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Innovation in Shale Oil Extraction: A Modern, Latin-American Quest

By: Carla Chinski

Twitter: @thelatestbyte

Post Date: 2022-03-04


In a world rife with energy needs and geopolitical machinations, shale oil emerges as a resource both coveted and controversial. Latin America, richly endowed with this hydrocarbon as one of the most exploited resoueces, stands at a crossroads. The region's storied history of intense exploitation – characterized by land occupation, invasive fracking, and environmentally aggressive practices – casts a shadow over its aspirations for energetic sovereignty. Yet, as we stand on the brink of technological transformation, could innovations in drilling techniques herald a new era?

New techniques for shale oil extraction, as we’re about to see, could reshape not just the region's energy sector, but its social fabric and economic prospects as well. Moreover, in the fervent quest for energy autonomy and economic rejuvenation, how can Latin American nations ensure that the benefits are equitably distributed?

Historically, Latin America's petroleum narrative has been marked by a significant shift from dependence on imports to a more balanced and, in some cases, export-oriented stance. Countries like Brazil have made considerable strides in offshore oil exploration, particularly in the pre-salt layers, propelling them into the league of top oil producers. Mexico, after its historic energy reform in 2013, opened its oil and gas sector to foreign investment for the first time in nearly 80 years, aiming to reverse declining production and reduce reliance on imports, although the results have been mixed. So, this predominant narrative of a resource-rich region is at a pivotal juncture.

For instance, Argentina's discovery and development of the Vaca Muerta shale formation has been particularly transformative, positioning the country as a potential global leader in shale oil and gas production. Navigating this terrain is no easy feat. In a context where exportation is required but, meanwhile, energy sovereignty is sought after by local governments, regional cooperations have been key, rather than pursuing nation-only exports. One such example is the Central American Electrical Interconnection System (SIEPAC), which allows trade to be more stable between countries and absorb external economic shocks from the West.

Shale Oil Innovations in Recent Years

However, the road to shale oil prosperity is not without challenges. The initial capital investment for drilling and infrastructure development is substantial. Moreover, the volatility of global oil prices can impact the economic feasibility of shale oil projects. Political and regulatory environments also play a crucial role, as supportive policies and stable governance are essential for long-term investments.

The Vaca Muerta formation in Argentina, which we’ve mentioned already, is estimated to contain billions of barrels of recoverable oil, positioning the country as a potential global energy leader. However, accessing these reserves requires technological finesse and innovation. Traditionally, shale oil extraction has been fraught with challenges, from the high costs of drilling and extraction to the significant environmental footprint. But recent advancements have begun to change the narrative. Horizontal drilling and hydraulic fracturing, or "fracking," have revolutionized the process. These techniques allow for more precise access to shale formations, significantly increasing the efficiency and volume of extraction.

Within the country, the Observatory for Economic Complexity (OEC) found petroleum to be Argentina’s second largest exported resource, “In 2021, Argentina was the number 28 economy in the world in terms of GDP (current US$), the number 48 in total exports, the number 51 in total imports, the number 82 economy in terms of GDP per capita”. But what happens with attracting foreign investment internally?

Well, innovation can make Latin-American countries more attractive to foreign countries such as the United States; countries like Argentina and Chile can have yet more leverage in international relations, as elections approach in the former. In both Argentina and Ecuador, economic crises have lead to all-time lows for employment opportunities, forcing more and more population downwards of the poverty and homelessness indexes. Where GDP is decreasing from what could be euphemized as generous public spending, energy provision by countries’ own means could imply cutting down costs and avoiding extra subsidies.

What’s Going On with Shale?

For instance, horizontal drilling involves the drilling of wells that turn horizontally within the shale formation, exposing more of the wellbore to the oil-bearing rock, hence increasing the amount of oil that can be extracted. When combined with hydraulic fracturing, which uses a high-pressure fluid mixture to create fissures in the rock, these methods have vastly improved the extraction rates and economic viability of shale oil operations.

The environmental impact of shale oil extraction has long been a contentious issue, with concerns ranging from water usage to seismic activity. In response, Latin American countries have started adopting greener technologies. For instance, waterless fracking, which uses gases like carbon dioxide or nitrogen instead of water, has gained traction. This method not only conserves water resources but also reduces the risk of groundwater contamination. Another innovative approach is the use of renewable energy sources to power extraction operations. In Argentina, some companies are harnessing solar and wind energy to run their drilling rigs, a move that not only reduces carbon emissions but also cuts operational costs in the long run.

Moreover, the advent of digital technologies has enabled more precise exploration and monitoring of shale formations. Advanced seismic imaging techniques, for instance, allow companies to create detailed subsurface maps, reducing the need for exploratory drilling and minimizing the environmental disturbance.

Economic Implications for Developing Regions: Push and Pull

The innovations in shale oil extraction have profound economic implications for Latin American countries. The ability to tap into vast shale reserves can lead to energy independence, reduce reliance on imports, and provide a significant boost to the national economies. For instance, Argentina's Vaca Muerta formation has attracted substantial foreign investment, promising to revitalize the country's energy sector.

However, there are some risks to be taken seriously. First, the initial capital investment for drilling and infrastructure development is substantial. Second, the volatility of global oil prices can impact the economic feasibility of shale oil projects. Political and regulatory environments also play a crucial role, as supportive policies and stable governance are essential for long-term investments. As these nations continue to innovate and adapt, they pave the way for a more sustainable and prosperous energy future.

Image: Freepik

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