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Natural Gas Business Issues Part 2

Course video 36 of 57

A range of technological and commercial factors determine accessibility and utilization of conventional energy resources. These lectures review considerations essential to the development of various fossil fuel sources of energy, including coal, oil, gas, and shale gas.

Основы международного энергетического бизнеса

Система университетов штата Колорадо

Learn about diverse and integrated markets for primary energy, and the essential considerations driving business leaders and policy makers in development of global energy resources.

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Получаемые навыки

Business Analytics, Economics, Energy, Business Analysis, Strategic Analysis

Преподаватели

Michael J. Orlando
Lecturer

Текст видео

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Natural gas, the thing that you may have noticed

in few slides ago, is some of the locations

where we are producing the shell gas are not very familiar

with this industry's activity is, is one observation.

Even in places where states where they're very familiar and, and have a

lot, long history with this activity, what we see with these nat, shell gas places,

that they're very diffusely located around the

US including in areas, relatively populous areas

like in the Dallas-Fort Worth region, for instance, has a massive shell gas play.

So, these things have brought the industry in

contact with the public in a way that, you

know, production in the Gulf of Mexico or

the North, North Slope of Alaska just doesn't do.

We have environmental concerns and legitimate

considerations and, and legitimate values that people

feel threatened, but they're, when it's in the north slope of Alaska or, or

off shore somewhere, it's a much more abstract than it, when it is a, a

rig operating, you know, ten blocks down the street from your house.

That's a very different, a very different prospect no matter how

comfortable the technicians in the industry feel, feel with the technology.

So, there's been a significant political action pushing back against

expansion of this, of this industry and much of it has come in the form of

of proposals for limitations of this particular technology, fracking.

Okay, because there are some concerns about, you know, will fracking affect

my groundwater and what exactly is going to happen with my property values.

So that's, that's sort of the, you know, basic summary of the conflict.

So I, I think it's useful to take a

second look at this fracking diagram to understand a little

bit more about what the industry, why the industry

feels pretty comfortable that, that this is not an end.

Also to understand why the opponents of the

technology and the practice feel it is a risk.

And maybe, appreciate how pretty much these two

groups are having, to some degree, completely separate conversations.

And, which may explain why there has not been

a lot of consensus on where exactly to go.

With this technology is basically right now you know, it's being used and it's

being used effectively and profitably, but it also is under tremendous

political pressure all around the country to be limited.

So, when we think about fracking, you know what we're, what we're

talking about is, you drill a well, you drill this horizontal section,

and then, when you drill the well, you actually would drill a wider hole here.

You see these edges here and you would, this gray material here is cement.

So there is actually cement in there that seals the,

the well bore from this aquifer.

So, when you actually do fracking, you take massive amounts of water.

And you may add some chemicals to that, and you inject

it into this well and you create all of these fissures

and then you have to pump back all of this water that you injected into the well

and you probably store some locally or you

truck it off to some disposal or reuse, possibly.

You try to treat it and reuse it.

Now, what the industry would say is, technically speaking

the fracking is this activity we just talked about.

And this is typically occurring, let's say, at about 8,000 feet.

Okay, the aquifer may be at something like, you know,

less than 200 feet to, you know, probably less

than 800 fee, not really much deeper than that.

These fracks, these fissures are probably, you know, the latest studies

I saw showed that the furthest that they have been documented as something

like several hundred feet to 1,00 maybe, occasionally, one or two will find a,

a seam of something and be over 1,000 feet long.

This research is evolving, but this is, this is kind of

the state of knowledge at this point, my state of knowledge.

And I know that this is very controversial, so

I will let everyone chime in in the discussion board.

But, for the most part, what the industry would say is, look this

can't, this activity down here can't possibly

connect to the thing you're worried about.

Okay?

So, that's kind of the fracking is, is safe argument.

Well, what the opponents will say is, well, how do you know that this,

cement here is actually,

well sealed, is a sealing very well.

What if you pump things in here and it comes

right up this channel, because the cement isn't, isn't very good.

Or, what if when you take it off of this

truck right here, it spills on the ground right here?

Or what if when you flow it back here, this produced

water storage area actually overflows?

Or, every one of these transfer points is an opportunity for a problem.

So, these are the concerns, some of the concerns, legitimate concerns that the

local communities have, who are dealing

with this activity proximate to their homes.

Technologically, I don't know if we're ever going to come to

an agreement about what exactly the values of the risks are.

Or maybe another way to put it is, it doesn't really matter if we come

to an agreement on what exactly are the

levels of the risks associated with this technology.

The bottom line is, typically the landowner, the surface owner,

is going to suffer any downsized risk, as small as it may be.

But they're not necessarily going to enjoy the upside benefits of this activity and

so that the, that asymmetry in the payoffs to the people

who could be effected with this they're, I think they're not quite always concerned

with how lightly the outcome the negative downside is to them.

What they're just sure of is there's really not a lot

of benefit to them, so they just don't want to take the risk.

So this is one of the, you know, this getting around the technological issues

is one aspect of dealing with the, the risks and

and benefits and opportunities associated with this technology.

Getting around the contracting risks of figuring

out who is exactly is going to bear

the risks associated with this technology is

probably even more formidable than the technical challenges.

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