Today, "shale" has become synonymous with "unconventional," greatly overshadowing longtime unconventional drilling targets such as tight sandstones.
For many years, shale zones were viewed only as source rocks, infusing other rocks with hydrocarbons. Drillers often zipped right through the infamously dense, low/no-permeability shale zones on their way to the usual suspects, like porous, permeable sandstones.
Legendary oilman George Mitchell and his cohorts at then-Mitchell Energy concocted the fracturing technology recipe needed to economically produce from the organically rich shales. It required only 20 years of financial outlay, research and effort.
Little did they know, they were on the cusp of a major oil patch revolution.
This early effort focused on the Barnett Shale Field in north Texas, beginning in 1981. It essentially birthed a shale production boom that would turn the United States into the go-to-place to learn about, and benefit from, all things shale.
The Barnett was a natural gas play, and once the Mitchell group made their findings known, companies quickly began staking out land claims in myriad locales such as Appalachia, the Great Plains, north Texas and Louisiana.
The thinking was that this would be a slam-dunk.
They soon discovered that a shale is not necessarily a shale.
These complex zones vary from place to place even within the same field - meaning they are not all created equal.
For example, their contained natural fractures differ in numerous ways, including intensity, distribution, size and porosity/occlusion patterns. At times, there are no natural fractures.
Equipped with horizontal drilling technology and improved hydraulic fracturing and stimulation know-how, operators soon began producing ever-increasing volumes of natural gas from U.S. shale fields.
Prices were good, producers were ecstatic and landmen continued to scurry about the countryside offering big bucks for any and all prospective leases.
Then the unexpected kicked in to wreck the party.
Swing High, Swing Low
In 2008, producers were becoming accustomed to lofty prices of $13/Mcf. During the following year, they watched dumbstruck as this number dropped below $3/Mcf, which hadn't been seen since 2002.
Not surprisingly, this steep slide was attributed to a major increase in production, along with a significant drop in demand.
As gas prices languished at the bottom of the charts, however, oil prices began marching steadily upward.
Natural gas quickly became old news, and the ever-optimistic oil patch folks virtually linked arms once again, this time to chase after shale oil.
Likely, no one would have thought that within a few years the United States would morph into the world's so-called swing producer of oil, owing principally to shale.
Some may question this unofficial title, but it's difficult to argue with the numbers. Average U.S. crude oil production explains why: It reached about 9.3 MMbpd in March of this year, according to the Energy Information Administration. Then, the agency announced in early June that May production reached its highest monthly level in 43 years, averaging about 9.9 MMbpd.
But never underestimate the impact of OPEC, with kingpin member Saudi Arabia long dubbed the global swing producer.
Crude prices that soared above the $100 mark not so long ago did them no favor, as this encouraged the shale crowd to bring still more oil to the market.
Rather than cut production to jack up falling prices as they've typically done in previous downturns, the Cartel opted to stand pat with its "official" 30 MMbopd output, which it reaffirmed at its meeting in June.
Saudi Arabia, in particular, cites interest in maintaining market share as opposed to beefing up its financial coffers.
Iranian oil minister Bijan Namdar Zanganah commented that most OPEC members consider $75 oil to be a fair price, according to Bloomberg and other sources.
"This is the first time I have seen the United States in a position of influence in this industry," commented AAPG member Chris Cheatwood, exploration vice president for business development and geoscience at shale oil play veteran Pioneer Natural Resources.
"I think OPEC members are taking us seriously, as they basically have thrown down the gauntlet that we have to be able to compete with them and be a low cost producer," he said.
"The people in this industry love a good challenge," he said, "and we're going to rise up to that challenge."
The U.S. position is even more compelling, considering that shale oil plays have only been around for five years or so.
"We're in the infancy of this type of development," Cheatwood emphasized.
A (Good) Time to Pause
Despite the painful 60 percent commodity price drop over the past year and the precipitous declines in rig count reported by Baker Hughes, U.S. shale oil production just keeps chugging along.
It's largely about the technology - completion and otherwise - which has been honed successfully by the U.S. industry operators, geoscientists and others.
Additionally, some of this production rise can be attributed to earlier wells awaiting completion prior to the price debacle.
A bright aspect of the current situation is that the companies - both E&P and service entities - have more time to focus on improving applications of today's technology while also identifying new and better tools.
