Abstract
Technological progress has enabled the extraction of hydrocarbons trapped amid shales, resources unexplored until a few years ago. High energy prices, abundant reserves, a firm-friendly business environment and a de facto moratorium of environmental rules boosted the adoption of hydraulic fracturing in the US, causing a sea-change in the energy landscape within a few years. Nonetheless, the economic benefits accruing from shale fuel production must be weighed against their higher extraction, logistic and environmental costs. Moreover, the possibility of replicating the US experience on the same scale elsewhere is limited by technical and social hurdles and stricter environmental regulation.
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Notes
- 1.
The geophysicist Marion King Hubbert, who discovered the so-called “Hubbert curve” used to appraise oil production peaks, published one of the first works on this technique: Hubbert and Willis (1957).
- 2.
- 3.
This is true using the International Energy Agency (IEA) definition of oil supply, which includes biofuels. See “Definition of oil supply” in http://www.iea.org/oilmarketreport/glossary/.
- 4.
In 2011, for the first time in 60 years, net imports/exports of oil products were positive. EIA (2012), “U.S. petroleum product exports exceeded imports in 2011 for first time in over six decades”, http://www.eia.gov/todayinenergy/detail.cfm?id=5290.
- 5.
According to the IEA, European petrochemical companies may suffer competition from US companies, which pay even 3–4 times less for natural gas, IEA (2013).
- 6.
An analysis of US FDI between 2002 and 2012 reveals that inward flows of capitals grew at a rate substantially higher than in manufacturing industry, not only in the mining and refinery industries but also in other energy-intensive sectors such as petrochemicals and pharmaceuticals.
- 7.
The US does not levy taxes on many energy products employed by industrial users; by contrast, taxation is particularly high in the EU, especially in the Scandinavian countries, in UK and in Italy (see Finnish Energy Studies 2011 and the chapter by Harding et al. in this volume).
- 8.
EIA projections to 2030 indicate that gas-fired plants will generate around a quarter of electricity and the share of coal-fired production will be reduced by a few percentage points (to 37 % of the total). See http://tinyurl.com/jwu5z5d.
- 9.
The years of future consumption covered with proven reserves are even fewer (around 5 for oil and 12 for natural gas; see Fig. 1).
- 10.
Transport bottlenecks are one of the main reasons why the US crude quotes at a discount with respect to the other international benchmarks. Huffington Post and van der Hoeven (2013), 7th February 2013.
- 11.
There are various sources confirming the IEA estimations of break-even points. “‘U.S. Bakken’ requires $65–73 and the ‘Permian Basin’ is relatively high cost at $73–89.” quoted from “Oil sands are cost-competitive with U.S. crude sources”, Scotia report, February 2014; http://blogs.edmontonjournal.com/2014/02/21/oilsands-increasingly-cost-competitive-with-u-s-crude-sources-scotia-report/. “Our compilation of various cost data shows that to maintain current growth rates, the US shale industry is likely to have to spend close to $100 billion per annum, translating into a hefty oil price required to manage cash flows. While production itself can breakeven at around an average of $65 per barrel, adding in the various upfront capital costs makes the total variable cost far more expensive, taking breakevens well into the $80s for some shale plays. The changing regulatory environment is also adding to costs for some producers”, quoted from “Flooring it: shale oil and marginal cost” by Amrita Sen; https://www.energyaspects.com/publications/view/flooring-it-shale-oil-and-marginal-cost.
- 12.
See Fig. 9.10 IEA World Energy outlook (2008).
- 13.
- 14.
The concept of EROI harks back to the net energy analysis introduced in 1970 by White, Boulding and Odum and is based on the same principles of Life Cycle Analysis, in which the energy and environmental impact of each source or technology is evaluated throughout the chain of research, exploration, production and transportation (Hall 2011).
- 15.
SFs are more “expensive”—in terms of energy used—if their energy yield is evaluated at the wellhead, i.e. taking into account the greater energy required in the extraction process; in terms of refined products, they are nevertheless penalized by a lower calorific value, which requires a more complex conversion process.
- 16.
Production decline curve analysis predicts well performance and life on the basis of well production.
- 17.
The hydrocarbon recovery factor is defined as the ratio of the quantity of product extracted to the quantity originally contained in the bed under similar conditions. The recovery factor for SF basins is between 3 and 8 % in the most favourable cases, while for conventional oil it amounts to 30–35 %.
- 18.
In order to stimulate oil and gas production, unconventional field operators are increasingly repeating fracking on exploited wells (refracturing); in the Bakken Shale this procedure yielded a 30 % increase in estimated ultimate recovery (Jackson et al. 2014).
- 19.
“There is considerable uncertainty regarding the ultimate size of technically recoverable shale gas and shale oil resources”, (EIA 2011, p. 6).
- 20.
- 21.
IEA (2012b, p. 60).
- 22.
As a consequence of the low productivity and EROI, in order to sustain SF production a large number of wells must be drilled. As an example, consider that the wells of the Marcellus Shale in the United States cover an area of over 250,000 square km, about ten times more than the conventional gas play in Hugoton, Kansas, the largest in the country (IEA 2012c).
- 23.
As the refracturing of wells becomes more common (see previous paragraph), water withdrawal will rise. The refracturing of oil wells in the Bakken Shale cited (which increases ultimate recovery by a third) requires twice as much water as the original fracking (Jackson et al. 2014).
