US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War
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.
- US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War (aei-ideas.org)
- Energy facts of the week: oil production highest since 1994, oil imports lowest since 1992, and oil jobs highest since 1988 (aei-ideas.org)
- Eagle Ford Shale helps boost U.S. oil production to 15-year high (transwestern-sa.typepad.com)
- Oil Industry Beats Buffett in Railroad Investments Surge: Energy (bloomberg.com)
These Are The Companies That Will Make A Killing Off Of The Coming ‘Industrial Revolution’ In America
Last week, Citi analysts argued that technological breakthroughs—particularly in shale oil extraction—that will allow energy companies to exploit petroleum resources that were formerly inaccessible could spark an “industrial revolution” across the North American continent.
A follow-up report from Citi’s equities team highlights the companies that are already in position to take advantage of this energy boom. While analysts argue that the effect of an energy boom would be transformative and extend far beyond the oil industry, these are the companies that will be directly and locally impacted by the technological breakthroughs in resource extraction.
Read more: BI
- The US Energy Industry Is Going To Grow So Fast, It Will Spark A New ‘Industrial Revolution’ (tarpon.wordpress.com)
(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)
- Pioneer Bets On West Texas Shale Oil To Rival Bakken (mb50.wordpress.com)
- Newfound Billions Of Barrels Of Shale Oil In Newfoundland (mb50.wordpress.com)
- To frack or not to frack: North Dakota’s dilemma (usatoday.com)
Source: Shoal Point Energy website
by Marco G.
The advent of new “fracking” technology has brought previously ignored and non-producible oil source rocks back to the forefront of petroleum exploration. The high pressure hydraulic rock fracturing technology has allow present day oil drillers to fracture and condition the oil source shale rock in order to recover a portion of the oil-in-place. The shale oil stories such as the North Dakota Bakken or the Texas Eagle Ford are now common place for the petroleum environment. There is another shale oil story that has yet to hit the news flow and so you may not be aware of it. It may be an extension of the Utica shales but situated much more northern in Newfoundland Canada.
Shale Oil Basics
Shales with oil are considered the source rocks for conventional oil deposits that are trapped within a seal rock’s anti-cline or hump in the earth’s geology. The source rock was originally a settlement layer underwater on the Earth’s surface where eons of organic matter becomes trapped in the sediments. With geologic events, the rock is overlain with other rocks and becomes embedded deeper in the Earth’s crust. The source rock then has passes through a time frame of the Earth’s geothermal furnace where the high heat and pressure at depths transforms the organic matter into gas, oil or coal in a successive cooking process of maturation.
One clue to the shale oil prospectivity would be the “Total Organic Content” (TOC) of the shale. Another clue is the type of kerogen that the organic matter constitutes and the Vitrinite Reflectance value that indicates whether oil is present or not. A third measure of the prospect is the porosity of the rock or its ability to hold oil within its pores. Finally, there is the permeability of the rock as to whether the oil can be transported from place to place within faults and fractures. This is where the drillers assist the shale layer in releasing their crude oil by hydraulically stimulating multiple fractures along the drilling path.
Location, Location and Location
This shale oil prospect is the Green Point Shale (GPS) that is in the Port au Port Bay area on the west coast of Newfoundland, the island just off Labrador on Canada’s mainland. Here is a link to a good map about Oil and Gas activities around Newfoundland. The specific drilling presently is on well 3K-39, in the map following:
As in real estate, the three most important factors to consider for a resource company are the three location factors. Firstly is the location in a safe jurisdiction, not prone to government seizure? Yes, this property is in democratic Canada on the Atlantic seaboard, about one thousand miles north-east of New York. Secondly, is this property in an environmentally supportive governing jurisdiction? Yes, this exploration property is in oil and environmentally friendly Newfoundland, where there is an oil drilling history and a refinery at Come-by-Chance, Newfoundland. Thirdly, is there the infrastructure to bring in supplies and to take the products to markets? Yes, there are roads and power and ports such as Corner Brook and Stephenville, within the vicinity.
Newfoundland Oil Drilling History
Off the east coast of Newfoundland, there has a long history of oil development including the Hibernia, Terra Nova and White Rose fields discovered 200 mile offshore in the 400 feet deep Jeanne d’arc Basin in the Grand Banks area in 1970s and 80s. These projects are now owned by a consortium of big oil partners including Suncor Energy (SU), Exxon Mobil (XOM), Statoil (STO), Husky Energy (HUSKF.PK) , Murphy Oil (MUR) and Chevron (CVX). These fields are producing 300,000 barrels of light crude per day.
