King: Fracking 101

Rude contributor Byron King takes us on a fracking field trip! [The Rude Awakening] February 27, 2024 [WEBSITE]( | [UNSUBSCRIBE]( King: Fracking 101 [Sean Ring] SEAN RING Today, my good friend and frequent Rude contributor Byron King is taking us on a field trip. We’re heading to Colorado, where Byron will take us through his Fracking 101 course. Enjoy and I’ll see you tomorrow! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( [*New Intel* Strange and Powerful AI Project Revealed]( Jim Rickards was recently passed some urgent new intelligence involving a $10 million A.I. project… That could have a massive and direct impact on your life. Everything you need to know is in this 2-minute AI briefing. [Click here to play his urgent message now.]( [Click Here To Learn More]( A Field Trip to Colorado: Fracking 101 Nobody can squeeze 6,000 feet down a drill pipe to look at an oil-bearing rock formation. Plus, it’s dark at the bottom of an oil well and hard to see anything. A while back, though, I had a chance to do the next best thing to being there. In fact, I found myself up close and personal next to one of the hottest, most prolific “tight oil” shale plays in the country. I placed my hands directly onto oil-bearing strata. I could see and smell the petroleum. Indeed, I held the gooey goop in my fingers: [Shale] Gooey, oil-rich shale in your editor’s hand. BWK photo. If you’re curious, it smells a lot like money — both money going down the hole and money coming back out. Problem and opportunity, in other words. There’s plenty to discuss here. Because what I was doing out in the field was not nearly as simple as just picking up rocks off the ground. In fact, I was visiting nothing less than a combination of geological marvel and industrial-technological miracle. Of course, there’s huge money tied up in all of this too, and I mean trillions of dollars. No typo: trillions. Let’s dig in… Today, we’ll take a field trip to the high plains of Colorado, northwest of Denver. The adventure was pre-Covid, when I visited a major drilling and oil-producing operation run by the former Noble Energy Corp., which was acquired in July 2020 by Chevron (CVX: NYSE). Here’s how it unfolded. Noble (and for clarity, I’ll call it “Noble” even though it’s now Chevron) sponsored a field trip to one of its major operations. I paid my own way to Denver and paid for the hotel and incidentals. Noble supplied a bus and several outstanding geologists to narrate the tour. Over the course of a long day, we went to several geological sites and kicked rocks. We also visited drilling and production sites to see development and oil handling operations. Broadly, the purpose of all this was to learn more about fracking, the process of drilling a well, pressurizing the hole and fracturing (“fracking”) the rock to release oil and gas. Along these lines, it’s fair to say that most people have never been close to a drilling rig or oil operation, particularly politicians and policymakers (and it shows). Most of what people think they know about oil operations comes from reading a book, from news articles or watching television or such. It’s also fair to say that most people don’t know much or understand even the basics of fracking. So the idea behind my field trip (and of this discussion today) is to take a look at real oil operations and learn a few things. After that, you can draw your own conclusions. Begin with a map that shows a geological feature called the Denver-Julesburg Basin (DJB), which underlies eastern Colorado, western Nebraska, etc. And there’s a site in the DJB called the Wattenberg Field, a major oil production area. [Map of usa] The key to Noble’s project was control over vast acreage in this DJB region. In particular, there are prime locales nicknamed “sweet spots,” mostly within a rock formation called the Niobrara Shale, which underlies much of the Great Plains of the U.S. and Canada. This Niobrara feature is a hydrocarbon-rich rock formation laid down long ago in Cretaceous time, 99 million to 65 million years ago. It formed in what geologists call the Western Interior Seaway; and here’s another map of the ancient dimensions, to give you an idea. [Map of usa and canadas great plains under water] Long ago, the U.S. and Canada Great Plains were underwater. Courtesy Niobrara News. [( The good news for geologists is that Niobrara outcrops at the surface, adjacent to the Front Range of the Rocky Mountains, just north of Denver. And that’s where our Noble geologist-guides began the field trip, at a limestone quarry operated by Cemex (CX: NYSE), the large, international cement-maker. In other words, the point of visiting the Cemex quarry was to see rocks exposed at the surface, particularly the entire thickness of Niobrara. This alone helps to understand why this oil play is such a remarkable energy asset. Basically, when Niobrara was laid down long ago, the ocean mud and ooze were filled with ancient