Archive for September, 2010

Successes in shale to be shared

September 7, 2010 Leave a comment

As predicted several years ago, water has become a critical limiting factor as the natural gas industry expands from one shale play to the next, according to Gary Hanson, director of the Red River Watershed Management Institute at LSU-Shreveport.

Hydraulic fracturing is required in all of the gas shale plays and it is crucial that industry continues to work with northwest Louisiana communities and voluntarily use predominantly surface water or the Red River Alluvial Aquifer instead of the limited Carrizo-Wilcox groundwater for fracing.

“By addressing our water concerns in a proactive manner and allowing development to proceed in a responsible way, we are a model to other areas of the country where unfortunately, fear, instead of facts, is driving resistance to shale gas development,” Hanson said.

As a result of Louisiana’s success, Hanson has been invited to several water and energy venues in the Southwest and on the East Coast to share the story and lessons learned. In one of the sessions set next month in Pennsylvania, Hanson will be joined by Lt. Gov. Scott Angelle, state conservation Commissioner Jim Welsh and Mike Mathis of Chesapeake Energy.

Other conferences will be in Houston, Pittsburgh and Baltimore. The Baltimore event in October, sponsored by the Water Research Foundation, is pulling together experts to evaluate water quality concerns related to hydraulic fracturing. One of the speakers will be Robert W. Puls, director of research for the Environmental Protection Agency’s Ground Water and Ecosystem Restoration Division.

“It is a real honor to be asked to participate in this expert workshop formed to evaluate hydraulic fracturing and gas shale development,” Hanson said.

As an example of what other area’s of the nation are facing, Hanson notes in the Marcellus Shale, which stretches into Pennsylvania and New York, poor groundwater aquifers exist and major river systems are being used for well stimulation.

New York has a drilling moratorium in place, and “well-meaning groups have incited the public to a point that regulators and scientists, whom I have spoken with, say it is basically impossible to get out objective facts about gas well drilling and hydraulic fracturing. Their greatest concerns are landscape change, excessive water use and fears that fracing may contaminate their drinking water and environment. Facts, not fear, should drive the development efforts,” Hanson said.

In south Texas, the Eagle Ford play is drawing a lot of interest from the oil and gas industry. It extends 250 miles from southeast of Austin to the Mexican border.

In much of the play, existing deep water wells are being utilized for drilling and stimulation because it’s too expensive to drill water wells. In areas near the border, no groundwater exists, so limited surface water is used. Also, encounters with Mexican drug runners and human traffickers make it dangerous for water transfer specialists to work there.

“Caddo, Bossier, DeSoto and Webster parishes, as well as the Red River Waterway Commission, Sabine River Authority, city of Shreveport, Metropolitan Planning Commission and LSUS should be commended for their efforts to preserve and protect our water resources here in northwest Louisiana,” Hanson said.

The state’s Legislature and Department of Natural Resources acted in a proactive manner by developing groundwater legislation here in Louisiana about six years before the Haynesville boom started. Recent water policies, including the newly adopted surface water use law, are being driven by the Haynesville activity.

However, DNR’s approach shows “institutions that are typically considered rigid and inflexible can in fact become flexible and adaptive with the right leadership,” Hanson added. “In an unprecedented manner, but typical of his hands-on management style, Scott Angelle (interim lieutenant governor) has chaired numerous and lengthy Ground Water Commission meetings throughout the state. This has given Louisiana residents, statewide, the opportunity to attend and have their water concerns heard.”

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Permian Basin, Eagle Ford Shale are hot drilling centers in Texas

September 7, 2010 Leave a comment

By Jack Z. Smith

DALLAS — Two Texas geological provinces — the venerable Permian Basin of West Texas and a young upstart, the Eagle Ford Shale in South Texas — are red-hot centers of drilling for oil and other petroleum liquids, investment bankers said here Thursday.

The Permian Basin, where operators are centered in the Midland-Odessa area, is thriving as a result of steady, respectable oil prices in the range of $70 to $80 per barrel, said Sylvia Barnes, head of energy investment banking and a managing director for Madison, Williams and Co. Barnes said energy producers there are also successfully employing technological advancements such as horizontal drilling and hydraulic fracturing that became staples of pioneering U.S. shale-gas plays.

“Since the first half of 2009, we’ve really seen oil activity on fire,” Barnes said. In that time, the drilling rig count in the Permian Basin has skyrocketed from 95 to 289, about a 205 percent increase, she said in a presentation at Hart Energy’s Strategies and Opportunities Conference at the Sheraton Dallas Hotel.

Houston-based oil field services firm Baker Hughes reported last week that the number of rigs drilling for oil in the U.S. had soared to 672, the highest count since Jan. 8, 1988.

The soaring Permian drilling activity is a major driver for the accelerating U.S. oil rig count. In the Permian, more advanced well drilling and completion technologies are having “a profound effect” in boosting production, Barnes said.

Highly successful wells have been drilled in the Wolfcamp, a once-obscure, largely ignored layer of packed limestone below the heavily drilled Spraberry Trend in the Permian.

Improved fracturing techniques have contributed heavily to boosting output of the Wolfcamp wells.

With natural gas prices dropping below $4 per 1,000 cubic feet, the Eagle Ford has become an increasingly appealing area because substantial portions of it also offer opportunities to recover higher-priced oil, condensate and natural gas liquids such as ethane and butane.

Energy companies from large to small are taking stakes in the Eagle Ford, where approximately 90 rigs were running in mid-August, a level of activity roughly on par with North Texas’ Barnett Shale, the largest gas-producing area in the U.S.

The Eagle Ford has become “a very active marketplace for transactions” and “large-acreage positions are garnering premiums,” said Chris Simon, a managing director and energy investment banker for Raymond James & Associates.

“There are still 13 to 14 deals out there on the market,” he said. “It’s going to be a very active area for deals for the rest of this year,” he added.

“In the most-sought-after areas” of the Eagle Ford, “we’ve seen the lease bonuses get to $3,000 to $3,500 an acre,” Simon said.

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