How Chesapeake Energy changed the world
DRILLING FOR oil and gas is a contest of man and machine against nature. In America’s shale formations, nature takes the form of rocks, rich in hydrocarbons, buried about a mile (1.6 kilometres) below ground. It is a geologist’s job to find those rocks. It is an engineer’s job to develop the right mix of water, chemicals and drilling technology to “hydraulically fracture” them. One of the core beliefs of America’s shale-fracking revolution, which took off in the late 2000s, is that if you blast enough pressure at the rocks for long enough, they will eventually yield a big bounty.
The two “Okies” who founded Chesapeake Energy, a pioneer of this hydrocarbon upheaval, were neither geologists nor engineers. Tom Ward and the late Aubrey McClendon were “landmen”. Their skill was in leasing mineral rights and persuading investors they would produce a bonanza, particularly of natural gas, if enough wells were drilled. Their success was extraordinary. At times in the 2000s Chesapeake was considered the Google of energy. It had leases with 1m Americans. It became America’s biggest producer of unconventional natural gas.
That was then. On June 28th this once-mighty firm filed for bankruptcy protection, unable to support nearly $9bn of debt. Robert Clarke of Wood Mackenzie, a consultancy, says that ultimately the poor quality of...