Nick Steinsberger for the “Al”

October 8, 2020

(Guest Post by Matthew Ladner)

Nick Steinsberger was a subordinate of previous “Al” winner George Mitchell, but after having read Gregory Zuckerman’s excellent book The Frackers it is clear that Steinsberger is worthy of an Al of his own. Mitchell was a driving force behind America’s energy revolution, but the lesser known Steinsberger actually made it happen.Although you may be hearing of Nick Steinsberger for the first time, he fundamentally changed the course of the world. As a young petroleum engineer working for Mitchell Energy in the 1990s, Steinsberger drew what was regarded as the dead-end assignment of working on George Mitchell’s obsession of drilling shale formations. The project had gone nowhere for years, the company was in deep financial trouble and it wasn’t a great time for the oil and gas industry generally. Mitchell considered selling the energy side of the business, but didn’t find much of a market for the company. Mitchell’s chosen successor and the board of the company were restless, and Steinsberger found himself in charge of the least profitable division of a not terribly profitable company in a not currently profitable industry nursing a decades long obsession of an aging and increasingly cantankereous founder. From this grim spot, Nick Steinsberger made the discovery that changed the world.

The technique being used combined horizontal drilling and fracking- blast liquid and sand into a formation in the hopes of releasing hydrocarbons. Mitchell’s obsession was to combine these techniques in order to get at the vast amounts of oil/gas contained in shale formations. Rather than giant collected resevoirs, shale formations contain small amounts of hydrocarbons spread throughout a large underground rock formation. The oil industry had knows about shale oil and gas for years but had large since written it off because it could not be extracted economically. The techniques being overseen by Steinsberger were extracting gas in the Barnett shale- just not nearly enough for Mitchell Energy to remain solvent.

One Steinsberger noticed that a fracking well he was supervising didn’t mix the fluid properly. The normal mix of fluids was thicker than Jell-O, but in this faulty mix the fluid was more like liquid. Strangely enough, the well with the faulty mix produced a surprising amount of gas. Some of Steinsberger’s colleagues thought it was a fluke, but Steinsberger began to suspect that maybe water and sand minus all those expensive chemicals might work just as well.

A few weeks later over beer and bbq at a Texas Rangers baseball game, Steinsberger learned from a friend of a technique used in Kansas called a “river frac.” Almost entirely water and sand, this technique had been used to break up dense rock. Given that Mitchell Energy was in deep financial trouble and that Steinsberger was running what was viewed as a quixotic vanity project, Nick decided to trim chemical expenses on more wells. What did he have to lose?

Many of his coworkers thought Nick was out of his mind. By their understanding of the geology of shale, this technique which had worked on Kansas sand-stone had no chance working in shale. Shale clay would absorb the water, swell up and jam up the fractures. That’s what the chemicals were for after all. One superior allegedly promised to eat his diploma if the technique worked. “It’s a stupid idea,” he was told. “It’s not going to work.”

Despite a great deal of opposition, Steinsberger got the chance to experiment, if only because the company couldn’t afford the chemicals. Steinsberger was acting on a hunch- he thought a mix with few chemicals and less sand would create multiple micro-fissures rather than a single large passageway to the surface.

“The idea was crazy at the time. He had guts, no one else would have thought of doing it,” a company executive later recalled. “If the oil business had a gonads on the anvil award, he’d win.”

In August of 1997, with an anxious wife with two young children making contingency plans regarding a possibly soon to be unemployed husband, Steinsberger anxiously monitored the performance of Barnett wells, three of which had used his new mixture. The initial production from the three wells was nothing special, but then Steinsberger’s luck changed. Fracked wells involve a quick spurt of product followed by a sharp decline. The three Steinsberger wells trailed off at a slower rate.

This was just promising enough to save Nick’s hide and to allow him to experiment further. He altered the sand flow, put more horsepower on the pumps, made adjustments. By the summer of 1998, a Mitchell Energy started producing one and a half million feet of gas per day with the revised techniques, and instead of tailing off, it just kept going, and going. Other wells began to do the same. The slick water frack wasn’t just cheaper, it was also better.