On the west coast of Newfoundland there has been minor oil exploration and production since the late 1800s. Offshore, is the Anticosti Basin, which was explored with seismic in the 1990s by Hunt, PanCanadian, Talisman (TLM), BHP and Exxon Mobil (XOM) . Onshore in 1994, Hunt Oil drilled the Port au Port #1 well and hit 51 API oil flowing in two intervals flowing at 1528 and 1742 bopd over nine days, but this diminished with time. The hypothesis was that this was a porous zone within a larger trend.
Currently Shoal Point Energy is extending the 3K-39 well and is about to perform open hole tests on the extension.
Billion Barrels of Oil-In-Place
The fascinating geology of the Green Point Shale is that it is considered an “Allochthon”, that is the landform has been moved here by geologic events, they were not formed in-situ. The hypothesis is that the geologic forces that moved the shale layer here also crumpled up the shales in a folding thickening pattern similar to an accordion. The layers are “tectonically thickened by imbrication (stacking)”, so that the shale layer that should be only tens of metres thick naturally ends up being a few hundred meters thick.
The Newfoundland government documents offering the oil exploration licenses for bids says this about the specific area:
Port au Port #1 oil and gas tests and the presence of oil in seeps and drilled wells demonstrate that source rocks are mature and that oil and gas was generated and migrated into traps. After trap formation there were direct migration routes through porous beds or faults from the Green Point shale into allochthonous reservoirs.
With source rocks in the oil window or dry gas window, trap preservation and presence of adequate reservoir remains the main risk factors in the Paleozoic basins.
This tells me that the shale rocks are oil bearing and the risk is how to find the reservoir. Even if conventional oil pools are not located, these thick shale beds can be now produced with modern “fracking” technology.
With the crumpled and thick layers of shale, this gives cause to the lucrative aspects of this story. The thicken layer implies an increase in the amount of oil source rocks available for extraction. The geologic forces may have also assisted in the stressing of the shales to make them permeable with large faults and micro-fracturing. The testing performed by NuTech of Texas on the geology gives some very interesting results as shown following:
Source: Shoal Point Energy website.
The GPS shale oil layers are uncommonly thick and thus gives a multiple to the amount of possible oil-in-place. Note the number for Long Point well M16 gives 930 MMBO per section, almost a billion barrels of oil-in-place.
Recent Alliance Events
The drilling for 3K-39 is operated by Shoal Point Energy (SHPNF.PK) of Toronto. On October 26, 2011, SPE announced an agreement to acquire 100% of EL 1070 from Canadian Imperial Venture (CIMVF.PK) and also increased their interest in EL 1120 to 80% from Ptarmigan Energy. This agreement acquires the whole of EL 1070 and acquires further interest in EL 1120 which abuts.
On January 17th, SPE announced an agreement with NWest Energy (NWNYF ) to acquire Exploration License (EL) 1079R which is contiguous to EL 1120 and the EL 1070 where the 3K-39 well is. This agreement acquires EL 1079R which increases the holdings three times to basically the whole of the GPS area in Newfoundland. It seems SPE is positioning for a successful well test of 3K-39.
The Catalyst for Discovery
The drilling of 3K-39 is for the appraisal purposes of the GPS. The latest update from SPE on February 22, 2012 was:
Shoal Point is pleased to announce that operations at the DLMC Shoal Point 3K-39z well are continuing, and that the side-tracked well is expected to reach a measured depth of approximately 1,800 metres over the next few days, after which the borehole will be logged, and a open hole test will be run over the entire approximately 190 metre open hole section below the whipstock. Thereafter, the hole will be drilled to final total depth.
As announced previously, the current work will also involve up to four tests out of the casing in the existing 3K-39 borehole, subject to final regulatory approvals of the testing program. All tests will occur within the Green Point Formation, and will test the flow potential and reservoir characteristics of unstimulated, fractured Green Point shales. The balance of the program is expected to take up to 45 days to complete.
SPE states that this GPS prospect has the potential for both conventional oil (due to the fractured formation) as well as unconventional shale oil. This well will test for the flow potential in addition to the prospectivity and the potential resource size for the total Green Point Shales. The numbers for the oil-in-place is estimated to be very large.
Shoal Point Energy’s US symbol is SHPNF and may be traded here. The author holds Shoal Point Energy shares.
Feb 14, 2012
Jan 26, 2012
Dec 14, 2011
Equities mentioned – XOM, CVS, SU, TLM, STO, HUKSF, MUR, SPHNF, NWNYF, CIMVF
Disclaimer: The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: The author holds Shoal Point Energy shares.
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