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Energy on the Move
By George Shultz, Robert Armstrong
Hoover Institution PressCopyright © 2014 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
NATURAL GAS FROM SHALES
Recent advancements in horizontal drilling and hydraulic fracturing of shale formations have changed the landscape of US oil and gas production. There were over 48,000 oil and gas wells drilled in the United States alone in 2012. Fifty percent of these new wells were horizontal wells; most of them drilled in unconventional oil and gas plays; and over 95 percent of them hydraulically fractured. The result of all this is now well known: dramatically increased domestic production of natural gas. These subsurface innovations — enabled in part by new technologies such as downhole imagery, microseismic imaging, and slick water fracturing — have both driven down natural gas prices and strengthened the contributions of the gas sector itself to the US economy.
Lower natural gas prices have led to significant environmental improvements. For the first time in decades, the US electric grid in mid-2012 was supplied by approximately equal shares of gas- and coal-fired power generation, though coal's share recently increased in part due to rising gas prices. Gas-for-coal substitution of course is attractive from a climate change perspective (and, in fact, according to several recent studies, coal-to-gas switching dwarfs the marginal contributions of renewable energy), but it also has huge — and largely overlooked — local environmental and health advantages.
For example, the respiratory impacts of local pollution from coal-fired power generation are routinely estimated to result in approximately 10,000 statistical lives lost in the United States each year. At the same time, low natural gas prices enabled by the uptake of shale gas technologies have helped drive nearly a 20 percent decline in coal-fired generation in the United States. At even a conservative estimate of attribution, new shale natural gas production is helping to save 1,000 lives per year, ongoing each year, across the United States. Further research and monitoring on potential adverse environmental impacts of natural gas extraction are advisable (as it would be for any source of energy), but these costs should be weighed against the real economic environmental and health benefits that the country is already enjoying from expanded gas production today.
Apart from gas, it is also worth noting that horizontal drilling technologies, along with ultradeepwater offshore — drilling, have also helped increase US domestic oil production in the lower 48 states after decades of gradual declines. Along with improved efficiency of oil use elsewhere in the economy, the Energy Information Administration estimates that this has helped reduce US net oil imports to 42 percent, down from a peak of over 60 percent in 2006. Also, with advancements in Canadian oil sands production, only about 22 percent of the United States' 2011 oil needs were met from suppliers outside the Western Hemisphere. This is helping to improve US energy security against the risk of severe global supply disruptions.
When you have an advanced technology available, the policy decisions become much easier.
— Julio Friedmann, Lawrence Livermore National Laboratory chief energy technologist
Claiming credit for delivering the US shale gas boom has become an energy policy parlor game, and the truth is that today's shale gas boom has many fathers. Mitchell Energy's tenacious trial-and-error experimentation with new and unproven field techniques persevered despite years of subpar returns. Serendipity — high gas prices, well-timed supply contracts, and convenient geologies — allowed this experimentation to continue long enough for costs to be gradually driven down. The United States' private-property rights regime, almost unique in the world in terms of its aggressive assignment of private property rights over mineral resources, offered an exit opportunity to compensate for early investment risks in a sector in which operational advances often spill over. A synergistic corporate acquisition combined key know-how — Mitchell's shale slick water fracturing techniques with Devon Energy's gas horizontal drilling capabilities — that made the process economic throughout gas basins outside of Texas's Barnett. And existing gas gathering and pipeline infrastructures, built over decades, ultimately provided ready legs to achieve today's shale gas-production scale.
Crucially, many of these contributions were enabled by years of industry, consumer, and government-sponsored research and collaboration. Some scientific and technical contributions were dead ends, and others took decades before their value was fully recognized. But without this R&D, permits for siting liquefied natural gas (LNG) import terminals — and not today's backlog of applications for hotly contested export licenses — would likely still be on top of the US energy policy agenda. Two recent investigations from the Breakthrough Institute and Resources for the Future trace this story of shale gas technology's development:
The story begins with research conducted by national labs, universities, and the private sector under DOE's Eastern Gas Shales Project, which ran from 1978 to 1992 in the Devonian shales of the Appalachians and ultimately aimed to increase production by improving the technology available for this geology. The program applied horizontal drilling, which had become commercial in oil fields through the 1980s, to Devonian gas shales. Massive hydraulic fracturing was similarly applied to gas shales using the techniques already proven in tight gas formations. The program also pioneered the use of foam fracturing, which Mitchell Energy would later use — and ultimately discard in favor of simpler water fracturing — in its attempts to "crack the Barnett." Other related public- and private-sponsored research contributions included:
The early development of more effective diamond-studded drill bits through a public-private federal government collaboration with GE.
The adaptation of downhole passive microseismic fracture monitoring to gas shales — a technology that originated in work done by Los Alamos National Lab for geothermal energy in the 1970s — through a collaboration between DOE and the industry-supported Gas Research Institute.