"A downturn gives us some time to step back and reflect on what we've done for the last couple of years and understand how we can do things better," Cheatwood said. "When prices are high, the industry tends to drill production as fast as it can without necessarily looking at how (it's) doing things."
His view is shared by others.
"We're seeing some companies positioned well and still trying to get more out of resources like seismic data to better understand the lithology and the reservoir in order to do better planning when drilling wells," said AAPG member Gene Sparkman, technical program co-chair for the upcoming Unconventional Resources Technology Conference (URTeC) July 20-22 in San Antonio.
Straightforward, Yet Controversial
Of course, hydraulic fracturing technology not only inaugurated the shale phenomenon, but remains the principal driver today.
The process entails mixing expensive chemicals and proppants (usually specific types of sand) with water and injecting the pricey mix under high pressure into a hydrocarbon-rich shale. The objective is to create miniscule cracks or pathways within the rock to enable the hydrocarbons to migrate to the wellbore.
This sounds pretty straightforward to the novice.
However, when you're traversing perhaps a 35-foot zone a few thousand feet underground, considerable skill and intense planning are essential. All it takes to kill an entire frac'ing job is to encounter an unexpected significant natural fracture, which enables the mix to escape from its intended path.
"When the engineer is planning something like frac stages, it's hard to pass up something, and you can end up fracturing everything," Sparkman said. "When price is critical you must look at every frac stage and avoid certain ones that likely won't produce.
"If you predict a stage won't be particularly good, you can save maybe $250,000," he noted. "I think companies are taking a closer look at that and factoring it into their planning."
A built-in plus for the United States with regard to shale production is that these plays are ideally suited for the vast number of small- to medium-sized companies that dominate onshore domestic activity.
The technology is there for everyone, and they have become very adept at securing funding from various sources while moving quickly where needed and being first on the scene to snap up prime leases.
Aside from the considerable skill sets and cash the industry must bring to drilling and producing, it has to deal with an array of controversial issues posed by the citizenry, particularly environmental groups.
A high profile example entails the innumerable meetings, media articles, threats and more stemming from the supposed poisoning of drinking water said to be caused by chemical-containing frac'ing fluid migrating into aquifers.
Forget that, thanks to a recent Environmental Protection Agency ruling, which stunned anti-frac'ing activists: The EPA announced in June it had concluded that hydraulic fracturing has not led to "widespread, systemic impacts on drinking water resources in the United States."
Perhaps this may lead to increased instances of legislation designed to prohibit individual communities from banning frac'ing, which became the law in Texas only recently. A similar ban is now in place in Oklahoma.
Concerns about the increased occurrence of earthquakes in the vicinity of frac'ing activity, including wastewater injection into disposal wells, are ongoing and being investigated.
How the current global price/production situation ultimately shakes out remains a mystery.
Domestic operators are known to be highly creative.
Some are focused on tapping into only the most promising areas of their lease holdings. Many have opted to hold off on completing already-drilled wells, while their peers continue drilling new holes to add to the inventory of drilled-but-not-completed. Much of this new drilling no doubt is dictated by lease agreements.
It's questionable whether the rising numbers of uncompleted wells sets the stage for prices to drop again almost as soon as they rise given all of the available production supply "waiting in the wings."
Every region has its own issues.
"The Middle East national oil companies are trying to maintain levels of production, but it's not all that easy to do," Sparkman commented. "Their fields are depleting also.
"We're getting a lot of interest from the internationals for URTeC," he added.
He shares Cheatwood's optimism about the potential for shale production.
"We've barely cut the surface of it," he declared. "I think we still see a good future."
This may provide a modicum of comfort to the many young professionals entering the industry.
Downturns are a given in this highly complex, competitive industry where the only certainty is uncertainty.
The current class of YPs is not the first group to leave the relative security of academia only to find that, while they were busy studying to make a big splash in industry, the industry was virtually being turned upside down.
Remember the mid-1980s when oil plunged below $10 per barrel and jobs essentially vaporized overnight?
The good news for the new crop of geoscientists is that gaining entry at or near the bottom makes the eventual ride to the top that much more fun.
The good news overall is that the weekly rig count decline clearly has slowed, and WTI crude prices continue to flirt with the $60 mark, which is doable for many shale plays. The price had dropped beneath $45 in electronic trading early in January, according to Bloomberg.
Given the omnipresent threat of some untoward geopolitical event, particularly in an oil-rich country, the script for the entire shale extravaganza could be rewritten at any time.