sea life from fish in the water to microbes in the muck. When they died, they were buried under layers of fine sediment, much of it clay which is why we have shale. Over the past 65 million years, the remains of these buried critters chemically transformed into oil and gas within the rock, although one can still find a few fossils here and there. [Fossil Clam] Fossil clam shell in Niobrara Shale. BWK photo. Meanwhile, just beneath the Niobrara is an older, dense rock formation called the Fort Hayes Limestone. That’s what Cemex quarries and grinds up for lime, with which to make cement. The geological layout is that, pre-Niobrara, the Fort Hays Limestone subsided and became the foundation, so to speak, for subsequent shale deposition. One thing follows another, right? Here’s a photo of several members of our field trip standing atop Fort Hayes, which plunges downward rather steeply toward the east, away from the mountain range. [limestone] Standing on plunging limestone; Niobrara Shale above. BWK photo. In the photo below, as you look out over the quarry, you’ll see literally the entire thickness of Niobrara, nearly 400 feet at this locale. Cemex removes all this shale just to get to the underlying limestone, which says something about the value of limestone used for cement-making. And as this photo shows, there are massive, energy-intensive, earth-shifting operations involved in all of this. [Shale removal to get close to the limestone] Cemex blasts and removes Niobrara shale to get to the underlying limestone. BWK photo. More of interest to oil-finders, as opposed to cement-makers, is that the Cemex quarry exposes four key layers of Niobrara, labeled A, B, C, and D. The Niobrara formation also has a couple of other lower zones, called Codell and Greenhorn. Way over east — about 30 miles or so, near Greely, Colo. — these rocks are buried 6,000 feet deep under many younger layers of rock. And this rock is what drill bits penetrate to make oil and gas wells. Here’s a schematic to help you visualize things. [Frack chart] The idea is to drill directional wells into Niobrara Shale; and then frack it for oil. Source: Naturalgasintel. That’s the basic geology. You have a hydrocarbon-rich shale atop a sturdy limestone bed underneath. It’s all uplifted, in the sense that the surface is well over 4,000 feet in elevation. But in the DJB the underlying rocks are not heavily folded, faulted, or fractured by natural processes. Now let’s move on to what the Noble reps explained about their wells when we visited actual drilling and production operations, east of that Cemex quarry and out in the Greely area. A typical well drilled into the Niobrara goes down about 6,000 feet from the surface and then about 5,000 feet outwards or “laterally;” although some wells are as much as 10,000 feet lateral. This involves flexible drill pipes and very sophisticated drill bits guided by astonishing navigational tech. The idea is to drill as much hole as possible, through the oil-rich shale. This maximizes the surface area available to drain oil from the otherwise impermeable rock. Geologists and engineers call it “maximizing the pay zone.” This kind of directional drilling is a remarkable technical achievement in general. The ideas (and patents and trade secrets) took several decades to mature in the 1980s, 90s and 2000s. Plus, each oil-bearing region is different, so people who work in an area tend to develop in-house approaches. Over time — basically from about 2012 to 2019 — Noble’s engineering talent and the company’s drilling contractors became astonishingly proficient at grinding wells through the rocks far beneath that Colorado prairie. One particular Noble well set a speed record, requiring all of five days “from spud to spud.” That means that Noble drilled one well in five days, totaling about 11,000 feet of hole. And then the driller reset the rig and began preparing to drill the next well in the series. Frankly, that’s really impressive. Noble’s approach has been to drill numerous wells from a single “pad,” meaning a relatively small area, usually under about 4 acres. There, the company stages the rig, equipment, machinery, supplies, and the like. The wells go outwards laterally, so that if you look down it’s like seeing spokes on a wheel or the teeth on a comb. [Drilling Patterns] Top-down view of drilling patterns in a fracking operation. After the wells are drilled, the rig moves on to other jobs, while topside production equipment has a minor footprint, as you can see in these shots here: [Noble wells] Noble wells and production pads in DJB area. In the mid-2000s, the DJB area became dotted with pads and wells. The typical Noble pad supports 16 wells. Each cost about $4 million to drill, for a total of about $64 million per full pad. Of course, numbers vary from site to site; these are average figures. Early on, a run-of-the-drill Niobrara well flows at rates of 400 to 700 barrels per day. One Noble geologist