Mitchell, a patron of the arts and many charities, was rewarded for his obsession and saved from personal financial ruin was hardly a moment to spare. The global implications of this innovation however were far more significant. Natural gas became abundant and cheap in the United States, abundant and cheap enough to greatly diminish the use of coal, reducing carbon emissions. Companies converted massive gas import facilities being built in American ports into export facilities. The technique worked on oil, and the United States reversed decades of decline in production and then, incredibly, began to export millions of barrels per day. The economic and political ramifications of this change have yet to fully play out, but they are already profound.

Nick did not become incredibly wealthy as a result of his innovation. Today he is still working as the COO of an energy firm. His influence on the global century however will remain long after the wealth of lesser figures has faded away. Nick’s example contains important lessons about innovation- human progress vitally depends on allowing people to follow hunches, to take gambles and to try new things. The urge require and deny permission, to standardize practice and to avoid risk has a largely hidden but staggeringly large potential cost- you likely never know what you missed out on. A world in which Nick was required to seek permission for each new technique he tried would be both poorer and dirtier. Red tape has been strangling American educators from the local, state and federal levels for decades. We could use more gonads on the anvil wildcatters like Nick Steinsberger.

 


The Cowboy Sons of George P. Mitchell vs. Saudi Sheik Update

May 20, 2015

(Guest Post by Matthew Ladner)

HT Mark Perry. From FuelFix:

HOUSTON — Pumping a barrel of oil out of the Eagle Ford Shale could get $10 to $15 cheaper by summer 2016 as service companies cut costs and operators tune up their wells, analysts say.

The oil slump hasn’t stopped producers in the South Texas play from getting better at targeting oil-rich rock in lateral sections of their horizontal wells, speeding up their pressure pumping systems and adopting better technologies for bringing wells into production.

Those efforts could help lift wells’ initial production rates by an average 33 percent in the Eagle Ford, even as service companies cut prices for drilling tools, proppant and rigs by an average 16 percent this year, Wood Mackenzie analysts said at a meeting with journalists last week.

Those two factors could bring the Eagle Ford’s breakeven oil price down from $56 to as low as $41 a barrel by June next year, putting millions more barrels within reach for producers. Similar trends are emerging in the Bakken Shale in North Dakota and the Permian Basin in West Texas.

“The death of the unconventional business has been greatly exaggerated,” Wood Mackenzie analyst Cody Rice said. “Operators can still make money in the best portions of the best plays in the lower 48.”

Do you really think you have a chance against us, Mr. Cowboy?


Now I have a Machine Gun Ho Ho Ho

April 27, 2015

(Guest Post by Matthew Ladner)

Must read article in the Financial Times The US Shale Revolution (how it changed the world and why nothing will ever be the same again). The Saudi attempt to wring excess supply from the market is not working in America, in large part because it simply has provided a powerful incentive for efficiency.

Oil producers praying for relief from low prices might take heart from the lost jobs and idled rigs in the US. But the American strengths that made the boom — entrepreneurial culture, depth of knowledge in oil and gas, innovation and supportive capital markets — are now being deployed to keep it alive. Recent history suggests it would be rash to bet against them.

“Look how far we’ve come since 2006,” says Russell Rankin of Statoil. “It’s incredible. So for us to think that we’re through with the technology . . . to say that that’s over is kind of idiotic . . . We’ll always come up with a solution.”

Thus far the U.S. rig count is down but production continues to climb as good ole fashioned American ingenuity extracts more oil from fewer drilling sites.  American drillers have been reportedly putting in new supply but not tapping it yet, waiting for a rebound in prices. Oh and then there is this little problem for OPEC:


Do you really think you have a chance against us Mr. Cowboy?

February 8, 2015

(Guest Post by Matthew Ladner)

The late great George P. Mitchell, winner of the Al Coleman Humanitarian Award among various lesser honors has joined the great rodeo in the sky but those who have taken up his legacy have a very interesting fight on their hands.

