The idea that the U.S. shale gas revolution was driven by small and midsize companies is largely false, two researchers said in a new report released by the group Resources for the Future.
In the report, Zhongmin Wang of Northeastern University and Qing Xue of the Chinese University of Petroleum noted that Mitchell Energy began the shale gas phenomenon in the Barnett Shale in the 1980s. After Devon Energy Corp. bought the company in 2002 and it became apparent that horizontal drilling in shale plays could be done successfully, companies of all sizes started to follow suit.
“Once drilling technologies achieved profitability, the barrier to entry became low, mainly because natural gas producers, large and small, typically outsource the drilling and fracking of a well to specialized oil and gas service companies,” the researchers wrote in “The Market Structure of Shale Gas Drilling in the United States.”
“Large gas producers have their own engineers who plan and design wells, but very small producers even outsource the planning and design function to service companies. Other than paying the service companies, these small natural gas producers only need to lease land and mineral rights from private landowners.”