Shale 2.0:Technology and the Coming Big-Data Revolution in America’s Shale Oil Fields

Manhattan Institute ^ | 5/16/15 | Mark P. Mills

[bestintxas]

With petroleum prices down 50 percent over the past year, many analysts and pundits are predicting the end of America’s shale oil boom. Recent headlines include: “Oil Price Fall Forces North Dakota to Consider Austerity” (New York Times);[1] “Oil Price Drop Hurts Spending on Business Investments” (Wall Street Journal);[2] “The American Oil Boom Won’t Last Long at $65 per Barrel” (Bloomberg Business);[3] and “The Shale Oil Revolution Is in Danger” (Fortune)[4].

High prices, shale skeptics argue, created a bubble of activity in unsustainably expensive shale fields. As shale-related businesses contract, consolidate, and adjust to the new price regime, a major shale bust is inevitable, they add, with ghost towns littering idle fields from Texas to North Dakota.

It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008. And as lower prices roil operators and investors, the shale skeptics’ case may seem vindicated. But their history is false: the shale revolution, “Shale 1.0,” was sparked not by high prices—it began when prices were at today’s low levels—but by the invention of new technologies. Now, the skeptics’ forecasts are likely to be as flawed as their history. This paper explains how continued technological progress, particularly in big-data analytics, has the U.S. shale industry poised for another, longer boom, a “Shale 2.0.”

The End of the Beginning

John Shaw, chair of Harvard’s Earth and Planetary Sciences Department, recently observed: “It’s fair to say we’re not at the end of this [shale] era, we’re at the very beginning.”[5] He is precisely correct. In recent years, the technology deployed in America’s shale fields has advanced more rapidly than in any other segment of the energy industry.

[bestintxas]

From report: Shale 2.0 will thus be data-driven. It will be centered in the United States. And it will be one in which entrepreneurs, especially those skilled in analytics, will create vast wealth and further disrupt oil geopolitics. The transition to Shale 2.0 will take the following steps: 1.Oil from Shale 1.0 will be sold from the oversupply currently filling up storage tanks. 2.More oil will be unleashed from the surplus of shale wells already drilled but not in production. 3.Companies will “high-grade” shale assets, replacing older techniques with the newest, most productive technologies in the richest parts of the fields. 4.And as the shale industry begins to embrace big-data analytics, Shale 2.0 begins.

Further, if the U.S. is to fully reap the economic and geopolitical benefits of Shale 2.0, Congress and the administration should: 1.Remove the old, no longer relevant, rules prohibiting American companies from selling crude oil overseas. 2.Remove constraints, established by the 1920 Merchant Marine Act, on transporting domestic hydrocarbons by ship. 3.Avoid inflicting further regulatory hurdles on an already heavily regulated industry. 4.Open up and accelerate access to exploration and production on federally controlled lands.

[ChildOfThe60s]

The government will do none of that.

[Sequoyah101]

What a COS fluff piece.

The author has little or no idea what he is talking about.

[Postman]

It’s important information for at least three of us. The author’s accomplishments and comments seem impressive to a layman, me. As the third known leg of the stool, would you care to elaborate on your comments? Thanks.

Mark P. Mills is a senior fellow at the Manhattan Institute, CEO of the Digital Power Group, a tech-centric capital advisory group, and Faculty Fellow at Northwestern’s McCormick School of Engineering and Applied Science. He is also a member of the advisory board of Notre Dame’s Reilly Center for Science, Technology, and Values. Earlier, he cofounded and was chief tech strategist of Digital Power Capital, a boutique venture fund, and served as chairman and CTO of ICx Technologies, helping take it public in a 2007 IPO.

Mills is a contributor to Forbes.com and is coauthor of The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy (Basic Books, 2005), which rose to #1 on Amazon’s science and math rankings. His articles have been published in various popular outlets, including the Wall Street Journal and New York Times Magazine. Mills is also a frequent guest on CNN, FOX, NBC, and PBS, and has appeared on The Daily Show with Jon Stewart.

