Could low oil prices kill the fracking business?
Texas Barnett Shale gas drilling rig. Image by Loadmaster (David R. Tribble) via Wikimedia Commons
At the start of 2014, there were more than 60 companies with fracking operations in the United States. But fracking has high overhead costs compared to other means of energy production, and the profitability of the process has become increasingly marginal as a result of stagnant oil prices. As companies close up shop or are acquired by larger operations, only 41 companies using the controversial technique remain. Bloomberg Business reports that by the end of this year that number could easily be cut in half, with only 20 or so fracking companies left.
At a conference in Houston, Rob Fulks, pressure pumping marketing director at Weatherford, the fifth-largest fracking group in the U.S., predicted the drop. “We go by and we see yards are locked up and the doors are closed,” he said. According to Bloomberg, oil companies will reduce their spending by more than $100 billion this year, as prices remain in a slump. While some project a rebound for petroleum, speaking at the same conference as Fulk, ExxonMobil’s CEO Rex Tillerson predicted no end in sight for cheap oil.
Image by Poster Boy via Flickr
While this is probably bad news for Fulk and his ilk, to many others who have spent the last decade trying to stem the flow of fracking and its associated risks to human health and the environment, this could be a boon if oil prices stay low for long enough. On the other hand, the fracking slide has left a glut of cheap extraction equipment that is being snatched up by larger companies, and half-finished projects that could easily be kicked back into motion if oil prices were to rebound. While on their own, super cheap equipment and drilling services could theoretically create a window for profitable fracking, it remains to be seen if costs will fall enough for this to actually happen. Bloomberg writes:
While many large private-equity firms are looking at fracking companies to buy, the spread between buyer and seller pricing is still too wide for now, Alex Robart, a principal at PacWest, said in an interview at CERAWeek.