Oil and Gas Lawyer BlogThis video was done by the American Petroleum Institute to illustrate the modern techniques used in the drilling, fracing and completion of a horizontal well.
Articles Posted in Unconventional Resources
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Shale Gas – an American Revolution?
In a recent Wall Stree Journal article, “America’s Natural Gas Revolution,” Daniel Yergin and Robert Ineson opine that gas produced from shale “is already changing the national energy dialogue and overall energy outlook in the U.S.–and could change the global natural gas balance.” Mr. Yergin is the author of “The Prize: the Epic Quest for Oil, Money, & Power” which won him a Pulitzer Prize. He is now chairman of IHS CERA. Mr. Ineson is senior director of global gas for IHS CERA.
Yergin and Ineson cite the following evidence for their thesis:
— Production of gas in the lower 48 states increased 15% from the beginning of 2007 to mid-2008 – an increase fueld mostly by shale gas discoveries, and an increase that is more than most other countries’ total gas production.
— Proven gas reserves have risen from 177 trillion cubic feet in 2000 to 245 trillion cubic feet in 2008, even though the U.S. produced nearly 165 Tcf during that time.
— “At current levels of demand, the U.S. has about 90 years of proven and potential supply — a number that is bound to go up as more and more shale gas is found.”
Most of this new gas comes from shale plays, beginning with the Barnett Shale in North Texas, and including the Haynesville (Louisiana and Texas), Fayetteville (Arkansas), Marcellus (Pennsylvania and New York), and most recently the Eagle Ford in South Texas. Shale gas is made possible by use of horizontal drilling technology and newly developed hydraulic fracturing completion techniques.
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EIA Says U.S. Natural Gas Reserves Highest Ever
EIA issued the following press release today:
U.S. Energy Information Administration Washington, DC 20585
FOR IMMEDIATE RELEASE
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Lots of Energy Behind Use of Natural Gas as Vehicle Fuel
Momentum appears to be gaining to increase use of compressed natural gas in vehicles in the U.S., both to decrease the nation’s dependence on foreign oil and as a “bridge fuel” to fight global warming.
- Last Week, the Potential Gas Committee issued a report estimating that the toal U.S. natural gas resource base at year-end 2008 was 1,836 trillion cubic feet, an increase of 39% from its 2006 estimate. Most of this increase comes from newly discovered shale reservoirs. Boone Pickens said that the new estimate “is the equivalent of nearly 350 billion barrels of oil, about the same as Saudi Arabia’s oil reserves.”
- Boone Pickens’ energy plan includes greatly expanding the use of natural gas as fuel for transportation.
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Bill to Regulate Hydraulic Fracturing of Wells Introduced in Congress
Four legislators from Colorado, New York and Pennsylvania have introduced a bill making hydraulic fracturing subject to regulation by the Environmental Protection Agency under the Safe Water Drinking Act. Dubbed the Fracturing Responsibility and Awareness of Chemicals Act, or FRAC Act (
FRAC Act.pdf), the bill would amend the Safe Drinking Water Act to require companies to disclose the chemicals they use in their fracturing processes. The press release (
Press Release FRAC Act.pdf) from the legislators states that “It’s time to fix an unfortunate chapter in the Bush administration’s energy policy and close the ‘Halliburton loophole’ that has enabled energy companies to pump enormous amounts of toxins, such as benzene and toluene, into the ground that then jeopardize the quality of our drinking water.” (Benzene and toluene are not additives to frac fluid.)
An energy lobbying group, Energy in Depth, has denounced the bill as an “unnecessary financial burden” on the industry which could result in more than half of U.S. oil wells and one-third of gas wells being closed, and reduction in natural gas production of up to 245 billion cubic feet per year.
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Air Pollution Caused by Barnett Shale Drilling
A study (
Armendariz Study.pdf) published last February by Al Armendariz, an engineering professor at Southern Methodist University, concluded that gas drilling in the Barnett Shale contributes about as much air pollution to the D-FW area as emissions from cars and trucks. Dr. Armendariz’s study was financed by the Environmental Defense Fund. Dr. Armendariz concluded that in the nine counties included in the D-FW metroplex area, gas drilling produced about 112 tons per day of pollution, compared with 120 tons per day from vehicle traffic. Dr. Armendariz suggested that pollution from drilling activities could be greatly reduced by requiring vapor recovery units on tank batteries and “green completions” of wells to prevent gas from being vented when a well is being completed.
Representatives of the industry quickly refuted Dr. Armendariz’s conclusions, arguing that his facts were all wrong.
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Chesapeake Energy Master Drilling Plan Approved by Fort Worth City Council
Chesapeake Energy has obtained City approval for a “master drilling plan” that lays out plans to drill 69 horizontal wells from seven drilling locations within the City of Fort Worth. The plan identifies the drilling locations and the gathering lines, and how produced water will be disposed of. The plan shows how horizontal drilling technology has revolutionized the drilling of wells in shale formations.
