Water scarcity near some of North America's major unconventional oil and gas fields is creating another technological innovation: waterless methods for hydraulic fracturing.

Water is a growing issue in drought-prone Texas and Oklahoma, where companies pump millions of gallons into a single well to crack shale rock some 2 miles underground and coax oil and gas to the surface. In Ohio, where drilling unconventional oil and gas wells is in its infancy, a water district recently announced it would stop sales to oil and gas companies until it completes a review of its reservoirs (EnergyWire, June 12). Well completions have been a challenge in Ohio's Utica Shale, where the way water and liquids flow into a formation is proving hard to predict.

The challenges have pushed companies to seek out methods of hydraulic fracturing that do not require the use of water. At the front of the line is GasFrac Energy Services Inc., a six-year-old upstart out of Alberta that uses a liquid-propane gel, or LPG, together with chemicals and sand to do hydraulic fracturing. The propane gel transforms to a gas at the right temperatures. It then flows out of a well instead of remaining underground after being injected.

The process is said to increase the rate of production in some shales, while completely eliminating the need for water. Nearly all the propane injected underground is recovered.

GasFrac has short-term contracts with two companies in the Eagle Ford and Niobrara shales, and the company says dates are lined up to show off the technology to eight other drilling companies. It is also setting up a hub for operations in Texas and hiring 100 workers to service Texas, Colorado and Oklahoma, said Kyle Ward, director of marketing and public relations for GasFrac. Two pilot programs had been started in Ohio's Utica.

GasFrac says what it has to offer is a win-win for drillers and the environment. Still, its push into the United States is being questioned by environmental groups and financial analysts, who are pressing the company to let outsiders get a glimpse of the chemicals in GasFrac's secret formula and conduct an independent environmental review of their impact.

"The one environment advantage that LPG fracking purports to have is that it cuts down on the amount of water that gets used," said Kate Sinding, senior attorney with the Natural Resources Defense Council. "And that is certainly a good thing, but what we don't know is whether the potential risks from explosion and contamination would mean that, on the balance, it's not necessarily preferable from an environmental standpoint."

Others have watched the company's wavering stock price, which climbed to $15 a share and then crashed to around $4 after its first-quarter profits came in lower than expected. The technology is difficult to assess because the company holds production rates close to the chest, and some are still analyzing results from previous test runs, said Dave Yoxtheimer, a hydrologist with Pennsylvania State University's Marcellus Center for Outreach and Research.

"It might not be the silver bullet that everybody's looking for to reduce the use of water, but it will find its place out there in the market," he said.

GasFrac's Ward said the operation and chemicals are clean, and he said analysts are wrong to treat the company as anything other than an emerging technology provider. It should not be compared with established pressure pumpers, he asserted, such as huge oil services firms like Schlumberger.

How it works

The use of propane or butane to extract other hydrocarbons such as crude oil is not new. One of the earliest patents for using such low-weight hydrocarbon gases in drilling wells was filed in 1966, but the industry never commercialized the technology because of the inherent fire risk in using flammable compounds at the high pressure.

GasFrac's founder filed patents in 2007 for a new process using liquid-propane gel to cut down on the fire risk. Since then, the company has been educating energy companies about its product, according to an investor presentation. It has a long-term contract with Alberta-based Husky Energy and does work for QuickSilver and Blackbrush in the United States.

The company mixes propane with a gelling agent of the phosphate ester, also used to make household paint glossy; anasulfate as a cross linker; magnesium oxide, which is used as a breaker; and sand as a proppant. The company pumps mixture into the well at high pressure.

Given that propane is more compressible than water, it has to be injected at much higher pressures than used in traditional hydraulic fracturing, said Yoxtheimer of Penn State.

The pressure helps fracture rock, and the propane gel breaks by itself in the formation, or sometimes with the help of the magnesium oxide. And since propane is a hydrocarbon much like the liquids underground, it rises to the surface of the well with the crude or methane. GasFrac recaptures between 99 and 100 percent of the propane pumped underground, said Ward.

Success depends on geology, and every formation reacts with the gel slightly differently. The company has been successful in 45 different formations so far, and each formation has been a learning experience, Ward said. Depending on the geology, engineers have to alter how much gel they need to pump underground and at how much pressure, but they never alter the chemical composition of the fluid itself.

Drawbacks of the technology are that it cannot be used in every shale and that it is much more expensive in the short run than using water, especially at a time when natural gas is trading at less than $2.50 per million British thermal units at the Henry Hub. At these prices, every chance to keep costs of production low matters, said Yoxtheimer.

Chemical disclosure still an issue

Since propane is flammable, it can present a major fire hazard. In Alberta last year, a propane leak at a Husky Energy site where GasFrac was operating burned three workers, and since then, the company has instituted a fire exclusion zone in the area.

Still, Sinding of NRDC questioned how careful one can be in transporting tankers of LPG to the site. She wants a detailed chemical disclosure from the company. The generic chemical class says little about the actual compounds being pumped into the ground, she said.

"It's similar to any other kind of fracking with proprietary mixture: We simply don't know," she said. "The concern would be a generic one, the same as what we have for traditional fracking with water, whether it's spills at the surface or the potential for contamination through drilling and fracking techniques."

It should also be noted that GasFrac's technology will not eliminate the need for wastewater disposal. Two types of water are recovered from frack jobs -- flowback, which is the water injected underground, and produced water, which is the liquid naturally present in shale that rises up toward the well bore due to a pressure gradient.

GasFrac's technology will yield produced water, containing chemicals present in shale such as bromine and some radioactive compounds, which will have to be disposed of by underground injection.

Meanwhile, analysts have downgraded the stock after GrasFrac's earnings in the first quarter of 2012 came in lower than the previous quarter, causing the price of the shares to drop. It was trading at $4.20 at 5:07 p.m. EDT yesterday on the Toronto Stock Exchange.

"The issue for GasFrac has come down to adoption rate -- converting its revolutionary fracturing process into cash flow growth," wrote analyst Andrew Bradford of Raymond Jones in a May 11 comment.

Because the technology is so new, companies have waited to analyze results before converting pilots into longer-term contracts, said Ward. Hooking customers can take longer in these initial states, he said.

Still, Bradford issued a warning: "Longer term, we still think GasFrac's technology has significant potential. We are simply unsure of how patient the market will be as GasFrac works to execute on that potential."