Shale Boom Foretells Energy Transition
The shale revolution has not yet finished its course, but the boom is well past. The next boom is the energy transition, and it, too, will reward those who see and act early.
In August, a small group of professionals attended SPE’s first symposium on energy transition. SPE convened its first event on shale gas in 2006 with similarly modest attendance. Today that conference has grown into the multisociety Unconventional Resources Technology Conference (URTeC), one of the largest in the industry. 2021 SPE President Tom Blasingame helped lead both kick-off events, and I agree with his conclusion: “Energy transition events will become mainstream in our industry in the coming years.”
The history of the shale boom and the roster of attendees at the recent symposium show how the energy transition will accelerate. Transition projects—emissions, decommissioning, repurposing, CCS/CCUS, geothermal, fossil brines, energy storage, and so on—will grow much faster in the next years and decades than oil extraction, especially in North America.
The shale revolution started slowly, with little consensus. Mitchell Energy first attempted to complete the Barnett Shale in 1981, and they were not the first to try. When they finally got down to the bottom of the barrel of ideas and attempted to fracture with slickwater, internal voices argued adamantly that it would never work. After the single initial success, it took 4 years to get the attention of a larger public company. Despite the publicity of the sale, it still took another 5 years to hold the first dedicated SPE event in 2006.
That first event drew a thin crowd. Few seemed convinced of the significance of gas shales, the explicit focus of the event. What is more, conventional wisdom still held that shale formations would never produce oil because the molecules were larger than the pore throats.
Meanwhile, a pioneering driller proved up a second shale-gas play the same year, the Fayetteville. Two years later, the Haynesville launched, and 4 years later came the first private conference about the Eagle Ford Shale oil play. As one vender noted in a breakout Q&A at that event, “I don’t think I saw any presentations this morning showing less than 100% rate of return. We will price our services accordingly.”
The shale boom lifted the boats of every segment of the industry, but not every player. The companies that made the most money were those that started first, leasing and drilling or offering specialized services, while others ignored the fringe idea or dismissed it out of hand. Every formation remotely prospective was leased and tested in a matter of only about a decade, with accelerating pace.
Of course, many shales never worked, and every shale has busted. Notwithstanding the recent announcement of a play extension by one major player and the kabuki of the Alpine High on the western edge of the Permian Basin, no new shale play has emerged since about 2014 or 2015. For better or worse, claims staked in the first few years of the revolution set the course of companies for decades.
Structural advantages in the US made the shale revolution possible, impelling the US to become the largest producer of both oil and gas in the world as long as prices, rig pace, and inventory hold up. Only one other shale play in the world has made even modest progress toward success, but the lessons of North American shale plays are being written and may be transferred around the world.
Fundamental Science, Intellectual Horsepower, and Financial Capital
The oil industry in general, and the US industry in particular, has structural advantages again in the energy transition and can again profit in a new revolution. As a whole, our industry has the fundamental science, the intellectual horsepower, and the financial capital. We have the expertise with uncertainty, the processes for massive projects, and even the external support to transform. In addition, some jurisdictions have many operators, private ownership, and regulatory frameworks that allow for multiple companies to push progress on the same idea simultaneously. Like much of the oil industry in 2006, much of the oil industry today lacks a vision of what is coming, but that won’t change the trajectory.
The troupe of pathfinders at the first energy transition symposium could see the future. At least six current or past presidents of SPE participated plus a handful of international SPE award winners. Attendees came to Houston from 16 international countries representing every major service company, most major international oil companies, a few national oil companies, 20 universities, six US national laboratories, as well as smaller oil companies, project developers, vendors, consultants, and publishers. I lost track of how many C-suite executives either sent videos or appeared on the stage. Shale gas did not start out with such high-level support.
The perspective of the crowd was not any more uniform than might be expected, not more uniform than the beginning of other brave new worlds. One CEO talked about how the world “needs” clean energy while another soft-peddled that the world “wants” clean energy. Some speakers warned that the transition should proceed slowly not to create crises now while others warned that the transition should proceed quickly not to create more permanent crises for the future. Our attendance, though, demonstrated our belief in what is coming; we see the opportunities.
The shale revolution has not yet finished its course, but the boom is well past. The next boom is the energy transition, and it, too, will reward those who see and act early. This time, though, there is more than just profit to pursue. Plus, the boom is unlikely to peak any time soon. We can help to create a new system of energy with wider benefits and fewer side effects. One that, unlike shale or even oil and gas in general, can persist and thrive for centuries of humanity.