Industry-led advances in 3D seismic imaging that were enabled by high-performance computing. This high-resolution subsurface mapping was particularly important to identify and recover from previously uneconomic distributed shale deposits.
Mitchell Energy was, however, the most important singular force in applying new technologies and operations that would commercialize shale gas production in the United States. Mitchell plowed a quarter of a billion dollars of in-house R&D budgets over two decades into bringing down the cost of shale gas production in north Texas's Barnett formation. Starting with a "gelled" water frac process previously developed through a DOE collaboration in east Texas, Mitchell relentlessly iterated to gradually bring down costs per well by simplifying the process. First, the nitrogen assist was removed from the original process, followed by the substitution of a cheaper low-quality sand proppant, removal of pre-frac acid treatments, and finally even the gel itself — all without significantly reducing effectiveness. This learning-by-doing process culminated in the deployment of the "slick water fracturing" technology (originally developed by Union Pacific Railroad for tight gas formations and, before it, Exxon for oil wells) for shales, reducing well stimulation costs by half and overall well costs by hundreds of thousands of dollars.
Mitchell Energy was rewarded for its early risk taking when the substantial shale acreages it had built up throughout the Barnett during the long applied R&D process (informed by — public- and private-sector geologic characterizations) were recognized for their newfound commercial value. And following the multibillion-dollar Mitchell-Devon Energy merger in 2002, shale gas development took off. The seemingly disparate technologies that had been explored over the past twenty to thirty years of R&D fell into place as enablers of commercial operations. Mitchell's slick water fracturing was combined with Devon's expertise in horizontal drilling, something that Mitchell had been unable to accomplish on its own; microseismic fracture mapping was successfully used to monitor stimulated shale gas well performance; and 3D seismic was increasingly used to identify new shale gas resources and guide low-tolerance horizontal drilling operations. Finally, a period of sustained high domestic gas prices provided headroom to continued development, eventually leading to the widespread use we see today across the United States. This stands today as one of the strongest examples of a public-private research partnership from many disparate strands, enabling the growth and development of a critical energy technology.
In the five years since the start of the hydraulic fracturing boom, the United States has not only become the global leader in the production of natural gas from shales, but also the — fastest-growing producer of oil. This means new wells in new landscapes — many of them populated, and many of them previously untouched by upstream oil and gas operations. Ongoing research seeks to improve understanding and mitigation of the industry's environmental effects — both in general and those that are particular to fracturing itself — including atmospheric, surface, and subsurface water contamination.
We don't actually know if we're doing a good job right now. We're maybe recovering between eight and thirteen percent of the resource. We don't know if the technologies we're using today are impairing future recovery of future resource. We don't know whether or not we're actually shooting ourselves in the foot today in terms of a national asset which has not been measured well and has not been developed in a way that's thinking about the long-term potential value. A lot of the potential allure of recovery — getting the flow paths right, making sure that we don't damage aquifers, and a number of other things — boils down to the ability to make and control fractures in the subsurface and the coupled hydrology that comes with them. That geo-mechanical problem is one that has been grossly underserved in a federal research program for a long, long time.
— Julio Friedmann, Lawrence Livermore National Laboratory chief energy technologist
Better understanding of subsurface-induced fracturing dynamics could also help improve hydrocarbon production efficiency and resource management. Moreover, unconventional domestic oil and gas asset estimates have not kept pace with new production growth. Work is currently ongoing to develop more credible geologic characterizations of these new resources and reserves, with academic researchers playing a significant role.
The need for fundamental and chemical mechanisms controlling flow from the nanoscale to the basin scale. ... This kind of research is going on in a number of universities around the country and the question of how much gas we're actually going to be able to recover boils down to nanoscale processes that are not yet well constrained. We have these large maps. We draw circles around large basins, but actually on an individual well basis, we don't understand these processes well enough to answer the question of whether or not these wells are going to last five years or they're going to last twenty-five years. And this research is absolutely essential. ... the private sector is very heavily involved in all these things and it's a combined responsibility to move the ball forward.
— Mark Zoback, Stanford University Benjamin M. Page professor of geophysics
The potential to increase recovery from existing fields — so no new surface infrastructure — is about 5–15 percent enhanced recovery. Subsurface micro and nanosensors — a third remote sensing platform, different from well logging and seismic — are being developed to address this EOR [enhanced oil recovery] target.
— Scott Tinker, Bureau of Economic Geology director at the University of Texas at Austin
Looking beyond the next decade, and even as the US energy system continues to greatly expand the usage of alternative energy, it is nonetheless clear both that oil and gas will maintain a major share of our energy demand and remain important pillars of our national and local economies. So longer-term R&D is just as important in this sector as it has always been.
