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USA: EQT Starts Pilot Program of Converting Drilling Rigs to LNG

EQT Corporation today announced the launch of a pilot program to begin converting drilling rigs to liquefied natural gas (LNG), displacing the diesel used to power equipment at the well site. This program marks the first LNG rig conversion in the Marcellus Shale and will provide a cleaner burning alternative fuel for the region’s drilling operations.

“We want to be a leader in reducing the environmental impacts related to drilling and we are proud to be the first operator in the Marcellus to launch such a program,” states Steve Schlotterbeck, President Exploration and Production for EQT. “Along with safety, protection of the environment is top-of-mind for our employees, contractors, and of course communities. We continually look for opportunities to improve our operations and displacing diesel, by introducing the use of alternatives such as LNG and field gas, is one way of doing so,” Schlotterbeck continued.

LNG is natural gas in its liquid form and from a physical property standpoint is as safe as, or safer than, using traditional fuels, such as propane or diesel. LNG, if exposed, evaporates quickly and leaves no residue on water or soil. Compared to diesel, natural gas emits between 20% and 30% less carbon dioxide and has a fraction of the emissions of nitrogen oxides, sulfur oxides, and particulates.

There are other LNG benefits, such as a reduction in fuel costs — with LNG being about 40% less expensive than diesel. The use of LNG also provides another means of reducing our dependence on foreign oil imports — with sourcing coming from various U.S. shale plays. The LNG being used for EQT’s pilot program is produced locally from Marcellus natural gas reserves.

EQT’s initial rig conversion is now operating in Northern West Virginia; and pending evaluation of the pilot program, the Company hopes to convert additional rigs in West Virginia and Pennsylvania.

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US shale gas unprofitable

Several US shale gas firms are cutting production because cheap prices have affected cost-effectiveness, reports say.

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Chesapeake Energy, Statoil’s east-coast Marcellus Formation partner, is axing 900 million dollars-worth of investments in comparison to last year’s 3.1 billion.

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Chesapeake Energy, Statoil’s east-coast Marcellus Formation partner, is axing 900 million dollars-worth of investments in comparison to last year’s 3.1 billion. This equates to an eight percent production cut.

Statoil press spokesperson Bård Glad Pedersen says to Dagens Næringsliv the measure is, “consistent with an industry trend over the past year to move activity from areas with dry natural gas to those with wet gas and oil. This is partly due to lower gas prices.”

Further reductions

Chesapeake, the US’ next-largest gas producer, was the first company to decrease output. It has not ruled out further reductions if prices do not move in a positive direction.

Gas prices rose 15 percent over four days following investment and production cut reports by Occidental Petroleum, ConocoPhillips and Consol Energy. The increase follows a long period of falls of 28 percent.

Nevertheless, IHS consultant Mary Barcella tells The Financial times she believes prices will be around USD 3 per million British Thermal Units (BTUs) for the rest of 2012. This is the lowest for 10 years.

US gas industry expansion since 2008 has lead to prices falling 80 percent.

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USA: Chevron to Splash USD 32.7 Billion in 2012

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Chevron Corporation announced a $32.7 billion capital and exploratory spending program for 2012.

Included in the 2012 program are $3 billion of planned expenditures by affiliates, which do not require cash outlays by Chevron.

Total investments for 2011 are estimated at $33 billion, reflecting approximately $28 billion in capital and exploratory expenditures and $4.5 billion for the acquisition of Atlas Energy, Inc., which closed earlier in the year.

We continue to develop an unparalleled project queue,” said Chairman and CEO John Watson.Our 2012 capital program covers a number of multi-year projects currently in the construction phase, including two world-class Australian LNG projects and multiple deepwater developments. We believe these investments will yield significant production growth and reward our shareholders for years to come. By 2017, we expect our net crude oil and natural gas production to grow about 20 percent to 3.3 million barrels per day. This growth profile, along with our current financial strength, supports our priority of continuously growing our dividends.”

Watson continued, “Our 2012 capital program includes spending of nearly $9 billion in the United States, with major new investments in the deepwater Gulf of Mexico, the Marcellus Shale in Pennsylvania and our refinery at Pascagoula, Mississippi. These projects are expected to result in new jobs and new sources of revenues for the communities where we operate. Our investments, both in the United States and elsewhere around the globe, help provide affordable new energy supplies to support a growing economy.”