stated, though, “We’re interested in maximizing long-term oil recovery; not in making splashy press releases about early flow-rates.” Per Noble, each well has an anticipated life of up to 30 years, with estimated ultimate recovery of about 350,000 barrels of oil to include associated gas and natural gas liquids (NGLs). So with 16 wells per pad, at 350,000 barrels each, we’re looking at about 5.6 million barrels per pad over the life of the operation. And this doesn’t include the possibility of “re-entering” a well in the future for new drilling, well-expansions or “re-fracking” an old well. That’ll bump up the numbers. But let’s stick with that 5.6-million-barrel number. About 70% of the oil comes out in the first six years, or just over 3.9 million barrels. And let’s say that the price per barrel is about $50, which is on the low side just now. The math totals to $195 million of cash flow per pad over six years. It more than pays down the initial $64 million capital cost to build out the operation. Although ongoing production maintenance and transportation also must be factored in. The good news for Noble has been that the geology and well costs paid for profitable operations. Such was not the case with many other fracking plays across the U.S., though; each oil field and region has its own tale to tell. But for Noble (now Chevron, as I noted above), that Niobrara rock still delivers immense volumes of oil and gas, much of it up front in the life-cycle and with strong economics. At $50 or more for oil, these DJB fracking plays made money for Noble and still do for Chevron. Still, as we’ve discussed in other articles, U.S. fracking may well be just a moment in time for the nation’s energy needs. That is, much fracking was funded with low-interest, “cheap” money all through the 2010s, courtesy of U.S. monetary policy and a long list of circumstances that are unique to the American oil patch. And even the best U.S. operations face severe headwinds from anti-fracking and anti-carbon policymakers from the local end to the state capitol in Denver and to far off Washington D.C. It’s an uphill climb for even the best of operations. Of course, the broader question remains of how the U.S. will remain an energized society. The U.S. uses about 20 million barrels of oil per day. It has to come from somewhere. Looking ahead, how will we keep the wheels rolling and the lights on? From the standpoint of history, that trip to the Cemex quarry and Noble well pads represented about 150 years of human ingenuity and effort to come up with all the ideas and technology that makes this work. And clearly, we have people in power right now who want to toss it all out, starting yesterday, and which will make for a rough time tomorrow. We’ll see how this unfolds. It’s all a story yet to be written. I’ll end with one last interesting point. Remember that Fort Hayes Limestone I mentioned earlier, which Cemex quarries? It turns out that quite a bit of it goes back down into the Niobrara — and I mean literally. That is, Cemex is a major cement supplier to well-completion businesses that serve the oil industry across Colorado. Limestone goes from quarry to kiln to cement, which the likes of Halliburton (HAL: NYSE) then pumps down into the ground to secure the steel pipe that makes a well. It’s kind of funny how geology works in real life. And how geology makes the rest of life possible as well. And on that note, I rest my case. That’s all for now… Thank you for subscribing and reading. Best wishes… [Byron King] Byron W. King In Case You Missed It… The Decade-Long CIA-Ukraine Relationship [Sean Ring] SEAN RING Chalk another one up for the conspiracy theorists. The CIA and USG have been in Ukraine since just after Russia took Crimea. And yesterday, [The New York Times]( decided to tell everyone about it. It’s getting embarrassing now. The definition of a conspiracy theorist is morphing into the exact definition of “clairvoyant.” But the powers that be are now happy to let us know: the USG has been in bed with Ukraine for a decade. [Glenn Diesen]( sums up the article nicely on X: The New York Times reports on America's secret war against Russia since Maidan in 2014: - On the eve of the US-backed coup in Ukraine, 24 February 2014, the new spy chief of the US-installed government in Kyiv "called the C.I.A. station chief and the local head of MI6... and proposed a three-way partnership." - The partnership "is no wartime creation" as it "took root a decade ago." - Since the coup, Ukraine's intelligence agencies were transformed into "Washington’s most important intelligence partners against the Kremlin." - "A C.I.A.