First of all, you may have noticed that gasoline prices have collapsed. The vast new supply of oil unleashed by Mitchell had a great deal to do with that, although the immediate precipitating event was a decision by OPEC not to attempt to restrict supply in order to keep up the price. By all accounts, the Saudis drove this decision, and explained it as desire to preserve their market share.

The OPEC cartel has had profound difficulties in the past in actually having members keep to their production targets. When the price of oil increases, so too does the incentive for members to cheat by producing over the caps. Historically Saudi Arabia has had vast production and relatively low extraction costs, giving it the role of swing producer.  In the mid 1980s depending upon which story you believe the Saudis tired of making up for the cheating of other OPEC members or wanted to bankrupt the Soviet Union or perhaps both. In any event, the oil market flooded, the price dropped to $9 a barrel. Stateside the Savings and Loan debacle unfolded and oil-producing states like Texas crashed Icarus-like to earth.

The price of oil tumbled after the OPEC decision, inspiring various theories. The Russians think that the Saudis are out to get them, the Iranians think the Saudis are out to get them, and the frackers also think the Saudis are out to get them.  Note however that these things are not mutually exclusive, and the Iranian theory seems more plausible than others to me. In any case, the general thinking was that all three of these competitors needed prices over $100 a barrel, and with their low extraction costs the Saudis were well situated to wring “excess supply” out of the market.

Good ole fashioned American innovation however thus far is winning the day.

No that is not a shot put, but rather a disintegrating frac ball, made of “electrolytic metallic nanoconstructed material.” It eliminates a step in the fracking process, and it was only one of a number of new drilling technologies discussed at a recent conference in the Woodlands in Houston (probably not coincidentally a property development project of George P. Mitchell). The article linked above discusses how American drillers are busy figuring out how to get more oil and gas out of already drilled wells. The number of new wells drilled in the United States has declined, but total production of oil and gas has not followed suit. Other interesting developments include the development of techniques without water, substituting CO2.

Now to be sure there are going to be some highly leveraged American oil firms who are going to go bust because of the decline in prices. Many of them have been through bankruptcy before, and you can expect them to see them back out in the fields soon. Anyone want to bet on OPEC welfare states displaying this same level of flexibility?

Place your bets- I’m all in on the high-tech wildcatters. Yippie kai yay!

 


We Will We Will FRACK You!!!

July 15, 2014

(Guest Post by Matthew Ladner)

The above gif is a 14 year time lapse, putting in tiny red dots for new oil wells (HT Mark J. Perry).  After watching this for a while, a few things spring to mind.

1. The motto of the University of Texas at Austin “We’re Texas. What Happens Here Changes the World” comes to mind.

2. Pennsylvania seems perfectly content to drill New York’s shale formation from just south of the border.  Memo to New York: fracking involves horizontal drilling, so you might want to rethink your ban.

3. Canada is just barely getting in on the action thus far, but western Canada has plenty of shale formations. So…

Hey you hosers! Don’t force us to sell our oil to China eh?

Just for the record I’d rather fill up my tank with gas refined from Canadian oil rather than line the pockets of various anti-American regimes. Pipelines please…

4. I have not heard much about Arkansas, but it looks like a boom going on in the north of the state (?)


Don’t Worry California, Texans will Eventually Figure out How to Get Your Oil

May 23, 2014

 

(Guest Post by Matthew Ladner)

So the bad news for California just keeps rolling in-turns out that the technology is not just there yet to get to more than a fraction of California’s 13.7 billion barrels of tight oil.   Not to worry Keanu, Texas wildcatters are getting better at the drilling techniques all the time.  Meanwhile in Texas, Mark J. Perry notes that in human history there have been 10 oil fields that have produced a million barrels of oil per day, and two of them are operating in Texas right now, largely thanks to the 18 years of visionary effort from the great George P. Mitchell.