For example, if China were able to successfully exploit its significant but hard-to-reach shale-gas resources as the United States does today, it would be just as much, or more, of a game changer as our own domestic experience to date. And China is even more desperate for solutions because of the devastating effect of particulate pollution from coal-fired power on its cities. For hydraulic fracturing to work in China, in addition to an improved property rights regime, we will need new technologies to improve deep-well costs and reduce fracing's water use. This is hard, but not impossible. Moreover, shifting natural gas from what is now essentially an imported boutique fuel in China to a serious domestically produced baseload power-generation contender would displace coal and help enable further renewable deployment on the Chinese electric grid through the ability to balance intermittence. Both would have positive spillover effects beyond China.
In that spirit, US universities are forging ahead in R&D for radical new drilling and completion concepts. Moreover, many such subsurface technologies could be dual use, enabling other clean but currently less economic energy systems such as geothermal and carbon capture and sequestration.CHAPTER 2
This is absolutely critical so we're hell bent on getting this done.
— Arun Majumdar, Google vice president for energy
Renewable solar power, which has the potential to enhance the energy security and environmental performance of the US energy system, is a reality today. The extremely low cost of the conventional baseload power generation that is otherwise available to Americans, however, means that renewable — technologies — whether centralized or distributed — require a continued strong R&D effort to compete economically without subsidies.
But here is why so many observers are optimistic about photovoltaics (PV): things are getting better, and fast. Take a pencil to the historical solar PV cost per kilowatt-hour curve, and extend its gradual declining slope just five or ten years into the future. Before you know it, the pencil will start getting close to zero, and well within the cost range of many conventional power-generation technologies — all with little to no fuel requirements or operational pollution. While there are legitimate questions about the sustainability of this decline (i.e., how much of it is the result of genuine innovation and economies of scale and how much of it is a result of low-cost dumping of PV panels by a Chinese manufacturing glut), there is no doubt that trends are moving rapidly in the right direction.
If you compare the cost of solar fifteen years ago to the cost of solar today, it has been reduced dramatically by a factor of five. And we're expecting that in the future there will be another factor of three at a minimum. There is nothing that is fundamentally stopping us from getting the cost down.
— Vladimir Bulovic, MIT School of Engineering associate dean for innovation
Today, there is a lot around the edges that can be done to make solar PVs more affordable: the pick-and-shovel work of installation that now makes up a majority of the total cost could be reduced, permitting could be streamlined, or more efficient financing mechanisms could extend consumer availability. At the same time, as noted above, many of the PV panel-side cost reductions in recent years have been the result of fierce competition among manufacturers, slashing profit margins and optimizing operational efficiencies to make up for over-investment in production capacity while tweaking well-known panel technologies to eke out slight gains in efficiency, form factor, and panel longevity.
But ultimately, R&D in the lab amplifies the effectiveness of all of these "soft cost" efforts, which promises to significantly improve the performance of the underlying PV product. For example, even the bugbear of panel-installation costs in many ways hinges on R&D — if not through direct research on panel form-factor or attributes such as weight and modularity, then on fundamental if tedious marginal progress in panel conversion efficiency itself. After all, if the same PV panel that costs $100 to lift onto a roof is more efficient to the tune of 10 percent, then the share for installation in the total cost may go up, but the actual installation costs per kilowatt-hour of electricity produced will fall. Driving down this cost per unit of useful energy production motivates much of today's R&D efforts in PVs.
Excerpted from Game Changers by George Shultz, Robert Armstrong. Copyright © 2014 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Hoover Institution Press.
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Table of Contents
Chapter 1 Natural Gas from Shales 1
Available Today: IT-enabled "smart" oil fields now make mountains of computational data available in real time to project engineers in the field or at distant control centers.
Near At Hand: University of Texas's downhole electromagnetic monitoring of frac proppants in a shale formation can greatly enhance fracture efficiency at low cost.
Near At Hand: A research team at the University of Texas has developed a novel hydrophobic membrane that resists clogging and enables fresh water savings of 50 percent during the fracing process.
Near At Hand: Stanford's ambient seismic oilfield monitoring technology could help oil companies improve recovery techniques and let drillers more effectively monitor existing oil fields.
On The Horizon: MIT's millimeter-wave rock-vaporizing directed energy beams could replace drill bits to access underground energy resources.
On The Horizon: University of Texas researchers have shown that hot brines saturated with dissolved methane in the Gulf of Mexico could be used to recover vast amounts of methane and geothermal energy, and also be a store of injected carbon dioxide.
Chapter 2 Solar Photovoltaics 17
Available Today: High-efficiency mono crystalline rear-junction silicon cells have over three decades grown from Stanford graduate student research into a multibillion-dollar business with dramatically reduced manufacturing costs.
