EIA: Horizontal Drilling Boosts Gas Production in Pennsylvania, USA

The U.S. Energy Information Administration (EIA) said in a report that between 2009 and 2011, Pennsylvania’s natural gas production more than quadrupled due to expanded horizontal drilling combined with hydraulic fracturing.

This drilling activity, which is concentrated in shale formations that cover a broad swath of the state, mirrors trends seen in the Barnett shale formation in Texas.

Historically, natural gas exploration and development activity in Pennsylvania was relatively steady, with operators drilling a few thousand conventional (vertical) wells annually. Prior to 2009, these wells produced about 400 to 500 million cubic feet per day of natural gas. With the shift to and increase in horizontal wells, however, Pennsylvania’s natural gas production more than quadrupled since 2009, averaging nearly 3.5 billion cubic feet per day in 2011. Natural gas wells accounted for virtually all (99%) of the horizontal wells started over this period.

Drilling programs in Pennsylvania’s shale formations, like those in other, more established plays such as the Barnett and Eagle Ford in Texas, are migrating to more liquids-rich areas due to the price premium of crude oil and natural gas liquids. The effect of low natural gas prices is apparent in Pennsylvania’s 2012 well count for the first third of the year. From January through April, drilling began on 618 new natural gas wells; over 700 new natural gas wells were started over the same period in 2011. In contrast, 263 new oil and “combination” (oil and natural gas) wells were started in Pennsylvania from January through April 2012, well above the 164 new wells that began drilling during the corresponding period in 2011.

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New drilling, production in Eagle Ford surges

New well starts in the Eagle Ford shale jumped 110 percent from January through March 2012 compared to the same period a year ago, according an analysis by Bentek Energy. (Source: U.S. Energy Information Administration, Bentek Energy)

 

Drilling in the Eagle Ford shale has dramatically increased in 2012, as producers have frantically turned away from cheap natural gas to production from regions that yield higher priced oils and other liquids.

The number of new wells drilled in Texas’ Eagle Ford shale more than doubled during the first three months of 2012, compared with the same period a year ago, according to Bentek Energy.

Operators started 856 new wells in the first quarter of 2012, compared with 407 in the same period a year ago, the energy market analysis firm reported.

There was also a record high number of 217 rigs active in the Eagle Ford during this month.

The increase in activity ratcheted up production of oil and other liquids, from 182,000-barrels-a-day in April 2011 to more than 500,000-barrels-a-day this month, according to Bentek’s analysis, which the U.S. Energy Information Administration highlighted on its website.

The Eagle Ford currently produces about 2 billion cubic feet of natural gas per day.

According to Bentek, Eagle Ford crude oil and liquids production was approaching the levels of the booming Bakken shale formation in North Dakota and eastern Montana during March 2012.

Source

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Insight: Natural gas pain is oil’s gain as frack crews head to North Dakota

By Selam Gebrekidan

NEW YORK | Mon Mar 19, 2012 4:43am EDT

(Reuters) – Collapsing natural gas prices have yielded an unexpected boon for North Dakota‘s shale oil bonanza, easing a shortage of fracking crews that had tempered the biggest U.S. oil boom in a generation.

Energy companies in the Bakken shale patch have boosted activity recently thanks to an exceptionally mild winter and an influx of oil workers trained in the specialized tasks required to prepare wells for production, principally the controversial technique of hydraulic fracturing.

State data released this month showed energy companies in January fracked more wells than they drilled for the first time in five months, suggesting oil output could grow even faster than last year’s 35 percent surge as a year-long shortage of workers and equipment finally begins to subside.

As output accelerates, North Dakota should overtake Alaska as the second-largest U.S. producer within months, extending an unexpected oil rush that has already upended the global crude market, clipped U.S. oil imports, and made the state’s economy the fastest-growing in the union.

Six new crews trained in “well completion” — fracking and other work that follows drilling — have moved into North Dakota in the past two months alone, according to the state regulator and industry sources. Back in December, the state was 10 crews short of the number needed to keep up with newly drilled wells.

“Three to four months ago, the operators were begging for fracking crews,” said Monte Besler, who consults companies on fracking jobs in North Dakota’s Bakken shale prospect. Now “companies are calling, asking if we have a well to frack.”

