Question

Horizontal drilling and hydraulic fracking have changed the prospects of the oil industry from an industry facing production shortages to one facing surpluses. To date the United States has been the only country to embrace these new technologies. It is widely believed that many other countries have formations and basins that would be productive using these new technologies. Look up a couple of articles and list your opinions as to why other countries are not adopting horizontal drilling and hydraulic fracking. Cite your sources.

Answer 1

The reason why other countries are not adopting horizontal drilling and hydraulic fracking is that the political and economic circumstances in other countries are vastly different from the circumstances in USA and the circumstances in these countries does not systematically support the use of these technologies. For example countries like Great Britain, Poland, etc. all have shale gas deposits but they are not using and adopting horizontal drilling and hydraulic fracking due to factors like price, regulatory framework, infrastructure, mineral rights etc.

The gas prices dropped sharply following its peak of $12 per million BTUs in the year 2008. The drop was massive and this made drilling for gas no longer profitable. Horizontal drilling and hydraulic fracking are unconventional practices and the drop in prices has rendered them financially unviable. USA is able to take this financial risk as it has stopped importing gas altogether and has in fact started exporting it. Secondly the regulatory framework in USA allows drillers to experiment with unconventional methods of horizontal drilling and hydraulic fracking. The petroleum contracts that countries use outside USA does not allow them to go ahead and use these unconventional methods. The next factor is that of infrastructure. USA has a robust midstream infrastructure while this kind of infrastructure is lacking in other countries. Lastly mineral rights are easy and relaxed in USA where landowners have the right to lease mineral rights to their property. This right is not there for landowners in the countries mentioned in the first paragraph.

Sources:

(1): Six Reasons Fracking Has Flopped Overseas (April 7, 2013), Jeff McMahon

(2): Countries Approach Fracking With Interest and Caution (January 2, 2014), Stephen L. Kass