In March 2005 an unknown start up oil company, privately owned and funded, drilled its first experimental well in LaSalle County, Texas. The company was named FHEG, Fracking Horizontal Energy Group. They used off the shelf technology, horizontal drilling that had been pioneered in the late 1980's to develop the Austin Chalk oil formation, also in Texas. Fracking techniques that had been developed over many decades until hydro-fracking had become well understood and useful for getting better lifting rates from conventional oil wells. Lastly, but certainly not least was the development of multi-lateral wells where the drilling underground was no longer just a line but now resembled a root system with branches at semi regular intervals to fan out under the surface as the well bore got further from the vertical collection piping.
FHEG beats the competitionNow for the first time FHEG put them all together by drilling down into the Eagle Ford Shale formation, creating a root like branching network for a full mile in all directions around the surface drilling location, then preforming multiple hydraulic fracturing locations on the multiple branches to get maximum contact between the fractures and the well bore.
It was a huge gamble, the most expensive well anyone had ever drilled in the entire history of Petroleum extraction. Even worse, because it was new to put all these different techniques together it took months before the first drop of saleable oil was produced for FHEG to put on the market.
If Oil had not hit the high price of $60 a barrel it is doubtful the owner of FHEG would have ever gone ahead with the project. When the well was finally ready however nobody was more pleased than he was to see over 7,000 barrels a day being produced. He had sunk costs of $3,200,000 into the well. On that first day the oil lifted was worth $350,000 and in two weeks he had made back his investment and was getting a healthy profit, despite the severance taxes and other sums of money sent to the State of Texas and Federal Government, and the rancher who owned the land and was leasing the mineral rights to FHEG.
With oil bouncing between $55 and $65 a barrel FHEG went right to work drilling more wells based on their techniques. Needless to say, because all of the processes were already well known in the oil industry it was not long at all before other oil companies were imitating FHEG. Some got just as rich, some struck out, but by the end of 2006 fracking was the new buzz all through the oil industry and by mid 2007 the USA was actually producing more oil than it had in 2003. Fears about Peak Oil and the imminent decline of world oil supplies died away as the Fracking revolution was able to reverse the decline in Texas in a way nobody had predicted, or expected.
Even at $65 a barrel a fracking well was so expensive to drill you had to pick your location carefully, otherwise you never made back your investment. Even so other shale formations around America were starting to experience the same kind of Fracking boom as Texas, with drilling in North Dakota, Pennsylvania and Ohio garnering the most attention.
Late in 2008 the housing bubble burst, and for a few month the terrible economy drove oil prices down from $65 a barrel to $35, but by the end of 2009 they were back to $55 and fracking resumed its rapid pace of early 2008. By 2010 American oil production had returned to 1990 levels, something nobody in March 2005 would have believed could happen without divine intervention.
Of course no boom lasts forever. By January 2010 so many of the fracking sweet spots had been drilled only spots of more modest production rates were available to drill. This created a dilemma, without constantly drilling more wells depletion rates would begin to set in lowering American oil production once again. On the other horn of the dilemma to make less productive locations profitable the sale price of oil would have to continue to rise. If it rose too far it would destroy demand for oil, leaving those companies with oil they could sell for $50 a barrel that had cost them $100 a barrel to find, drill and frack before the first barrel was sold.