First Damper on US Fracking Boom

Bad news is coming from two U.S. mining sites. The yield from fracking has not met expectations. Must the industry, previously spoiled by success, change its thinking?

The expectations of oil and gas production from shale can remain high — for years they have regularly been exceeded. Again and again, results surpass production forecasts as the industry gets caught up in its gold rush.

The energy markets both in the U.S. and worldwide face major upheaval. Finally, there is success in extracting previously-inaccessible raw materials from the ground with new technologies like fracking, which is controversial in Germany.

The boom has already led to declining gas and electricity prices in the U.S. According to the International Energy Agency, the country could overtake Russia in gas mining by 2015, surpass Saudi Arabia in oil production two years after that, and reach energy independence by 2035.

Environmental Consequences Scarcely Researched

When fracking takes place, water, sand and chemicals under high pressure are forced into the shale in order to set trapped gas or oil free. The environmental consequences have scarcely been researched, and critics in Germany primarily fear for drinking water.

In spite of an agreement between the Free Democratic Party and the Union, a fracking law in the Bundesrat [upper house of the German Parliament] has little chance — for many countries, the environmental restrictions are not strict enough. Undeterred by that, the shale oil industry in the U.S. continues its triumphal march in at breathtaking speed.

First Delivery Problems

The new sources are bubbling, and delivery companies vie for pipeline capacity to bring their output to customers. But now, if only on the periphery, come the first dents in the apparently unstoppable upward trend: From two of the not-so-widely-developed U.S. mining sites come recent reports that could cause the success-spoiled industry to reflect.

Statistics from the deposits in Utica, Ohio were disillusioning. In the past year, fewer than 70,000 barrels of oil were extracted from the ground there. That is only as much as a small oil tanker holds. In comparison, in the shale basin “El Dorado” of Bakken, North Dakota, considerably more is obtained every day.

“Utica Has Failed to Live Up to Its Hype”

Chesapeake Energy, an American company, brought Utica to the starting line with large promises. The then-head of operations declared boastfully that reserves worth $500 billion could lie underground in Ohio. For the originally agricultural Midwestern state, it was the greatest thing since the plow made its entrance into the fields.

Among others, the French oil company Total spent billions on mining rights. Government geologists calculated an oil deposit of 1.3 to 5.5 billion barrels — gigantic quantities. But they, too, concede that the 2012 yield fell short of expectations. “The Utica has failed so far to live up to its hype,” summarized Ed Morse, managing director of commodity research at Citigroup.

Investments Are Not Being Made

The firm NuStar Energy also recently had to concede a setback by meekly abandoning a pipeline project due to lack of customer interest. NuStar wanted to pump the oil from the Niobrara shale deposits in Colorado to Texas.

Underutilized pipes were to be retrofitted for that purpose. But in the end, the meager demand didn’t justify the investment. In the industry, no one doubts that high-energy natural deposits can be extracted from booming production sites like Bakken in North Dakota and others in Texas.

Yet the disappointments in Ohio and Colorado could be harbingers that the enthusiasm around shale gas and shale oil has slowly reached its high — or that efforts are needed on a larger scale.

“This is all about technology,” said Sandy Fielden, an analyst at RBN Energy in Austin, Texas. “The bottom line is that this stuff is down there, it’s just figuring out the sweet spot of where to get it and the right conditions to get it out” of more difficult formations.