Earlier, Mills was a technology adviser for Bank of America Securities, and a coauthor of a successful energy-tech investment newsletter, the Huber-Mills Digital Power Report. He has testified before Congress and has briefed many state public service commissions and legislators. Mills served in the White House Science Office under President Reagan, and subsequently provided science and technology policy counsel to numerous private sector firms, the Department of Energy, and U.S. research laboratories.

Early in his career, Mills was an experimental physicist and development engineer, working at Bell Northern Research (Canada’s Bell Labs) and the RCA David Sarnoff Research Center on microprocessors, fiber optics, missile guidance, nuclear energy, and non-proliferation. He earned several patents for his work in these fields. Mills holds a degree in physics from Queen’s University, Canada.

[1010RD]

Further, if the U.S. is to fully reap the economic and geopolitical benefits of Shale 2.0, Congress and the administration should:

1.Remove the old, no longer relevant, rules prohibiting American companies from selling crude oil overseas.

2.Remove constraints, established by the 1920 Merchant Marine Act, on transporting domestic hydrocarbons by ship.

3.Avoid inflicting further regulatory hurdles on an already heavily regulated industry.

4.Open up and accelerate access to exploration and production on federally controlled lands.

This is why we need a GOP POTUS, particularly a successful governor like Walker. He'll do the above, along with cutting the Gordian Knot of red tape created over the last few decades. America will boom.

Imagine 16 years of GOP control over government. Of course, we'll have to watch them carefully, but just slowing government growth to zero will shrink the deficit.

1-3 can all happen fairly easily with little resistance. #4 can be achieved by transferring lands over to states for them to use or not use as they see fit. The best stewardship is the closest can be the rallying cry.

[bestintxas]

“What a COS fluff piece.

The author has little or no idea what he is talking about.
“

Please elaborate on your comments re fluff and explain where there is little understanding of the aspects of the shale industry.

My work in unconventionals over years sees this differently than yours.

[buffaloguy]

I definitely see this coming to pass. Even small E&P operations are running data analyses that were unimaginable just 20 years ago.

[buffaloguy]

And I will add that if it does come to pass that the US dominates the world oil industry and prices in the future, all will benefit.

[Sequoyah101]

I read the article.... you tell me what it said that is profound.

[q_an_a]

nice read...thanks

[Praxeologue]

The ultimate energy solution is thorium, in the form of LFTR or other types of molten salt thorium reactors. Hydrocarbons are the transitional energy source and tight oil and gas will play a growing role in that

[Postman]

Dear S., When I replied to your initial comment, I said “The author’s accomplishments and comments seem impressive to a layman, me.” As such, I have neither the training nor the experience to read something like Mill’s article and grade it anywhere on the COS/Profound scale. I was impressed by his article to the extent that I was impressed by the ranking, “COS”, you gave it and your positive assertion that “The author has little or no idea what he is talking about.” This would usually mean that you most certainly do know what you’re talking about and I’m disappointed that you chose not to share a more expansive critique of Mill’s article. I was not seeking a debate; just more light on a topic I know little about.

[Sequoyah101]

Fair enough but I still ask, what did he say that is profound?

It is about 40 years of experience in looking for, drilling, completing wells, producing and selling oil by which I make the ranking that the article is a COS.

Putting it quickly, he did not say anything. He seems to indicate that shale economics will be improved by data analysis and presumes that somehow it will reveal something overlooked. Poppycock. He also seems to indicate that some new technology has been invented that will make shale production generally economic at $60 or so... he does not understand the fundamentals of supply and demand or oil and gas economics or the unique characteristic of shale, cliff-like decline rates, that are to be overcome.

I can’t give you a complete lesson in oil and gas here and now, haven’t the time or the inclination. The article remains a COS though written by an academic pandering for recognition as I see it from where I sit having seen this many times before.

[Postman]

Thanks for taking the time to expand your comments. As for your question, I can’t help because I don’t know enough about the field or the specific issues to rate the article at any level and I will gladly defer to your knowledge and experience when you call it a crock. You’ve added anchor points to keep in mind and I know more about something very complex than I did initially. Thanks for that. All best wishes.