Was shale a frackin bubble?

Those who have spent the last 10 years in oil and gas were in for the ride of their lifetime. Those who have spent far longer in the industry will look back at the nuttiest 10 years of their entire careers.

We have gone from peak fear to boom and now gloom with lots of local ups and downs strewn in between.

But whatever else has happened, nothing has rocked the energy world more than shale. A couple of roughneck oil and gas drillers in the early Nineties have given the industry quite a ride for their buck.

But now, oil prices have gone a little lower and there is widespread expectation that this would be the secret weapon to kill those unworldly shale mongers. The Saudis even think that if they just kept prices low enough for long enough, they would be able to completely kill those shale drillers off and go back to their old ways.

They will be proven wrong but the way will not be smooth or even. In another upcoming post, I explain how those lower prices are the shoot-in-the-arm shale needed to jump another paradigm.

Because now it’s teeth-gritting time for the drillers as money has been spent and to stave off bankruptcy, they will cut the slack, streamline processes, and innovate the hell out of the industry. Local lawmakers, fearful that the shale bonanza will end so quickly will become ever more sympathetic to the driller’s demands (there are jobs on the line in the end) and the shock absorption capability to international events that shale brought also came to be appreciated in the US.

Plus, the shale (and other unconventional gases genie) is firmly out of the bottle as now it starts to happen in other areas of the world. There are still high gas price patches out there and they are just as eager to have some frackin energy of their own.

But will it be enough to sustain the momentum? The US is still the global benchmark when it comes to shale – and rig numbers are down quite impressively off late.

So is production. For a while, it seemed that production numbers would defy gravity for all the rig cutting but in the end, it’s downwards here as well.

But look at prices. The Saudis are pumping at record levels, a deal with Iran is imminent, and still, prices go up again. We are beyond 60 USD for Brent which is 20% higher than one month before that.

The fact is that there is a double tiger in the wait as drillers for shale get the workout of their lifetime with the current lower-than-usual prices world and at the same time, prices are going up again providing fresh ground for another shot at the fracking pump.

Some of the greatest generals of history knew well that certain dogs are better left sleeping as once they wake, there is no going back. Shale oil and gas was such a dog and he is awake now.

What OPEC and the other classical oil producers hope is that it might fall asleep again but it’s also one of those universal truths of the world that once awake, the dog won’t dooze off anymore.

The world has seen what’s possible and licked blood. Before the advent of shale, some oil and gas crazies out there guessed that it might one day be possible to make shale a thriving business if just it could be pruned enough. Now, every non-energy person knows that it’s there and that it can be produced economically.

The guesswork of some nutbags has been replaced with a solid body of knowledge which will make it much easier for the follow-up generation of oil and gas drillers to squeeze the lemon even more. There is still a lot of juice where that came from.

It’s a basic fact that the resource is there, like it or not. And it’s enough to keep the world spinning for decades or even centuries. Trust me; we won’t need all that oil as before we will have better, cheaper, and cleaner to power our lives.

The combination of – it’s there – and – we know how to get it – makes up for a potent mix.

Never underestimate the power of a cornered entrepreneur. And there are lots of them now. They will fight to the last drop of blood in their veins and this is the stuff legends are made of.

When in 2000 the Dotcom bubble collapsed it was also not the end of the internet although this is what many had predicted. It was on the contrary the start of the internet that has blown away some of the most fundamental ways we led our lives. And I am not talking about online shopping only. The Rabbit hole goes much deeper.

The apparent demise of shale is nothing but a metamorphosis event that will give shale a huge shot in the arm. It will push technology to the point where shale will become profitable at even lower oil prices and almost anywhere on Earth.

Plus, the sense that almost anything is possible has put a lot of oomph into even more exotic stuff such as Methane Hydrates which, no doubt, will be mined not long from now and profitably so.

Shale is here not only to stay but now it’s going to blossom in ways we have not imagined before. The journey has just about started.