For the last three years, smaller oil companies with thin pockets were forced to wait for two to three months before they could book fracking crews and get oil out of their wells. As more and more wells were drilled, that backlog has grown.

Last year, an average 12 percent of all oil wells were idled in North Dakota. Even so, output in January hit 546,000 barrels per day, doubling in the last two years and pushing the state ahead of California as the country’s third-largest producer.

FEWER WELLS IDLE

Fracking, which unlocks trapped oil by injecting tight shale seams with a slurry of water, sand and chemicals, has drawn fierce protests in some parts of the country, but it has not generated heated opposition in North Dakota.

The number of idle wells waiting to be completed in the state reached a record 908 last June, the result of a new drilling rush and heavy spring floods. Only 733 wells were idle in August as crews caught up, but the figure crept steadily higher until the start of this year.

Now, the industry may be turning a corner in North Dakota, the fastest-growing oil frontier in the world.

“Both rig count and hydraulic fracturing crews are limiting factors. Should they continue to rise together, production will not only increase, it will accelerate,” said Lynn Helms, director of the state Industrial Commission’s Oil and Gas Division.

The tame winter likely played an important role in helping reduce the number of idle wells — those that have been drilled but not yet fracked and prepped for production. That number fell by 11 in January, as oil operations that would normally be slowed by blizzards were able to carry on, experts said.

Residents of the northern Midwest state — accustomed to temperatures as low as minus 40 degrees Fahrenheit (-40 Celsius) in winter and snow piles as high as 107 inches — this year enjoyed the fourth warmest since 1894, according to the National Weather Service.

The milder conditions also helped prevent the usual exodus of warm-weather workers that occurs when blizzards set in.

“Not everyone wants to work in North Dakota in the winter,” Besler said.

The backlog of unfinished wells has also begun to subside because the pace with which new wells are drilled has leveled off. The state hasn’t added new rigs since November.

The latest state data shows oil companies brought 37 new rigs to North Dakota’s in 2011 but have not added more since November. The rig count held steady at 200 in January 2012, although more than 200 new wells were drilled in that period.

SLUMPING NATGAS PRICE PROVIDES RELIEF

North Dakota has gotten a boost from the fall-off in natural gas drilling due to the collapse in prices to 10-year lows. Energy companies such as Chesapeake and Encana have shut existing natural gas wells and cut back on new ones. Last week, the number of rigs drilling for gas in the United States sank to the lowest level in 10 years as major producers slimmed down their gas business, according to data from Houston-based oil services firm Baker Hughes. [ID:nL2E8EG9OY] The fewer gas wells drilled, the less need for skilled fracking crews in the country’s shale gas outposts.

Fracking in oil patches is similar to the process used in gas wells, except for the inherent power of the pumps employed. Crews inject high-pressure water, sand and chemicals to free hydrocarbons trapped in shale rock. So big service firms such as Halliburton, Baker Hughes and Schlumberger  are reshuffling crews from shale gas fields to oil prospects in the badlands. “We have moved or are moving about eight crews. Some of those crews are moving as we speak,” Mark McCollum, Halliburton’s chief financial officer, said at an industry summit in February.

Halliburton declined to specify where the crews were moving.

Calgary-based Calfrac moved one crew into the Bakken in late 2011, according to an SEC filing. Privately owned FTS International no longer works in the gas-rich Barnett shale but has set up operations in the Utica, an emerging prospect in Ohio and western Pennsylvania, according to a company representative.

The reallocations come with some efficiency losses. Halliburton had to scale back its 24-hour operations and is still trying to solve logistical problems. “You actually take the crew from one basin and they have to go stay in motels, you have to pay them per diems for a while. And then you have to double up your personnel while you’re training new, locally based crew on the equipment once it is moved,” McCollum said.

At the same time, a shortage of key equipment such as pressure pumps is easing as companies start taking delivery of material ordered months or even years ago.

It takes about 15 such pumps to frack a gas well, and many more for oil wells. The total pressure-pumping capacity in the United States at the end of 2012 will be 19 million horsepower, two-and-a-half times more than in 2009, according to Dan Pickering, analyst with Tudor Holt and Pickering in Houston.

FRACKING AROUND THE NATION

Easing personnel constraints suggest recruiters may be meeting with success in nationwide campaigns to attract workers with specialized knowledge of complex pumps and hazmat trucks — and a willingness to brave harsh conditions.

