Following BP and Shell’s recent U-turn on their previously announced production cuts, the credibility of oil and gas companies’ transition strategies is in focus. However, much of the discourse in the press, and among shareholder activists, centers on the plans of integrated oil and gas companies, particularly the majors. The independent exploration and production (E&P) companies, whose businesses are primarily focused on finding and extracting hydrocarbons, have largely been overlooked in the transition conversation.
Yet, the potential for these independent E&P companies to transition to a low-carbon economy is significant, especially given the similarities between geothermal drilling and oil and gas extraction. The recent news from Fervo Energy, a geothermal startup, underscores this potential. Fervo has achieved a key technical milestone by successfully applying oil drilling technology, specifically hydraulic fracturing, to tap into geothermal energy. This breakthrough suggests that independent E&P companies, particularly those involved in fracking, can transition more quickly (to geothermal energy) than previously thought.
The process combines drilling deep wells with hydraulic fracturing, creating large reservoirs deep in the Earth’s crust. Thermal energy in the Earth’s crust raises the temperature of any water pumped into the reservoir, and when the water is pumped back to the surface a heat exchanger converts the heat to steam that powers a turbine, generating electricity.
Fervo’s recent 30-day test at its pilot plant in northern Nevada achieved conditions that would have generated 3.5 megawatts of electricity production, enough to power approximately 2,625 homes at once. This breakthrough provides an opportunity for smaller E&P companies to transition, especially US shale producers. The application of fracking technology to geothermal energy extraction opens new geographies for carbon-free energy production, provided the ground water impacts and the potential for induced seismicity can be mitigated, and could play a crucial role in the global transition to a low-carbon economy.
The transition of independent E&P companies to geothermal energy producers has always been feasible. Fervo’s breakthrough suggests it is now more possible. Whether it becomes reality is for another day, but it’s clear that the future of the oil and gas industry lies not just in the hands of the household names, but also in the innovative approaches of independent E&P companies.
David Root
Head of Client Engagement
FFI Solutions