The cautionary tale of US fracking companies – The Wall Street Journal

Oil, the black gold of modern times, is an intoxicating dream. Finding a rich source of oil can transform a community, or a country. Nations like Norway have grown rich on the back of a rich oilfield. But history is also littered with examples of countries for which oil has proven a resource-curse, from Venezuela to Nigeria. Recent events in the US serve to underscore another danger of the oil dream: Excitement about black gold can lead to the loss of a lot of green (money). The US has enjoyed a long and exciting fracking boom – much of it centred on the Permian basin on west Texas and New Mexico. But while fracking operations have dramatically increased US oil production and helped lower global oil prices, one thing that they have not done is made any money. Indeed, most fracking companies have actually delivered major operational losses, and often, the more they produce, the more money they lose. Part of this is due to the nature of fracking. Fracking wells tend to produce a lot in the first year and then less and less every year after (unlike more consistent oilfields in places like the Gulf and Saudi Arabia). Plus, fracking is expensive and complicated, demanding a lot of skilled workers and special equipment. So, those South Africans dreaming of a Karoo fracking boom might want to read this article carefully. – Felicity Duncan

A Leader of America's Fracking Boom Has Second Thoughts

By Rebecca Elliott and Bradley Olson

Early this year, Scott Sheffield realized he had a problem. Investors were cooling on Pioneer Natural Resources Co., the company he built into one of the leaders of the American fracking boom.

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