Even with U.S. unemployment at 8.3 percent, such skilled labor remains in short supply despite salaries from $70,000 to $120,000 a year. In North Dakota, unemployment was just 3.2 percent in January, the lowest rate in the nation.

Fracking crews, much like roughnecks on drilling rigs, clock in 12-hour shifts for two straight weeks before getting a day off. They live in camps far from cities and towns. Jobs are transient — a few weeks at a single location. Most workers divide their time between the California desert, Texas ranchlands and the freezing badlands of the Midwest state.

Companies have scrambled to nab talent, with recruiters scouring far and wide. Military bases have gotten frequent visits, and some companies have hired truckers from Europe.

“There’s definitely a push to look all over for people who have good experience since it takes at least six months to train someone how to use a fracking pump,” said David Vaucher, analyst with IHS Cambridge Energy Research.

(Editing by David Gregorio)

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Pioneer Bets On West Texas Shale Oil To Rival Bakken

Two wells drilled by Pioneer Natural Resources have already exceeded expectations. The company has 900,000 acres under lease.

By MARILYN ALVA, INVESTOR’S BUSINESS DAILY Posted 01:41 PM ET

U.S. oil production is enjoying a renaissance, thanks to new technology that has made oil recovery possible in tight shale rock.

The busy Bakken formation in North Dakota and Montana is the largest and best-known oil shale play.

The Eagle Ford in South Texas and the Barnett “combo play” (gas and oil) in North Texas are also fairly famous unconventional plays.

But the Wolfcamp Shale?

“Over the next two or three years, everybody is going to be making a beeline to the Wolfcamp,” said Scott Sheffield, chief executive of Pioneer Natural Resources (PXD).

Spanning numerous counties across West Texas, the Wolfcamp formation is located below the long-plied Spraberry field, which helped make Midland, Texas, oil-central starting in the early 1950s.

Its location in the Midland Basin is within the larger Permian Basin.

Sheffield and other oil experts say the Wolfcamp is probably the thickest of any onshore U.S. oil shale play, with up to 1,000 feet of potential payout across hundreds of thousands of acres.

Biggest And Thickest

“It will be the biggest, and it is already the thickest,” Sheffield said. “So it’s got the most pay zones of any oil shale play in the U.S. I call it the third or fourth coming of the boom in West Texas.”

If Wolfcamp does turn out to be the next big oil shale play, Pioneer is on the ground floor. With 900,000 acres under lease in the Spraberry, it has the largest land position.

Pioneer believes that more than 400,000 of those acres are ripe for horizontal drilling.

Its game plan: drill 10,000 feet down through the Spraberry to the Wolfcamp and then out 7,000 feet horizontally.

For now, it’s targeting 200,000 acres in the southern portion of the Spraberry field.

Pioneer’s two completed wells in the Wolfcamp have already exceeded expectations, each producing 800 to 1,000 barrels of oil a day, and they’re still early in production.

EOG Resources (EOG) started drilling in the Wolfcamp earlier and is now seeing higher output from its 35 or so wells.

But Sheffield says Pioneer will be a bigger operator in the Wolfcamp in the sense that it has 400,000 prospect-worthy acres to EOG’s 100,000.

“We are going to drill 80 wells in 2012 and 2013,” he said.

EOG’s wells in the Wolfcamp are producing 2,000 barrels a day, says Dan Morrison, analyst with Global Hunter Securities.

“Even if Pioneer’s don’t get to 2,000 barrels a day, at 800 barrels a day the play is incredibly economic,” Morrison said.

Source

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North Alaska may hold 80 trillion cubic feet of shale gas

Shell’s Arctic-class drill ship, the Kulluk, is shown as it is towed near Alaska. Shell is moving the Kulluk drilling unit from Dutch Harbor, Alaska, to a Seattle shipyard for ongoing maintenance and planned, technical upgrades. (Photo courtesy of Shell Oil Co.)

Alaska’s North Slope shales may hold as much as 80 trillion cubic feet of gas, or more than half the highest estimate for the Marcellus formation, and as much as 2 billion barrels of oil, the U.S. Geological Survey said.