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US Shales: Whether its a Revolution of Evolution, Shale Gas Delivers

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Shale gas enhancing energy supply, security

Whether you call it revolution or evolution, one thing is clear: Shale natural gas is producing jobs and economic benefits across the nation.

This week, shale gas was the focus of a major conference in Houston involving industry representatives, government officials and academics who gathered to discuss the technologies and future of this increasingly important source of energy.

For most of the nation, the contributions of shale gas may seem like a revolution. Shale gas has created thousands of new jobs, meant millions of dollars in new government revenues and enhanced energy security for America.

Of course, those of us who work in and around the energy industry understand that shale gas has been more of an evolution than a revolution.

The technologies used to develop these natural gas supplies aren’t new. Our industry began directional drilling in the 1920s, leading to substantial use of horizontal drilling in recent decades. And we have used the process of hydraulic fracturing since the 1940s. In that time, the industry has safely drilled more than a million wells.

The transformative impact of shale gas is challenging us all to think in new ways.

Not long ago many worried about a natural gas supply shortage in the U.S. But as President Obama recently stated, a “century’s worth … [lies] in the shale beneath our feet.” A decade ago gas from shale accounted for less than 2 percent of U.S. natural gas production. Today it is nearly 30 percent and growing.

As our nation considers this potential, we are reminded of the importance of reliable, affordable energy to our economy – especially during challenging economic times. Affordable supplies of natural gas – driven by the increase in shale production – have helped reinvigorate the domestic petrochemical industry, which relies on gas as a feedstock to make plastics and the other building blocks of modern manufacturing. These supplies are strengthening America’s steel industry, which is building new mills and hiring workers to support shale gas drilling. And areas where production of shale oil or natural gas is occurring are experiencing economic growth, job creation, and increased tax revenue.

For instance, in North Dakota, unconventional oil and gas production in the Bakken Shale has provided enormous economic benefits, with close to $5 billion in direct economic activity in 2009. In Texas, a study of the Barnett Shale formation near Fort Worth estimates it is now responsible for $11 billion in annual economic output and more than 100,000 jobs for the North Texas region. And in Pennsylvania, state labor statistics show 214,000 Marcellus Shale-related jobs at the beginning of 2011. Penn State researchers meanwhile calculate that Marcellus drilling could add nearly $10 billion in value to the Pennsylvania economy this year.

We also must not forget that hydraulic fracturing helps our nation reach our shared goals for responsible environmental stewardship. Natural gas produces about 50 percent fewer greenhouse gas emissions than coal when used to produce electricity for consumers and businesses, and significantly reduces other emissions such as mercury, sulfur and nitrogen oxide. It also uses a small fraction of the water used in coal, nuclear and solar power generation processes to produce a barrel of oil equivalent energy.

To ensure economic and environmental benefits continue, the people of the natural gas industry understand that we must remain firm in our commitment to properly manage the risks involved in drilling operations. That means meeting the highest standards of well design and well integrity. It means training our personnel and contractors to ensure adherence to established operating procedures. It means safely and efficiently handling the water and additives used to fracture wells. And it means working with state regulators to ensure protection of water and air quality.

The United States’ shale gas resources are an extraordinary energy endowment for our country, and our industry knows how to produce these resources safely and responsibly. We must keep these facts in mind as the public and policymakers discuss energy policies – and what increased access and technology mean for the energy industry.

With a commitment to operations integrity, wise development of our shale gas can provide new supplies of affordable, reliable energy in a safe, secure and environmentally responsible manner. And the rise of this resource comes at a time when our country – and the world – clearly needs the economic and environmental benefits that natural gas stands ready to deliver.

Mark W. Albers is a senior vice president at Exxon Mobil Corporation.

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Chesapeake: Report Finds No Major Influence from Gas Well Drilling on Drinking Water (USA)

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The Center for Rural Pennsylvania on Tuesday released the findings of a study it conducted on the impact of Marcellus Shale drilling on drinking water supplies.

The research was sponsored by a grant from the center, which is a legislative agency of the Pennsylvania General Assembly.

The Center for Rural Pennsylvania is a bipartisan, bicameral legislative agency that serves as a resource for rural policy within the Pennsylvania General Assembly, its website indicates.

According to the report, this research studied the water quality in private water wells in rural Pennsylvania before and after the drilling of nearby Marcellus Shale gas wells. It also documented “both the enforcement of existing regulations and the use of voluntary measures by homeowners to protect water supplies.”