Near At Hand: Stanford's nanocrystalline-silicon shells improve thin solar panel light absorption, reducing materials usage and processing costs.
Near At Hand: MIT's three-dimensional solar cell arrangements could reduce installation cost and increase power output per base area.
On The Horizon: MIT's thin-film organic polymer flexible solar cells, created with moderate temperatures and no liquids, have been printed on tissue paper, textiles, and even plastic food wrap.
On The Horizon: University of Texas's printable inorganic thin-film flexible solar cells have reached efficiencies of nearly 4 percent without the need for expensive high-temperature manufacturing processes.
On The Horizon: A University of Michigan team is analyzing the potential of photovoltaic technology based on semitransparent organic material that could be incorporated into conventional built environment surfaces.
Chapter 3 Grid-Scale Electricity Storage 33
Available Today: A new generation of research into compressed air energy storage technology reduces costs and improves efficiency by changing how these systems handle heat during compression and expansion.
Available Today: USC and Caltech's direct methanol fuel cell technology has proven commercially useful for long-lasting, low-power electricity delivery in a wide variety of distributed power applications.
Near At Hand: MIT researchers have unraveled the properties of a "superlattice" material structure that improves the reactivity of fuel cell electrodes.
Near At Hand: Research at Stanford on multiwalled carbon nanotubes and graphene has found a way to reduce the cost of fuel cells by replacing platinum catalysts.
On The Horizon: MIT's liquid-metal batteries employ a novel "reverse smelting" process to lower the costs and increase the longevity of large-scale energy storage.
On The Horizon: Stanford's low-cost crystalline copper hexacyanoferrate large-scale battery electrode lasts for 40,000 cycles of charging and discharging.
On The Horizon: A Stanford research team's simplified lithium polysulfide membrane-free flow battery performs well over more than 2,000 discharge cycles.
Chapter 4 Electric Cars
Available Today: MIT's carbon nanotube enhanced ultracapacitor, now commercially available, stores twice as much energy as conventional alternatives and delivers seven to fifteen times more power.
Available Today: The origins of lithium-ion batteries, now ubiquitous in mobile electronics and increasingly so in electric vehicles, can be traced to university and industry research in the 1970s and 1980s.
Near At Hand: Stanford's novel electrodes made of silicon nanoparticles and conducting polymer hydrogel dramatically improve the performance of lithium-ion batteries.
Near At Hand: UT Austin's researchers have demonstrated a novel "carbon paper" cell configuration that improves long-life, high-energy, and high-power lithium-sulfur batteries.
Near At Hand: MIT's carbon nanofiber lithium-air battery demonstrates energy density significantly above today's lithium-ion cells.
Near At Hand: UC Berkeley's rechargeable, flexible zinc batteries aim to create a new class of lower-cost and safer energy-storage devices.
Near At Hand: University of Michigan's vanadium nitride supercapacitors aim to double the energy density of the current generation of supercapacitors while dramatically reducing cost.
On The Horizon: Stanford's improved highway magnetic induction system could potentially be used to wirelessly charge cars and trucks as they are driven.
On The Horizon: University of Michigan's driverless vehicle research test bed will simulate public roads to examine the feasibility of connected vehicle automation.
Chapter 5 LED Lighting 63
Available Today: University of Michigan's high-quality, LED-based drop-in bulbs can effectively replace the fluorescent tubes commonly used in commercial applications.
Available Today: A Stanford program in cross-disciplinary "design thinking" has helped launch an affordable, solar-powered LED lantern for the developing world.
Near At Hand: MIT's nanophosphor "quantum dot" LEDs, now commercialized, affordably improve the color reproduction of highly energy-efficient LED bulbs and visual displays.
On The Horizon: Georgia Tech research into high-efficiency piezo-electric microwires improves the efficiency at which LEDs convert electricity to ultraviolet light by up to four times.
On The Horizon: An international research team has demonstrated a revolutionary electrically driven polariton laser that could significantly improve the efficiency of lasers.
On The Horizon: An interdisciplinary research team at Stanford has created a device that tames the flow of individual photons with synthetic magnetism.
Looking Ahead: Known Unknowns 77
Science and engineering advances often have crosscutting implications. A sampling of some that may particularly impact energy: thermoelectrics and thermionics, surfaces at the nanoscale, algorithms and software, and catalysts and computational chemistry.
Game Changers In Action: The US Military 93
Extreme energy reliability and performance demands put the US military at the leading edge of driving energy innovations. This section surveys potentially game-changing energy technologies being operationalized by the US Army, Navy Marine Corps, and Air Force on base and in forward deployment.
Conclusion: Energy Researchers as a Strategic Asset 107
About the Contributors 113
About the Hoover Institution's Shultz-Stephenson Task Force on Energy Policy and the MIT Energy Initiative 117