|Fig. 1: Schematic Picture of Underground Shale Drilling. (Source: Wikimedia Commons)|
Shale is a sedimentary rock composed mostly of mud, that typically sits around 7000 feet beneath ground. As a sedimentary layer, shale is particularly rich in oil and natural gas, but exploiting these resources is tricky- for a number of reasons. Firstly, they are not found in pockets, as is conventional. Rather, they are dispersed (more or less) homogenously throughout the shale sediment. Secondly, shale formations aren't very thick (50-1000 ft), so drilling them vertically would not be particularly efficient or fruitful. That is where Hydraulic Fracturing comes into the picture.
Hydraulic Fracturing, or "Fracking", is a method of drilling used to horizontally extract crudes from the shale formations in which they sit. After briefly walking through this process by which these crudes are extracted, I will discuss a recent downturn in the shale exploration industry due to oversupply. This conversation will focus on the oversupply of natural gas, since the effect of horizontal drilling on oil supply has been marginal in comparison. Ultimately, I will conclude that this hiccough is not a threat to the future of shale extraction, which will remain the most promising source of natural gas for years to come.
Fracking is accomplished first by drilling vertically downwards from the wellhead, until the drill sits about 900 feet from the shale formation. At this stage, a directional drill is employed in order to progressively curve the drill hole until it is more or less parallel to the shale. It is worth noting that multiple horizontal canals, exploiting different parts of the shale, can be created from a single over ground well. Hence, the operational footprint of this sort extraction is quite small. 
As the well is excavated horizontally through the shale, it is reinforced with perforated steel that oil and gas can flow into. However, for these to escape the shale, vertical fracture networks must be created in the rock. In order to create these networks, extractors will pump several million gallons of fluid through the well and into the rock at high pressure. This fluid is usually composed mostly of water (95%-98%), sand (1%-2%), and proprietary chemicals (0.5%-2%). The sand helps to maintain the fractures after the water pressure has fallen, while the chemicals can be acids to clean up the shale, or biocides to ensure that organisms don't clog up the shale fractures. As such, gas or oil escapes the shale and pours into the well, from where it can be extracted easily.
Over the past few years, the production of gas from shale has been celebrated for bringing energy independence to the US, and for stabilizing energy markets worldwide. It turned the US into the world's largest producer of natural gas, and was praised by President Obama for providing an environmentally friendly source of electricity. As it turns out, horizontal drilling is indeed a cheap and clean way of producing lots of natural gas. It is so effective, in fact, that it has recently become a victim of its own success. 
In recent weeks, the markets have given shale producers some cause for concern. Some of the most forward-looking shale gas producers have seen their shares tank this year. Range Resources' shares were down 18% this year, as of late September. Likewise, Cabot Oil & Gas equity has shrunk by 17%, and Chesapeake is down 7%. Indeed shale companies, or E&Ps as they're known in investor circles, have produced more gas for fewer dollars than most thought possible (Dizard), and in so doing they have flooded the market, making gas prices tank. The outlook for E&Ps is not all bleak, however. The falling cost of shale excavation is allowing E&Ps to weather low gas prices with reasonable success.  For example EOG resources, one of the biggest shale excavators in the US, has cut its cost-per-well in the Leonard shale from $6.9m in 2011 to $5m today. The recent climate has proven that the model for shale drilling is resilient enough to withstand abnormally low prices for natural resources, which is promising for the future.
It is difficult to see how the current climate of crude prices worldwide will endanger the future of shale drilling. As I have explained, shale drilling allows for the relatively cheap extraction of oil and gas in large quantities, with minimal environmental impact. Seeing as these resources are non-renewable, current oversupply will inevitably dissipate, and prices will return to a profitable level.
© Louis Lambilliotte. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
 A. Clark et al., "Hydraulic Fracturing and Shale Gas Production: Technology, Impacts, and Regulations," Argonne National Laboratory, ANL/EVS/R-12/5, April 2013.
 J. Dizard, "US Shale Oil and Gas Producers Are Victims of Their Own Success," Financial Times, 26 Sep 14.
 E. Crooks, "Falling Oil Price to Cut Shale Costs," Financial Times, 22 Oct 14.