You’ve no doubt heard about hydraulic fracking and the new business that crude oil from this process has brought to the inland barge industry. But what about fracking 2.0?
Some say this could be the next big trend in the oil patch. And if so, it could mean a new source of business for liquid barging, which has softened up of late as crude oil prices and production have dropped.
Fracking 2.0 is what the oil companies are increasingly doing these days in order to produce more oil more cheaply with new technologies. It involves the re-fracking of existing wells using techniques that didn’t exist the first time the wells were drilled. Blasting water, sand and chemicals down older shale wells that have already been fracked will crack the rock, which lets oil and gas flow up to the surface.
Refracking results have been spotty, but with the current oil crash, more and more energy companies are looking into it. There are about 50,000 wells in the U.S. that could be suitable for fracking 2.0, according to Bloomberg.
Refracking an older well costs about $2 million, while it can cost about $8 million to drill a new one. Now you get the idea of why it’s so attractive.
Barge operators like Kirby, the nation’s largest tank barge operator, are already feeling the pinch as demand for barges to move crude to refineries has weakened. They have seen profits dip and are rethinking their business outlook.
Refracking could help oil production recover and that could restore demand for crude-on-barge, many say.
“You’ve got a new phenomenon coming out which is refracking of wells which is very cost effective,”David Grzebinski, president and CEO said in Kirby’s April 30 earnings call with analysts. “You are starting to hear more about that. I don’t know that the volumes are significant yet, but it is another cost migrating effort that the industry is undertaking.”
