Is Offshore Fracking the Next Frontier?

Deep Water Fracking Next Frontier for Offshore Drilling

Energy companies are taking their controversial fracking operations from the land to thesea-- to deep waters off the U.S., South American and African coasts.

Cracking rocks underground to allow oil and gas to flow more freely into wells has grown into one of the most lucrative industry practices of the past century. The technique is also widely condemned as a source of groundwater contamination. The question now is how will that debate play out as the equipment moves out into the deep blue. For now, caution from all sides is the operative word.

"It's the most challenging, harshest environment that we'll be working in," said Ron Dusterhoft, an engineer at Halliburton Co., the world's largest fracker. "You just can't afford hiccups."

Offshore fracking is a part of a broader industrywide strategy to make billion-dollar deep-sea developments pay off. The practice has been around for two decades yet only in the past few years have advances in technology and vast offshore discoveries combined to make large scale fracking feasible.

While fracking is also moving off the coasts of Brazil and Africa, the big play is in the Gulf of Mexico, where wells more than 100 miles from the coastline must traverse water depths of a mile or more and can cost almost $100 million to drill.

Dumped Overboard

That's a reasonable and worthwhile investment, as the industry grapples with the challenge of "how to best fracture and stimulate the rocks" bearing crude oil, said Cindy Yielding, director of appraisal at BP.

At sea, water flowing back from fracked wells is cleaned up on large platforms near the well by filtering out oil and other contaminants. The treated wastewater is then dumped overboard into the vast expanse of the Gulf of Mexico, where dilution renders it harmless, according to companies and regulators.

The treatment process is mandated under Environmental Protection Agencyregulations. In California, where producers are fracking offshore in existing fields, critics led by the Environmental Defense Center have asked federal regulators to ban the practice off the West Coast until more is known about its effects.

Harmed Sea-life

Offshore fracking in the Gulf of Mexico should also be subject to a detailed environmental review, said Tony Knap, director of the Geochemical and Environmental Research Group at Texas A&M University. The concern is that chemicals used in the fracking fluid that's released in the Gulf could harm sea life or upset the ecosystem, said Miyoko Sakashita, oceans director at theCenter for Biological Diversity.

Source: Bloomberg

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• Insurance & Risk Management
• Fracking