russia. Furthermore, there hasn't been any substantial scientific evidence showing that fracking contaminates drinking water. Alexander Grannis, the Commissioner of the New York State Department of Environmental Conservation, said, "It is important to understand that the hydraulic fracturing takes places many thousands of feet underground, well below any groundwater zones." The fact that there is bad drinking water in some places where there is fracking does not prove causation.
That being said, it is necessary to emphasize the importance of water conservation. Water supplies in the US are decreasing while usage is increasing. The GAO estimates many states will experience water shortages over the next decade:
We should not stop fracking. However, we should take steps to increase water conservation, especially in the Western United States. As World Bank vice president Ismail Serageldin observed in 1995, "If the wars of this century were fought over oil, the wars of the next century will be fought over water."
