In Search of the Next Shale
The growing momentum behind geologic hydrogen.
“Life leaps like a geyser for those who drill through the rock of inertia.” – Alexis Carrel
In the mid-2000s, soaring natural gas prices in the US triggered a crisis in its heavy manufacturing sector. After staying flat for the prior decade, domestic gas production fell measurably in 2004 and even further in 2005, down more than 5% from the level seen two years earlier. By December of that year, prices at Henry Hub crossed an astonishing $15/mmBTU, a compelling demonstration of the inelasticity of demand for hydrocarbon fuels.
The price spike came on the heels of the publication of Matthew Simmons’ controversial book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, a tome that fed a general sense of panic that the world was running out of economically extractable hydrocarbons. Proponents of Simmons’ peak oil conjecture saw validation in the natural gas market, with many warning that this was just the warmup act for a collapse in production of the comparatively more important liquids sector. So convinced was the industry of Armageddon’s arrival that plans to build liquefied natural gas (LNG) import facilities along the US Gulf Coast were announced, and chemical companies jockeyed for investment allocations to hedge their exposure. The sharp price expansion only served to accelerate the construction schedules of such projects.
As ground was breaking on several LNG import terminals, entrepreneurs with an appetite for risk were putting new drilling techniques to work in the Marcellus Shale. Although it was long known to possess an enormous resource of natural gas, the formation was considered by most to lack economic viability. Even after the first commercial wells began producing gas in 2005, few could internalize the meaning of the breakthrough.
In the ensuing years, production of natural gas in the Marcellus and other shales raced higher, the US became by far the largest producer of the stuff in the world, plans for new LNG import facilities were shelved, a wave of export terminals were built, and the awesome technical prowess of the US energy sector was validated yet again.
Having postponed their peak energy forecasts by decades, true believers of the concept moved on to predicting when production in various US shale regions will decline, arguing that the shale bounty is merely a reprieve. In the various debates we have participated in since publishing “Peak Cheap Oil is a Myth” last December, we are often asked what the next energy miracle will be. Although our standard answer is that miracles are not required to ensure oil and gas production continues to grow steadily for decades, the history of shale development demonstrates that there is almost always something of significance cooking in industrial labs that can change the trajectory. Spotting the early signs of revolutionary potential before it becomes obvious is the tricky part.
Earlier this year, we published an article on one possible breakthrough creating interesting chatter among industry executives and government officials alike. In “Natural Hydrogen: Something or Nothing?”, we applied our standard five-question framework to assess the claims that hydrogen exists in massive quantities underground and could potentially be extracted directly. If true, the introduction of a new carbon-free primary energy source into the world’s existing fuel options would indeed be significant. We concluded our analysis as follows:
“We find ourselves more optimistic about the potential for natural hydrogen than we were when we embarked on the research for this piece. There are huge barriers to its eventual commercial development, but they are hardly insurmountable given the size of the prize. We will be keeping close tabs on developments in the field.”
In the six months since we published that piece, momentum around natural hydrogen, also commonly referred to as geologic hydrogen, has continued to grow. Could this technology be the next shale? What recent developments make us think it might? How will environmentalists react if this new source of primary energy proves out? Let’s have another look.