June 20, 2015

WE'LL STILL BE PUMPING OIL WHEN THE EARTH CRASHES INTO THE SUN:

Shale 2.0 : Technology and the Coming Big-Data Revolution in America's Shale Oil Fields (Mark P. Mills, 5/16/15, Manhattan Institute)

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." 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. Shale 2.0 promises to ultimately yield break-even costs of $5-$20 per barrel--in the same range as Saudi Arabia's vaunted low-cost fields.

The shale industry is unlike any other conventional hydrocarbon or alternative energy sector, in that it shares a growth trajectory far more similar to that of Silicon Valley's tech firms. In less than a decade, U.S. shale oil revenues have soared, from nearly zero to more than $70 billion annually (even after accounting for the recent price plunge). Such growth is 600 percent greater than that experienced by America's heavily subsidized solar industry over the same period.

Shale's spectacular rise is also generating massive quantities of data: the $600 billion in U.S. shale infrastructure investments and the nearly 2,000 million well-feet drilled have produced hundreds of petabytes of relevant data. This vast, diverse shale data domain--comparable in scale with the global digital health care data domain--remains largely untapped and is ripe to be mined by emerging big-data analytics.

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:

Oil from Shale 1.0 will be sold from the oversupply currently filling up storage tanks.

More oil will be unleashed from the surplus of shale wells already drilled but not in production.

Companies will "high-grade" shale assets, replacing older techniques with the newest, most productive technologies in the richest parts of the fields.

And as the shale industry begins to embrace big-data analytics, Shale 2.0 begins.

Only taxes can make oil uneconomical.
Posted by at June 20, 2015 12:07 PM
  

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