Nobody doubts that the cost of US fracking has fallen since oil prices collapsed in June 2014. However, there is considerable disagreement over the causes. While critics point out that since 2014 wages and service costs have fallen dramatically, the fracking companies have been keen to claim that technological improvements are responsible for lower costs. However, the companies have been far more reticent about what these technological improvements are.
One likely contender is extended lateral drilling – that is, drilling longer (horizontal) holes. This, though, may yet prove to be a very expensive improvement. According to Adam Wilmoth in NewsOK:
“At least 450 older vertical wells in Kingfisher County alone have been damaged economically because of bigger horizontal wells in the area, according to an interim report by vertical producers.
“The Oklahoma Energy Producers Alliance released the interim study last week, saying it indicates that the older wells have experienced widespread well bashing and that damage has cost producers and royalty owners throughout the state.”
In effect, the fracking companies have been drilling into oil deposits already owned by conventional oil companies… and damaging the existing wells in the process. This is likely to result in lengthy court disputes that will add to the financial woes of the fracking companies. As Wilmoth reports:
“A federal jury last month awarded H&S Equipment Inc. and Mark Holloway Inc. $220,000 in damages for vertical wells that were affected by horizontal wells drilled by Felix Energy LLC…”
These cases will fuel speculation about the likelihood of fracking companies using extended lateral drilling to encroach on each other’s shale deposits; especially as profitable shale oil and gas is increasingly limited to relatively small sweet spots within much larger plays.