Sunday, February 1, 2015

Industrial Policy in Oil Exploration

Since 2008, US oil production has risen spectacularly by nearly 80 percent, on the back of oil and gas extracted from underneath shale rock formations. This development which promises to usher energy independence for the US has been enabled by two breakthrough technologies - hydraulic fracking and horizontal drilling.

However, as Eduardo Porter reports, these technologies originated from US industrial policy in the aftermath of the 1973 Arab oil embargo,
Congress passed the Energy Reorganization Act of 1974, creating the Energy Research and Development Administration — which would soon become the Department of Energy. This kick-started a period of heavy government investment in research and development to recover gas from shale. The agency provided funds for “directionally deviated” drilling, a precursor to the horizontal drilling used today. It subsidized the development of polycrystalline diamond compact bits to cut through the shale. It performed the first big hydraulic fracturing. Energy Department labs created a multi-well fracking test site. Research at the Sandia National Laboratories into underground imaging — based on microseismic monitoring once used to detect coal mine collapses — was critical to map fractures and position wells.

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