President Barack Obama’s administration and the state of Alaska are offering more access to oil and natural gas resources on land and in the Arctic waters to help lower dependence on imported fuel and push more crude through a major oil pipeline crossing the state. Royal Dutch Shell Plc plans to start drilling this year in the Chukchi and Beaufort seas, which are off the coast of the North Slope.

“Alaska’s energy resources hold great promise and economic opportunity for the American people,” Interior Secretary Ken Salazar said today in an e-mailed statement.

The geological service, part of the Interior Department, said in a statement that North Slope shale hasn’t been developed because of economic and infrastructure considerations.

The assessment, the first made of North Slope shale resources, is based on success in extracting oil and gas from similar formations, such as the Marcellus Shale in the U.S. East. The agency last year estimated Marcellus may hold as much as 144 trillion cubic feet of gas.

Shale gas and shale oil, produced by horizontal drilling and hydraulic fracturing by injecting water and chemicals underground, led to record natural gas output in the U.S. last year and 33 percent decline in prices in the past 12 months.

Source

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Repsol YPF ups Argentine shale potential

Posted on February 8, 2012 at 6:08 pm by Associated Press

SANTIAGO, Chile — Repsol YPF on Wednesday raised the estimate for potentially recoverable oil and gas in its part of Argentina’s “Vaca Muerta” (Dead Cow) basin to the equivalent of nearly 23 billion barrels, indicating a total shale deposit big enough to enable Argentina to challenge the United States in non-conventional petroleum production.

But it cautioned that exploiting the formation would need a huge expansion in Argentina’s oil and gas industry, requiring thousands of wells, hundreds of drilling rigs and a national push to attract the necessary talent, equipment and investment at a time when other countries are competing to increase energy resources.

The company’s shares traded on the Buenos Aires stock exchange jumped 8 percent after the announcement.

Repsol YPF SA, a majority-Spanish-owned company, issued the statement from Madrid shortly after its president, Antonio Brufau, returned from a series of closed-door meetings in Argentina with government officials who have been pressuring the company to increase exploration and development.

The pro-government newspaper Pagina12 in Buenos Aires said Repsol YPF has been paying out more in dividends than it has made in profits in Argentina, and suggested President Cristina Fernandez might consider nationalizing the company’s Argentine operations so the money could instead be used to increase Argentina’s energy capacity.

Juliette Kerr, a Latin America energy analyst at IHS in London, discounted the possibility of nationalization, saying Argentina can’t afford a buyout. The idea was never openly endorsed by Fernandez or her Cabinet ministers.

Company spokesmen and government officials declined to comment on the talks this week.
But Wednesday’s statement, made as a filing to Spain’s securities regulator, provided a stark analysis of Repsol YPF’s commitment to Argentina and how much would have to change for the country to realize its energy dreams.

“If exploration proves successful in the Vaca Muerta formation and immediate intensive development began in the area, in 10 years its capacity could double Argentina’s existing gas and oil production. This would require a vast investing effort that would reach $25 billion per year in order to develop all the existing prospective resources,” it said.

Repsol YPF said in November that it had discovered 927 million barrels of recoverable oil and natural gas in the shale deposit. But even 23 billion barrels ranks below Brazil’s recent deep-sea oil discoveries, which experts estimated at up to 55 billion barrels, or the 296 billion barrels of proven crude reserves that Venezuela claims.

Argentina currently has only 80 drilling rigs and would need at least 100 more, along with upgrades in all sectors of its oil and gas industry, to capitalize on the potential of the deposit in western Neuquen province, the company said.

Repsol YPF currently is the leader in exploring in this area, having invested $300 million in exploration, mapping and initial development, but has claims on less than half of the formation, which stretches over 7.4 million acres. Many other companies would need to make substantial investments for the area to achieve its potential, it said.

So far, only a tiny fraction of the Vaca Muerta foundation has been developed, producing 700,000 barrels as of December, and the statement suggested that Brufau didn’t give in to the pressure for huge new investments right away.

“The company aims to drill 20 wells in 2012, solely and jointly with several partners, to continue investigating prospective resources,” it said.

The statement suggested international investors may be holding back until they have confidence that Argentina will guarantee government policies and labor unrest won’t get in the way of eventual profits. Instead, Argentina has been withdrawing energy exploration subsidies, dealing with a punishing oil workers strike and making it more difficult for multinational companies to move their gains out of the country.

