- Apache's latest "discovery" supports the shale enlightenment thesis and it's major implications.
- Apache did not discover a new rock layer, petroleum deposit, or invent a new technology. All it did was challenge industry dogmas.
- The fact that this is all it takes to "discover" a major new field provides an illustration for what investors should expect from the shale enlightenment going forward.
As I've written before, the so-called "shale revolution" is not as much a technology-driven revolution as it is an ideas-based enlightenment. This distinction is more important than most people can even imagine. An ideas-based enlightenment opens untold opportunities, whereas a technology-driven revolution is limited in scope.
Apache's (NYSE:APA) recently announced Alpine High "discovery" is just another example of this. Apache did not discover a new rock layer or petroleum deposit. Nor did it invent a new technology. As described in a recentWSJ article, Apache was simply willing to question an existing dogma, conduct experiments to challenge that dogma, and once they were convinced the old dogma was wrong, they scooped up all the appropriate acreage. Shockingly, it's not much more complicated than that.
The complicated part is understanding why these dogmas exist in the first place, why it has been so rare for companies to challenge these dogmas in the past, and why it has become more common for them to do so in the past decade. As I've argued elsewhere, the mathematical formulas taught to petroleum engineers around the world do not support the notion that we can produce from shale formations. When the formulas are applied to nano-scale porosities, they simply say that the hydrocarbons in such formations will not flow: Fracking or no fracking, horizontal drilling or no horizontal drilling, they simply will not flow!
However, the experiences of the past decade have clearly demonstrated that these theories are missing something. The position of the industry before the shale revolution was analogous to someone attempting to use Newtonian physics to understand the behavior of black holes and quantum particles. Without the more advanced theories of general relativity and quantum mechanics they would have been utterly lost.