In its introduction, the authors said they evaluated water sampled from 233 water wells near Marcellus gas wells in rural regions of Pennsylvania in 2010 and 2011.

Among these were treatment sites (water wells sampled before and after gas well drilling nearby) and control sites (water wells sampled though no well drilling occurred nearby),” the study indicated. “Phase 1 of the research focused on 48 private water wells located within about 2,500 feet of a nearby Marcellus well pad, and Phase 2 focused on an additional 185 private water wells located within about 5,000 feet of a Marcellus well pad.”

During that phase, the researchers collected both pre- and post-drilling water well samples and analyzed them for water quality at various analytical labs. During Phase 2, the researchers or homeowners collected only post-drilling water well samples, which were then analyzed.

The post-drilling analyses were compared with existing records of pre-drilling water quality, which had been previously analyzed at state-accredited labs, from these wells.

According to the study results, approximately 40 percent of the water wells failed at least one Safe Drinking Water Act water quality standard, most frequently for coliform bacteria, turbidity and manganese, before gas well drilling occurred,” the report indicated. “This existing pollution rate and the general characteristics of the water wells, such as depth and construction, in this study were similar to past studies of private water wells in Pennsylvania.”

The study’s pre-drilling results for dissolved methane showed its occurrence in about 20 percent of water wells—although levels were generally far below any advisory levels.

Despite an abundance of water testing, many private water well owners had difficulty identifying pre-existing water quality problems in their water supply,” the report indicted. “The lack of awareness of pre-drilling water quality problems suggests that water well owners would benefit from unbiased and consistent educational programs that explain and answer questions related to complex water test reports.”

In this study, statistical analyses of post-drilling versus pre-drilling water “did not suggest major influences from gas well drilling or hydrofracturing (fracking) on nearby water wells, when considering changes in potential pollutants that are most prominent in drilling waste fluids.”

When comparing dissolved methane concentrations in the 48 water wells that were sampled both before and after drilling, the research found no statistically significant increases in methane levels after drilling—and no significant correlation to distance from drilling.

However, the researchers suggest that more intensive research on the occurrence and sources of methane in water wells is needed,” the report indicated.

The report then cited the Pennsylvania Oil and Gas Act of 1984, which indicates that gas well operators are “presumed responsible” for pollution of water supplies within 1,000 feet of their gas well for six months after drilling is completed if no pre-drilling water samples were collected from the private water supply.

This has resulted in extensive industry-sponsored pre-drilling testing of most water supplies within 1,000 feet of Marcellus drilling operations,” the report states. “However, the research found a rapid drop-off in testing beyond this distance, which is driven by both the lack of presumed responsibility of the industry and also the cost of testing for homeowners.”

The authors of the study said their research suggests that a standardized list of minimum required testing parameters should be required across all pre-drilling surveys to eliminate confusion among between water supply owners and water professionals.

The study indicates that this standardized list should include bromide. The research found that bromide levels in some water wells increased after drilling and/or fracking. These increases may suggest more subtle impacts to groundwater and the need for more research.

Bromide increases appeared to be mostly related to the drilling process,” the study indicated.

Additionally, “a small number of water wells also appeared to be affected by disturbances due to drilling as evidenced by sediment and/or metals increases that were noticeable to the water supply owner and confirmed by water testing results.”

Increased bromide and sediment concentrations in water wells were observed within 3,000 feet of Marcellus gas well sites in this study, suggesting “that a 3,000 foot distance between the location of gas wells and nearby private water wells is a more reasonable distance for both presumed responsibility and certified mail notification related to Marcellus gas well drilling than the 1,000 feet that is currently required.”

On the regulatory side, “the research found that regulations requiring certified mail notification of water supply owners, chain-of-custody water sampling protocols, and the Pennsylvania Department of Environmental Protection’s investigation of water supply complaints were generally followed, with a few exceptions.

The study also concluded that “since voluntary stipulations were not frequently implemented by private water well owners” that more educational and financial resources should be made available to facilitate testing.

The authors were clear: “This research was limited to the study of relatively short-term changes that might occur in water wells near Marcellus gas well sites. Additional monitoring at these sites or other longer-term studies will be needed to provide a more thorough examination of potential water quality problems related to Marcellus gas well drilling.”

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