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US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War

Mark J. Perry | January 20, 2013, 12:48 am

From Saturday’s WSJ:

U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013. Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high, according to the American Petroleum Institute (API), a trade group. It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began (see chart above).

The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day. The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.

Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.

That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region. The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.

The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing.

MP: Actually, the API’s estimate of a 779,000 barrel per day (bpd) increase in domestic oil last year is pretty conservative compared to year-end comparisons of EIA data for weekly US oil production. Compared to oil output at the end of 2011 (5.846 million bpd), US oil production increased by 1.139 million bpd last year to almost 7 million bpd during the last week of December 2012. Alternatively, using the EIA’s four-week production averages show an increase of 1.063 million bpd from December of 2011 to December 2012. The reason that the yearend comparison shows a much higher annual increase in US oil production (about 1 million bpd vs. 779,000 bpd) is that domestic oil production accelerated during the second of last year – crude oil output increased 14.6% during the second half of 2012 compared to the 4.2% increase during the first six months.

The record increase in oil output last year reminds us the US oil and gas industry continues to be at the forefront of the otherwise sub-par economic recovery, and without that sector’s strong growth in output and jobs, the economy’s sub-par performance would be even more lackluster. The 1 million bpd increase in domestic oil production last year has delivered a powerful energy-based economic stimulus to the economy, creating thousands of new direct, shovel-ready jobs in oil and gas activities, and igniting many spinoff business and indirect jobs throughout the oil and gas supply chain like the “oil-by-rail shipping boom.” The future of the US economy over the next few years looks a lot brighter because of America’s surging domestic energy production.

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Eagle Ford a contender for top U.S. play

By Vicki Vaughan

Highly productive wells and the vast size of the Eagle Ford Shale are combining to make the South Texas shale play a contender for being the nation’s best, according to a new report.

The report, from information and analytics firm IHS, looked at well performance for oil and oil-rich liquids in the Eagle Ford as well as in the Bakken Shale of North Dakota and Montana, currently the nation’s top play. The Bakken has more wells than the Eagle Ford, but so far, on a per-well basis, the Eagle Ford seems to be producing more than the Bakken.

The Bakken is more established, and the Eagle Ford is still developing.South Texas

This IHS report is part of a broader study that’s under way of 27 of the nation’s shale plays.

The IHS analysis shows that “Eagle Ford drilling results appear to be superior to those of the Bakken,” said Andrew Byrne, director of equity research at IHS and the study’s author.

The Bakken shale is the play against which others are measured, Byrne said, because “it was the key play that really opened up development of unconventional resources” using high-tech drilling methods and hydraulic fracturing.

The Bakken first began to show great promise about 12 years ago, Byrne said.

“The results from the Bakken were so strong that it set the standard by which all others will be measured. It was the one play that incited the industry into pursuing these opportunities,” he said.

Now, though, comes the Eagle Ford.

Wells in the Eagle Ford Shale have a stronger flow – 300 to 600 barrels a day or oil and oil-rich liquids, based on average production in a peak month – than in the Bakken, where flow ranges from 150 to 300 barrels a day.

“One of the reasons we really like the Eagle Ford is its potential as a large total resource. It could be one of the best, if not the best, in North America,” Byrne said.

“The Eagle Ford covers such a vast area. That also makes this such a strong play.”

The Eagle Ford sweeps 400 miles from East Texas to counties south of San Antonio and on to the border.

The play “gets uniformly strong results, and that’s making the play look that much bigger and better,” Byrne said.

“All plays essentially have sweet spots. What makes the Eagle Ford so good is that the noncore stuff is delivering strong results also. In some other plays, it’s only the sweet spot that’s economic.”

2012 prediction

The Center for Community and Business Research at the University of Texas at San Antonio has also prepared studies of the Eagle Ford Shale. Center Director Thomas Tunstall predicts that the Eagle Ford Shale will produce 65 million barrels of oil for 2012. Oil production in the Eagle Ford reached 36.6 million barrels in 2011, according to Texas Railroad Commission data.

It’s somewhat difficult to predict production from the shale because the rate of production is accelerating, Tunstall said.

IHS doesn’t yet have an estimate of all the oil that is in the Eagle Ford.

“We’re working on that,” Byrne said.

Last week, Steve Trammel, senior manager of industry affairs for HIS, said in an interview that rig counts are declining in shale plays with much more natural gas than oil because of low natural gas prices.

But drilling is on the rise in shale with oil and “liquids-rich” areas, where wells can tap a mix of oil and condensate, a light oil, and “wet,” or liquid, natural gas, Trammel said.

Looking ahead

In fact, the highest average monthly production in the Eagle Ford is coming from the formation’s liquids-rich window, Byrne said.

Asked which might be the next hot play, Byrne said: “We haven’t officially put out that opinion yet. That will have to be reserved until we finish our study.”

The energy industry is “very creative,” he noted. “It seems like every quarter another play shows up.”

vvaughan@express-news.net

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New drilling, production in Eagle Ford surges

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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.

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