- 24.
Proppant is a solid material, typically treated sand or ceramic materials, designed to keep the fracture open.
- 25.
According to Osborn et al. (2011) the quantity of methane in drinking water aquifers located in the proximity of SG plays is systematically higher than the natural level. An EPA investigation in Wyoming found a level of benzene in groundwater 50 times higher than safe levels together with several hazardous pollutants commonly adopted in hydraulic fracturing (DiGiulio et al. 2011).
- 26.
GWP is a measure of how much each greenhouse gas contributes to global warming using carbon dioxide (CO2) as a reference. GWP considers the combined effect of the gas remaining in the atmosphere and its ability to absorb infrared radiation emitted from earth. The GWP of methane is more than twenty times that of CO2.
- 27.
Earthquakes supposedly generated by the injection of liquids into the ground during the extraction of SG occurred in the fields at Cuadrilla (UK) and Youngstown (United States). In both cases, small-scale earthquakes were recorded (about 2° on the Richter scale) without apparent damage to the surface (IEA 2012e).
- 28.
The minimum requirements set by the EPA concern the authorization and regulation of all injection wells, the construction and the location of exploratory platforms and the ex-post evaluation of the permissions granted. http://water.epa.gov/type/groundwater/uic/basicinformation.cfm.
- 29.
All information about the objectives and progress of the project is available through this website: http://epa.gov/hfstudy/.
- 30.
For example, a requirement for wellhead containment systems could protect aquifers and avoid the dispersion of fracking fluids into the soil.
- 31.
The relationship between resources and reserves must be interpreted carefully. While the former denotes hydrocarbons unexplored and non-extractable under current market conditions, reserves indicates hydrocarbons which can be exploited under the prevailing market conditions and with the technology available.
- 32.
http://www.technologyreview.com/news/508146/china-has-plenty-of-shale-gas-but-it-will-be-hard-to-mine. Indeed, according to an industry website and a government source, early exploration efforts to unlock unconventional fuel proved challenging due to complex geology and high production costs.
- 33.
In the US, landowners have been compensated with up to 25 % of royalties (or 25,000 dollars per acre).
- 34.
The EIA estimates summarized in Table 2 remain at the upper limit (about 13.3 trillion cubic meters).
- 35.
In 2011, France established a moratorium on all concessions for the production of SG, followed by Bulgaria in 2012; http://www.bbc.co.uk/news/world-europe-16626580.
- 36.
The low profitability of Polish deposits has hindered the exploration activities of some US companies: BBC, “North American firms quit shale gas fracking in Poland”, http://www.bbc.co.uk/news/business-22459629.
- 37.
Shale oil resources in the United States are twice the proven conventional oil reserves; in Europe the ratio drops to 1:1.
- 38.
One should also consider that the geology of Western Europe is also more problematic because many European countries are located on basins with more fractured formations (EASAC 2014).
- 39.
“Competent authorities and companies active in shale gas confirm that they do not experience significant differences between regular hydrocarbon procedures and procedures with a view to permitting/authorising shale gas activities. One concern may be that shale gas projects often start on a very small scale (the exploration phase), but develop into large-scale projects having a higher potential impact on the environment and on the population than originally foreseen/expected”, p. 97.
- 40.
According to FAO Aquastat (www.fao.org/nr/water/aquastat/data/query/index.html), in 2011 per capita renewable water resources amounted to 9802 cubic meters in the United States, 3342 in France and 1608 in Poland.
- 41.
The European Roadmap to 2050 foresees an 80 % greenhouse gas emission reduction by 2050 (compared to 1990) differentiated by sector (electricity sector −95 %, industry −85 %, transport −61 %) (European Commission 2011).
- 42.
“Shale gas: member states need robust rules on fracking, say MEPs”, http://tinyurl.com/l7dg4ch.
- 43.
Poland is considering issuing bonds to finance exploration by national companies. Euractive (2012), “Poland to issue special shale gas bonds”, http://tinyurl.com/cmltaks.
- 44.
On 21 November 2012, Environment Commissioner Potočnik stated that “[…] It is clear that the future development of shale gas will depend on the extent of public acceptance of fracking. Addressing health and environmental risks will be of paramount importance for the industry to gain broad public acceptance and a ‘public license to operate’ in Europe”; http://europa.eu/rapid/press-release_MEMO-12-885_en.htm.
- 45.
The consultation (Unconventional fossil fuels in Europe) took place between 20 December 2012 and 23 March 2013. The Report is available at http://tinyurl.com/padwqvf.
- 46.
- 47.
In Europe, coal still has an important role in power generation: in the EU-27 average it accounts for over a quarter of the electricity produced, a figure that rises to over 45 % in Germany and to 84 % in Poland.
- 48.
Germany has planned to stop its nuclear power plants (which at the moment generate just under a quarter of German electricity) by 2022 and Belgium (where nuclear accounts for more than half of the domestic generation) is planning a similar phasing out between 2015 and 2025.
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Di Nino, V., Faiella, I. (2016). Shale Fuels: The Solution to the Energy Conundrum?. In: Bardazzi, R., Pazienza, M., Tonini, A. (eds) European Energy and Climate Security. Lecture Notes in Energy, vol 31. Springer, Cham. https://doi.org/10.1007/978-3-319-21302-6_7
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