Looking into the future of fracking
Fracking spurs more than $1 trillion in capital spending.
Although hydraulic fracturing (fracking) has engendered the possibility of shale-produced oil and natural gas, vaulting the United States into the world’s No. 1 spot in fossil-fuel production (oil, coal, natural gas), prestigious financial weekly Barron’s now estimates up to $1 trillion in capital-goods spending will be generated to make this happen by 2025.
These infrastructural expenditures will include pipe-valves-fittings, railcars, storage tanks, pumps and refinery equipment. Although an ancillary national infrastructure will be necessary to maximize this gusher of oil and natural gas into the most effective routes to refineries, such massive expenditures to make this happen have not yet been estimated. However, such a program will easily necessitate another $1 trillion to simultaneously effectuate this.
A study from IHS Global, financed by the American Petroleum Institute, is extremely bullish on the energy industry as a whole and the material producers, fabricators and marketers involved in this dramatic expansion. IHS Global times this infrastructure boom to have taken off in 2012 when investment rose from more than $50 billion to $60 billion per annum, then quickened to a $90-billion annualized rate later in 2013. IHS believes this level will be maintained for the next six years, cooling down to $60 billion annualized after 2020.
The study emphasizes that direction of production support facilities will get 60% of the overall revenues generated from these producers of shale oil and natural gas. Engineers, surveyors and thousands of construction workers will be in greater demand. The varied industry giants such as Foster Wheeler, Western Energy Services, Fluor, Baker Hughes and General Electric and their subsidiaries will profit generously and quickly expand to meet the increased demand.
The study concludes the vast amount of capital spending needed to keep this fracking surge alive will be greatly advantaged by the monetary liquidity of participating corporations — which has been festering in their balance sheets — and their borrowing power, at a time of relatively low credit terms.
Future global disaster problems
While the U.S. has been blessed with the fracking technology to break the back of the long-term energy crisis, little attention has been given to what could become an even more critical future economic shortage — water.
This may seem paradoxical when considering almost 80% of the earth’s surface is covered with oceanic fluids and seemingly abundantly available and cheap in the “first world” of developed nations.
Unfortunately, from the standpoint of water shortage, the most urgent need for clean water is rapidly forthcoming from the underdeveloped nations experiencing the world’s greatest population explosion — Southeast Asia, the Islamist Middle East, northern Africa, sub-Saharan Africa and parts of South America.
Such rapidly developing nations as Nigeria, Angola, Mozambique and South Africa are experiencing serious water shortages as the expanding, underdeveloped populations are creating a demand for clean water that is not even beginning to be met. This comes at a time when political instability has never been greater.
The only solution to a future nightmare that could set off even greater instability and epidemics is the embryonic development of “desalination,” a conversion of salt water into potable fluids.
A step forward in this regard has already occurred as Israel, Jordan and the Palestinian Authority have agreed to share what is actually a gift from Israel — desalinated water. Through the superior technology of its world-class university, especially Haifa’s Technion, this urgently needed clean water element already has developed a process whereby almost all used, residual water can be converted into clean, usable fluids.
With a population of less than eight million, Israel already has requited its internal needs and is prepared to share its conversion process with the rest of the world, which badly needs it. Incredibly self-defeating, an alliance between global Islamists, Europeans and Americans has forestalled utilization of this water shortage solution centerpiece because they are more interested in the rectitude of their antagonism than solving the world’s most urgent problem.
Renewable energy generates gains
Between 2008 and 2012, the Charlottesville, Va.-based SNL Energy Report says net generation from all utility-scale renewable fuel types in the United States (biomass, geothermal, solar and wind) increased 23% or 90,329 GWh, the measuring stick for renewable energy components.
The report states wind comprised the majority of the net generation supplied by renewables, adding 74% or 66,717 GWh of the increase. Wind also comprised the bulk of the increase in operating capacity installed over the period, but solar now is coming along even faster. While output from wind facilities’ net generation grew 121%, solar posted the largest net generation capacity percentage increase, growing 330% or 3,118 GWh.
Although renewable energy often has been touted as the major replacement for fossil fuels, this contention, despite its impressive growth in the last decade, must be questioned. It’s objectively estimated by expert analysts without an ax to grind that by mid-century, oil, natural gas and even coal will represent 75% to 88% of all energy used worldwide.
In fact, the biggest forthcoming surprise in energy usage will be natural gas for transportation empowerment. T. Boone Pickens, the world’s leading advocate of natural gas, emphasizes he will live to see natural gas, shackled by lack of broad distribution and replenishment, evolve into a supplement for gasoline and diesel. Currently evolving technology allows for “natural gas” stations throughout the United States rather than just for business and government vehicles that have stations to go back to every night for replacement.
With the incredible fracking revolution, oil and liquid natural gas are the revenue and job generators that will make the United States the central fueling center for a rapidly developing world. This is destined to exceed other world countries’ barrels-of-oil-per-day output. Their demand now is back at 2007 levels before the reverses of the Great Recession.
With a world population headed for more than nine billion by mid-century, plus a much larger percentage than exists today having reached a level of industrial development far greater than even now anticipated, both fossil fuels and renewable energy will reach a demand factor that will make both an urgent necessity.
Oil demand reaches pre-recession levels
Another sign of a previously moribund oil demand going back to pre-financial recession levels is the close to 20 million-barrel-per-day output recorded in the U.S. this past October, a level not seen in this country for the past five years. Such demand reflected a 3% growth level not experienced on a month-to-month basis since August 2011.
When including oil derivatives such as gasoline, heating oil, jet fuel, diesel, etc., it is becoming apparent this leading fossil fuel is unexpectedly flexing its muscles.
This is occurring despite technological energy usage advances and the inching up of solar, ethanol and the greater use of natural gas, especially in the generation of electric power.
This expanding phenomenon is one reason the pace of both West Texas Intermediate (light domestic crude) and worldwide Brent crude costs have stayed at price levels nearing the “bubble stage,” not experienced since the price crash brought record prices down to less than half in mid-2009 after reaching unprecedented peaks in July 2008.
These statistics should give ample fodder to support the current expansion levels of “fracking” shale development. This procedure has only excavated less than 10% of the potential now attributed to reserves which could be gained through total U.S. extraction of private shale and federal lands.
It also strongly adds to the advocacy of crude oil shipments abroad that are currently stymied by a 1974 federal law which was panicked by the Arab oil embargo while U.S. production was in sharp decline.
It’s no exaggeration to claim that maximum exports of oil, natural gas and coal to an energy-hungry developing world could generate the revenues necessary to more than offset U.S. budget deficits.