Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Hydraulic fracturing , also called fracking, is an important technological advance for the oil and gas industry.
In addition to opening up a staggering amount of natural gas for production, fracking allows extraction companies to recover what is called tight oil from deposits that were unworkable just a few decades ago. However, the new technology has also introduced new costs to the oil extraction process.
In this article, we will discuss the expense of extracting conventional crude oil versus extracting oil using fracking technology. Conventional production establishes the basic costs of drilling a well. You need a rig, drill stem, casing, the crew, and all the other pieces that go into a vertical well.
The difference with shale oil is that, instead of drilling just past the target deposit, the wells will take a degree turn in the deposit and run alongside it horizontally. These wells go thousands of feet down to reach the deposit, but they also run thousands of feet horizontally.
This type of well takes more time to drill, which means higher labor costs and more basic inputs like drill stem. Once the well is drilled and perforated, millions of gallons of water, proppants materials, like sand, introduced to keep the fracture open , and chemicals are pumped down the hole to fracture the formation and allow the oil to flow back into the pipe to be pumped out.
Millions of gallons mean a lot of hauling, with either added capital and labor costs for the trucks or, more likely, an oil service firm contract for the fluid hauling. All of this adds to the cost of the well. Some new shale oil wells in the U. With these costs paid upfront for a comparatively short production life compared to a conventional well, it makes sense for the shale oil industry to suspend new wells when world oil prices dip and ramp up when the prices are strong.
Shale oil drilling and extraction are far more labor-intensive than conventional oil extraction, making the process necessarily pricier. Conventional oil production generally refers to the pipe and pump production off a vertical well. This means a hole has been drilled straight down into a deposit and a pump jack is put on it to help pull the deposit to the surface where it can be sent on for further refining.
For example, offshore drilling can be viewed as pipe and pump production, just with the small matter of an ocean between the drilling rig and the first layer of rock. There are also a number of processes, including perforation, that are now a part of every well. Perforation is the use of explosives to blow holes in the sides of the pipe to allow the hydrocarbons to flow in.
Because this can cause debris to shift and slow the flow, acids or fracturing if legal are then used to open up the deposit around the perforated section of the pipe. This is oil, sweet, bubbly crude. Conventional oil is often found at a depth of around 6, feet in deposits of varying size. Crude oil is often drilled through more straightforward methods than shale and natural gas. A hole is drilled straight into the earth.
Then, a pump jack is set up, and the oil is essentially sucked from the ground. With the second-largest deposit of crude oil in the world, Saudi Arabia has a vast network of crude oil pumps to match.
Around the world, below the gravel, rocks, and deposits of crude oil that helped build oil-rich nations like Saudi Arabia, sits the shale layer. Where most modern oil deposits average depth of around 6,, the shale layer can range as deep as 9, feet. The primary distinction between crude or conventional oil and shale oil is the way it collects.
There are stages in the transformation process over the years from organic material to crude oil. Kerogen is one of those stages. Oil shale is essentially a type of rock that contains solid bits of kerogen. Kerogen is a petroleum product essentially, a precursor to oil. In order for the kerogen in oil shale to be converted into something useful, one of two methods must be used. One method is to mine the oil shale and then heat it later in a low-oxygen environment.
This process converts the kerogen—the petroleum product in the oil shale—into a useful product. The other method is to heat the oil on-site by applying heat to the shale formation. After this process is completed, the resulting liquid is pumped out of the reserves. The major difference between these methods is that the first method—the mining method—requires more heat than the second method—the on-site method, where heat is injected on-site.
There are also other additional benefits to the on-site method because the gas produced from this process—a byproduct of the process—can be recycled to produce more heat. In addition, the end product is of higher quality. That said, both methods result in a product that costs more per barrel to extract than conventional oil products.
Shale oil refers to hydrocarbons that are contained in formations of shale rock. Shale oil is closer to a finished product than oil shale, but the extraction process still involves drilling and fracking. Fracking refers to an extraction process whereby oil companies drill down horizontally into layers of shale in order to open up the shale rock formations so that oil can be extracted.
Shale rock is not very porous. As a result, the hydrocarbons contained in the rock cannot easily flow out into a pipe. Instead, the oil is accessed by drilling horizontally across the deposit and then opening up the rock and allowing the oil to flow. Fracking injects water under high pressure into the layers of shale to release the oil. Some of the more familiar names in the oil industry—such as Chevron Corp. COP —are also engaged in fracking activities. Fracking is just one unconventional method used to extract oil.
Developing oil sands and directional drilling are two other methods. Whether we are talking shale oil or oil shale, there is a common denominator: both cost more per barrel for extraction than more conventional oil deposits.
This means that both are especially vulnerable to market forces. While oil shale could potentially be an enormous source of oil, it is still a work in progress as far as bringing the production costs down enough to compete. Shale oil, on the other hand, has shown more resilience in such a price environment. According to the U. Energy Information Administration EIA , the degree to which the shale oil industry responds to oil prices can impact the future price of oil.
For example, in June , oil prices surged in response to growing demand as global economic activity and travel increased following the easing of travel restrictions.
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