Myths have been built about unconventional hydrocarbons: they are the solution to the scarcity of fossil fuels, which contribute to mitigating climate change... Perhaps those related to the energy sector are the most difficult to understand. In the following lines we will try to answer the question: Is the decision to extract unconventional gas energy-efficient?

Oil peak and hydraulic fracture

The peak of oil has already become a reality. It doesn't matter if it happened a few years ago, according to some studies, or if production stays constant for a while. Natural gas will also reach its peak in a few decades. One consequence of this is that hydrocarbons cannot be extracted at the same rate as in the past. The oil industry therefore relies on deposits that were previously not economically viable. Unconventional.

The adjective “non-conventional” does not refer to the product itself (gas or oil), but to the techniques used for its extraction. One such technique is fracking. Its massive development should be seen as an attempt to keep the hydrocarbon tap open in one way or another, even if its economic, ecological and social cost is much higher than that of the previous era.

Energy deterioration of hydraulic fracture

The energy return rate (ITE) is the ratio between the energy obtained from a given source and the energy used to obtain it. The more EIT, the more energy efficient this source is: the same energy investment puts more energy in the hands of society.

It is not easy to calculate the EIT of gas extracted by fracking. There are no up-to-date direct measurements, but indirect methods can be used, comparing energy performance with economic performance, among others. These methods show that the values are very low. Considering that the production costs of US non-conventional gas are eight times higher than those of Russian conventional gas, and knowing that the EIT of Russian conventional gas is approximately 20:1, we can consider that the cost of slate may be between 2:1 and 3:1. Spend one to get two or three. It should be noted that for the exploitation of a hydrocarbon to be economically profitable, the EIT should normally be higher than 10.

At the dawn of the industrial revolution, the energy performance of coal enabled the EIT to reach 50:1, but not around the world, but in the industrialised countries of Europe and North America. They became metropolis and many other regions of the Earth, in their colony. The EIT of the metropolis binomial was slightly above 10:1. The advantages of 50:1 and, as was later seen, the disadvantages, could only be enjoyed by the rich of the world.

Global EIT, continuously decreasing

The beginning of the oil era led the EIT to rise to 100:1 (on the privileged side of the world, no doubt). The fuel was very close to the surface, it was energy high-performance ... Oil could be bought and processed at an affordable price, and that explains the fat ITE. Only the fact that these enormous amounts of energy are at hand is what makes a lifestyle so “own” for a West today.

The problem is that we've not only maintained that lifestyle, but we've increased, but ITE isn't 100:1 before. Gradually, we began to extract hydrocarbons that were less close to the surface and that were not as pure as the others were exhausted. In order to achieve the same energy, more energy needs to be spent, while consumption is constantly growing. Currently, the EIT for oil around the world is around 20:1 hours, and continues to descend. With the decline of conventional hydrocarbons, which are low cost and easy to obtain, there has been an increase in the percentage of non-conventional hydrocarbons in total: In 1965 it was 3%, currently 20%.

Hydraulic fracture and speculation

As we have seen, fracking is by no means an energy solution for the future. But even if this is obvious, playing with the calculated reserves can be very profitable for some companies. A paradigmatic case of this is the unconventional oil and gas field of Vaca Muertos (Argentina). When Repsol announced that the oil company’s reserves were 22,000 million barrels equivalent, shares in the Argentine YPF section increased by 7%. But Repsol’s intention was not to exploit the site, which invested very little money, but to get rid of it for as much as possible, as demonstrated by the fact that it had held 142 meetings to that end. The operation was not carried out due to the expropriation of YPF by the Argentine Government.

It's not a unique example. Many companies that obtain a deposit of non-conventional hydrocarbons add up to their reserves and those of conventional deposits that are exploited in a much simpler and cheaper way. So they build the fiction that oil and gas are for long and reject the problems of new deposits.

Many analysts have warned. The boom in the hydraulic fracture has been compared to that of the subprime mortgage; on that occasion, the fraud consisted in blending the litter mortgages with those of lower risk and selling them all as the highest rating.

If that were not enough, the initial estimates of the moat reserves, which are announced with great fuss, are excessive, and in the end they have to be drastically reduced.

In 2011, the US agency EIA had to admit that the forecasts for the Marcellus area in eastern America were too high. Of the expected 410 trillion cubic feet, the U.S. Geological Service analyzed the area and left only 84. That is, only 20% of what is planned. The calculation made for Poland was even higher: Of the forecast of 187 trillion, only 1.3 trillion remained. A drop above 99%! And that, regardless of the fact that Poland's gas does not serve as a fuel, because it has too much N. The companies that were on the spot have left, leaving behind their business dreams.

Fracking gas bubble

Some unconventional hydrocarbon deposits are very productive, but they only account for a small percentage. Overall, the decline is rapid. According to David Hughes' Drill, Baby, Drill report, and in view of the United States experience, it is necessary to invest $42 billion a year in order to open new wells and keep gas flow intact. The most serious thing is that the resulting gas value is lower than the inverted: In 2012, for example, the Government of Spain disbursed $32.5 billion in cash. It can therefore be deduced that hydraulic fracture is an economically unfortunate business, not just environmental and energy.

Financial analyst Deborah Rogers, in a well-known report published in 2013 (the title is very significant: Was the price of natural gas organized? ), showed that the Wall Street financial companies had driven the exploitation of slate gas, bringing the gas price below the production price. As a result of this decline, the companies that made fracking became attractive to investors. The financial intermediaries received huge profits from the merger and purchase operations.

Forecasts of fracking, oil and fracking skyrocketed in this context. According to Rogers, the swelling was between 100% and 500%, as seen at the beginning of the extraction. This shows that it is a question of ensuring the financial business on a physical basis that is not solid.