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Wind Energy in Texas
Renewable energy is a hot topic in the new Obama Administration. Wind Energy is being touted, especially in Texas, as a solution to global warming and U.S. dependence on foreign oil. Wind farms have sprouted all across Texas. Texas is now the leading wind energy producing state. Texas utilities are about to spend billions of dollars extending high-voltage transmission lines into West Texas and the Panhandle, opening up those areas to additional wind energy projects. The Texas Panhandle will see the next boom in wind energy development. Having grown up in the Panhandle, I can verify that the wind blows there.
Three points are good to keep in mind when reading stories about renewable energy in general, and wind energy in particular. First, it is important to distinguish between two different goals being pursued by the Obama Administration: freedom from dependence on foreign oil, and reduction of carbon emissions. Wind energy is “clean,” because it does not produce CO2. To the extent that wind energy can replace conventional coal- and natural gas-burning power plants, it therefore reduces CO2 emissions, thus fighting global warming. But wind energy has little or no effect on imports of oil, which is mostly used for fueling cars and trucks. If and when the auto industry solves the battery problem and is able to produce electric cars, wind energy could contribute to reduction in oil imports.
Second, it is important to understand that, although wind farms are increasing exponentially, they contribute only a tiny portion of the nation’s total energy consumption. According to the Energy Information Administration, as illustrated below, in 2007 wind energy contributed only 5% of 7% of the nation’s energy — .35%!
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Ruminations on Unconventional Resource Plays
The last few years have seen a boom in the oil and gas exploration business in the U.S., driven by new technologies that have allowed exploitation of “unconventional” resources for gas and oil. These resources are often called “resource” plays, because the oil and gas is being produced from shale beds. Shale is known by geologists to be the source or “resource” of pockets of oil and gas accumulated over hundreds of years in more conventional oil and gas sands, trapped by faults and other geological anomalies.
The resource plays in the news over the last couple of years are the Barnett Shale in Texas, in and around Fort Worth, the Fayetteville Shale in Arkansas, the Bakken Shale in North Dakota, and more recently the Marcellus Shale in Pennsylvania and New York, the Haynesville Shale in Louisiana and East Texas, and the recently discovered Eagle Ford Shale in South Texas. Exploitation of these resources has resulted from two factors: improved technology, especially horizontal drilling, and high oil and gas prices. The discovery and exploitation of these shale plays has dramatically increased the U.S. reserves of natural gas. The top producing well in the Haynesville Shale produced 713 million cubic feet of gas in December, an average of 23 mmcf per day.
The table below shows the increase in production from the Barnett Shale since 1982:
These shale plays have had dramatic effects in the U.S. economy and in U.S., state and local politics. For example:
— Lease bonuses in the Barnett and Haynesville Shale plays reached heights unheard of last year — $25,000 to $30,000 per acre. By September 2008, Chesapeake had acquired leases covering 550,000 acres, EnCana and Shell had bought 325,000 acres, Petrohawk Energy 275,000 acres, Devon energy 130,000 acres. Haynesville lease bonuses averaged more than $13,400/acre. The Haynesville play was like the California gold rush.
— The Haynesville Shale is 200-300 feet thick. Recoverable gas reserves are estimated at 24-60 Bcf (billion cubic fee, or a million mcf) per square mile. Estimated ultimate recoveries from Haynesville wells have been estimated at 4.5 to 8.5 Bcf per well.
— In and around Fort Worth, and in areas of Pennsylvania, landowners began to organize themselves to bargain with exploration companies as a group, to increase their leverage to obtain better lease terms.
— Ray Perryman, a Texas economist, estimated that the economic impact of the Barnett Shale on the Barnett Shale Region in 2008 was almost $30 Billion.
— Horizontal drilling technology has allowed the drilling of wells in urban areas, including under the DFW Airport and under the campus of Texas Christian University in Fort Worth.
— Urban drilling has also lead to increased regulation by municipalities of drilling activities in urban areas. Fort Worth and surrounding cities have adopted increasingly sophisticated and complex drilling ordinances, regulating aspects of drilling and producing wells that have not heretofore been the subject of regulation, including sound abatement, air pollution, pipeline safety, and street maintenance.
— Members of the Texas Legislature, now in session, have introduced numerous bills – principally in response to complaints by constituents – to allow municipalities, counties and groundwater districts some authority to regulate condemnation for and location of pipelines, underground disposal of produced water and frac water, and “the quality of the environment.” Industry lobbyists are being kept busy opposing those bills.
— The Pennsylvania Legislature is considering bills to impose a property tax on producing minerals and a severance tax on production in that state.