The People of America's Oil and Natural Gas Indusry

What is Fracking?

Mark Green

Mark Green
Posted October 8, 2013

Hydraulic fracturing and horizontal drilling are safely unlocking vast U.S. reserves of oil and natural gas found in shale and other tight-rock formations. Developing energy from shale is an advanced process that uses the latest drilling technologies and equipment. Click here for a video showing how this process works, and visit Energy From Shale.org to learn more about America’s shale energy revolution.

As for what fracking means to the United States – the answers, in charts:

Oil and Natural Gas Production

The U.S. Energy Information Administration (EIA) details how surging domestic oil production is narrowing net imports of liquids supply – from 60 percent of what the United States uses in 2005 to 45 percent in 2011. EIA projects net imports will fall eia_oilto 37 percent by 2040. Again, much of the increase is being driven by production from unconventional reserves using fracking and horizontal drilling. A study by IHS Global estimates tight oil production will reach 4.5 million barrels per day (mbd) by the end of this decade – more than double its share in 2012 (2.2 mbd).

EIA Administrator Adam Sieminski had this analysis during an energy conference earlier this year:

“There’s a fairly significant, long-standing relationship between spare production capacity in OPEC and what the pricing environment is for oil. So the 2-million-barrel-per-day increase in U.S. oil production that surprisingly took place over the past five years has resulted in higher OPEC spare capacity, and undoubtedly, has been a factor in why Brent oil prices are $103 to $104 per barrel rather than $125 to $130 per barrel.”

In other words, increased U.S. domestic oil production puts downward pressure on global crude prices. The United States is in a stronger position economically and in a general security sense when it produces more oil here at home. And it is, thanks largely to fracking.

The story of natural gas produced using hydraulic fracturing is equally dramatic. This EIA chart shows how growth in domestic eia_natgasnatural gas production has changed the U.S. outlook from one of having to import natural gas to having ample supply to both meet domestic needs and export gas to friendly nations around the world.

A little more than a decade ago natural gas production from shale accounted for 2 percent of total U.S. output. Today that figure is 37 percent, and another IHS study projects that share will rise to more than 80 percent by 2035. EIA has key numbers: U.S. dry natural gas production will increase from 23 trillion cubic feet (tcf) in 2011 to more than 33 tcf in 2040 – again, thanks mainly to fracking.

Job Creation and Economic Growth

Increased production of domestic  oil and natural gas has profound job and economic impacts for the U.S. Development of these resources from shale supported 2.1 million jobs in 2012, ihs_jobsaccording to IHS. This includes exploration, drilling, production and refining, plus employment in energy-related chemical industries. IHS projects that total could reach nearly 3.9 million by 2025, slightly more than a decade away.

With job creation, there’s employment. With employment there’s household income. IHS says real disposable income to the average U.S. household would increase to more than $2,700 in 2020 (up from $1,200 in 2012) from the lower energy costs and lower costs for all goods and services due to development of unconventional oil and natural gas.

Economic lift is being felt in the U.S. manufacturing sector and will continue, according to IHS. It estimates that between now and 2025, one out of every eight U.S. jobs supported by unconventional oil and natural gas development will be in manufacturing. Labor income – a measure that includes earnings and employer-provided benefits – from unconventional oil and natural gas is projected to surpass $278 billion by 2025 (from $149 billion in 2012). Job creation in the energy-related chemicals sector is projected to increase from about 53,000 last year to 149,000 in 2015 and almost 319,000 in 2025. Hydraulic fracturing means individual opportunity for prosperity and overall economic growth.

Trade

Fracking means natural gas abundance and the opportunity to sell a valuable U.S. commodity to eager buyers overseas, generating trade benefits here at home. Studies by ICF International and NERA Economic Consulting detail broad economic benefits to the U.S. from exporting liquefied natural gas (LNG).

ICF projects net job growth of 73,100 to 452,300 between 2016 and 2035 and increases in GDP between $15.6 billion and $736 billion, depending on how much LNG is exported:

us_russia_sa_hydrocarbons

NERA’s study found net economic benefit from LNG exports across all scenarios. We have the natural gas reserves to meet demand at home while also supplying friendly customers abroad. The U.S. is the world’s leading natural gas producer, but it isn’t even in the top 10 of natural gas- exporting nations. With federal approval of pending LNG export licenses the U.S. could become a serious player in the global market, creating new outlets for a valuable commodity and spur even more domestic production.

The Future

What is hydraulic fracturing? It’s energy and opportunity – for better lives and a stronger, more energy-secure country. It is largely responsible for changing America’s energy narrative from one of limited options to one of nearly limitless plenty. David Garman, former energy undersecretary (2001-2005) at a natural gas forum hosted by the Bipartisan Policy Center this week:

“We are in the midst of a great policy reset. Our energy policy heretofore had been based on scarcity is now confronting a tremendous abundance. The shale gas boom … is a cause for a tremendous celebration.”

With the right policies, strong industry standards and effective state oversight the celebration can continue as we safely and responsibly build on the ongoing shale energy revolution. 

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.