Source

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Analysis: Bulgaria’s Shale Gas and the Wider Geo-Economic Game

In mid-2011, the Bulgarian government announced it would provide shale gas exploration licenses to Chevron for the Northern part of the country.  Under the terms of the agreement the company would pay around $30 Million USD in order to begin its project. Initial findings pegged assumed reserves anywhere from 300 BCM up to 1 TCM. These prospects presented for shale gas were quite significant, not just for Bulgaria but for the whole of Europe.  It should be noted that reserves likely extend to the neighboring state of Romania, which is just a few kilometers from the country’s Northern borders.

Nevertheless, soon NGO‘s and various environmental and citizen’s groups started campaigning against shale gas exploration, citing the dangers of hydraulic fracturing (hydrofracking). These campaigns took the form of street protests, Internet broadcasts and intense lobbying of local councilors and politicians, which eventually forced the government to retreat from its original plans that spoke of making Bulgaria the shale gas champion in Europe.

The Center Left party (Socialist) in Bulgaria that is often perceived by outsiders as pro-Russian took a leading role in opposing shale gas research. In the Bulgarian Parliament two judicial initiatives were submitted with regards to this.

The first was drafted by three members of parliament of the Socialist party that proposed a complete ban on research and exploitation of any shale gas reserves in the country. The second initiative was drafted by the incumbent government and called for a moratorium on the exploration of shale gas until a new environmental-friendly method is found.

Media reports from Bulgaria have often mentioned the initiatives both by the Socialists and the environmental NGO’s to be linked to the interests of Russian gas companies, namely Gazprom. In fact the Minister for Economy and Energy, Traicho Traikov, went as far as saying in public that behind all protests, powerful energy import interests are to be found, indirectly pointing the finger at the Russians.

It is important to note that Ivaylo Kalfin, a leading Socialist politician, organized the local movement against shale gas in Northern Bulgaria where Chevron was to explore. Moreover, two out of the three Socialist MP’s that drafted the judicial initiative against shale gas had signed in the past when they were in government important energy deals with Gazprom. The third MP has business collaborations with a consultancy that supports the construction of the Belene thermonuclear power station, which was awarded to the Russian company, but has been “frozen” as a project over the past two years.

Furthermore, it is widely known that the current Bulgarian government is seen as anti-Russian under Premier Boyko Borizov, who has effectively frozen many bilateral agreements with Moscow, ranging from Burgas-Alexandroupoli oil pipeline to the South Stream pipeline gas project to the Belene nuclear station. Thus, the question arises: why did the Bulgarian government decide to stop a project that may eventually lead to the diversification of its energy dependence from Russia?

The answer is that Bulgaria has already started a whole range of initiatives in order to decrease its dependence by interlinking its system with that of Greece and Turkey and by bidding for a pipeline route in the Southern Corridor through its territory. Also, Russia exerts considerable influence in Bulgaria and it is likely that Borisov’s government decided that it is the best not to oppose Russia any further, bearing in mind that the opposition against shale gas exploration in the country was not solemnly coordinated by Moscow and really had strong domestic social support against it.

A third answer is that strong domestic energy interests, that are anti-Russian but also pro-natural gas, have played their role in undermining shale gas explorations. These interests are in favor of importing natural gas from markets such as Azerbaijan, thus they viewed shale gas as their opponent as they have traditionally viewed Gazprom as well.

The story though does not end in Bulgaria alone. On the 26th of January, Borislav Sandov, one of the leaders of the opposition against shale gas, made statements in the Bulgarian media and supported protests against shale gas exploration in Romania as well. There was a protest at the Romanian Embassy in Sofia and it seems that Bulgarian and Romanian NGO’s are coordinating their activities. In parallel, the government in Romania is battered by an ongoing wave of protests by state unions and workers against its economic policies, and the ability of Bucharest to resist yet another campaign against its policies is decreasing. Lastly, the especially harsh winter period in both Bulgaria and Romania with temperatures in major cities reaching minus 32 degrees Celsius and with a considerable number of casualties, has increased significantly the natural gas imports from Gazprom, which seems in any case to be the only sure winner from all of these developments and the current failure of shale gas explorations in these particular countries.

Source

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