-supported network of spy bases constructed in the past eight years that includes 12 secret locations along the Russian border." - Secret bases established "fully financed, and partly equipped, by the C.I.A." - "Around 2016, the C.I.A. began training an elite Ukrainian commando force — known as Unit 2245 — which captured Russian drones and communications gear so that C.I.A. technicians could reverse-engineer them and crack Moscow’s encryption systems." - "That initial tranche contained secrets about the Russian Navy’s Northern Fleet, including detailed information about the latest Russian nuclear submarine designs. Before long, teams of C.I.A. officers were regularly leaving his office with backpacks full of documents." - The CIA used their secret bases in Ukraine to "track Russian spy satellites and eavesdrop on conversations between Russian commanders." - "The C.I.A. also oversaw a training program, carried out in two European cities, to teach Ukrainian intelligence officers how to convincingly assume fake personas and steal secrets in Russia." - The CIA directs attacks on Russian cities such as Rostov. - "The C.I.A. and other American intelligence agencies provide intelligence for targeted missile strikes." After reading this piece, it’s hard to call Vladimir Putin a liar about US involvement in Ukraine. In fact, the USG, via the CIA, has been lying for ages about its relationship with Ukraine. Let me quickly review one crucial piece of information called the Minsk Agreement. [Urgent Publisher Warning]( Hi, I’m Matt Insley. I’m the Publisher at Paradigm Press. Today, I have [bad news to share]( regarding the future of Jim Rickards’ newsletter. [>> Click here now for my announcement.]( [Click Here To Learn More]( The Minsk Agreement In a [Rude]( I wrote two years ago, I defined the Minsk Agreement thus: The Minsk Conundrum The Minsk Agreements were two sets of points to bring peace between Ukraine and Russia. But they never worked because the two countries saw the agreements in entirely different lights, now called the Minsk Conundrum: Ukraine sees the 2015 agreement as an instrument to re-establish control over the rebel territories. It wants a ceasefire, control of the Russia-Ukraine border, elections in the Donbas, and a limited devolution of power to the separatists – in that order. Russia views the deal as obliging Ukraine to grant rebel authorities in Donbas comprehensive autonomy and representation in the central government, effectively giving Moscow the power to veto Kyiv’s foreign policy choices. Only then would Russia return the Russia-Ukraine border to Kyiv’s control. So, they were doomed to failure from the start. What we didn’t know at the time was that then-President François Hollande and then-German Chancellor Angela Merkel flat-out lied about keeping the agreement. From Merkel’s interview with [Zeit]( ZEIT: But one can still find it plausible how one acted in earlier circumstances and today, in view of the results, consider it wrong. Merkel: But that also requires you to say what exactly the alternatives were at the time. I thought the initiation of NATO accession for Ukraine and Georgia discussed in 2008 was wrong. The countries neither had the necessary prerequisites for this, nor had the consequences of such a decision been fully considered, both with regard to Russia's actions against Georgia and Ukraine and to NATO and its rules of assistance. And the 2014 Minsk agreement was an attempt to give Ukraine time. That’s why Putin is still so upset with Merkel. He repeated his position to Tucker Carlson: if he knew Merkel were lying, he’d have started the Special Military Operation much sooner. But I’m not here to defend Putin. They’re Lying to You The apparent goal of releasing this exposé in The Times is to essentially say to the American taxpayer, “You were right. We’re caught. But we’ve been here for so long, and you’ve been paying for this the entire time anyway. So we may as well keep going.” And I’m here to say, “No.” You simply cannot let them get away with this. The CIA and its useful idiots even “tiptoed around Trump” to keep this farce going. Again, from The Times: The election of Trump in November 2016 put the Ukrainians and their CIA partners on edge. Trump praised Putin and dismissed Russia’s role in election interference. He was suspicious of Ukraine and later tried to pressure its president, Volodymyr Zelenskyy, to investigate his Democratic rival, Biden, resulting in Trump’s first impeachment. But whatever Mr. Trump said and did, his administration often went in the other direction. This is because Mr. Trump had put Russia hawks in key positions, including Mike Pompeo as C.I.A. director and John Bolton as national security adviser. They visited Kyiv to underline their full support for the secret partnership, which expanded to include more specialized training programs and the building of additional secret bases. Wrap Up What a mess. But it’ll get even messier if the U.S. stays in Ukraine. As far as I can see, Trump had no comment on the piece. But I wonder if he’ll do anything different if he’s reelected. We shall see… if Biden doesn’t start World War III first. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. 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