Mitchell gets tribute, coal gets crushed, Edward grows apace, Parsley breaks ground, and Range pays attention.
George P. Mitchell, 94, the son of a Greek goatherd who was one of the most prominent independent oilmen in U.S. history, died July 26 in Galveston. He was instrumental in unlocking immense natural gas and petroleum resources with techniques such as hydraulic fracturing and horizontal drilling.
“It is because of him that we can talk seriously about energy independence,” energy scholar and author Daniel Yergin said in unsuccessfully nominating Mitchell for the Presidential Medal of Freedom last year. The Oil and Gas Journal said in April that a well that would have produced 70 barrels a day using conventional drilling can produce 700 with fracking.
“In the 1980s and 1990s, when many energy analysts foresaw only irreversible declines in hydrocarbon supplies, Mitchell got busy poking holes in Texas dirt on the hunch that they were wrong,” the New York Times said. “Marshaling mostly existing technologies, he began fracturing shale rock formations in fields where he had long pumped oil and gas at shallower depths. After 17 years of trying, Mitchell finally hit pay dirt with gushers of gas in 1998.”
He sold his company to Devon Energy Corp. for $3.5 billion in 2001.
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Tenaska said it has cancelled plans for coal-fired power plants in West Texas and Illinois and shifted its attention to natural gas and renewable sources. The $3 billion Trailblazer Energy Center scheduled in West Texas was announced in 2008 for Nolan County between Sweetwater and Abilene. Nolan County Judge Tim Fambrough told the Abilene Reporter-News, “The price of natural gas is still so low that coal plants can’t compete with it.”
Trailblazer was to be among the first plants to capture the majority of carbon dioxide emissions (to sell to enhance oil production in the Permian Basin). The 2,400 acres acquired by Omaha-based Tenaska for the plant reportedly will be sold. “A number of market and policy changes have occurred since then [2008],” Dave Fiorelli of Tenaska said, “all of which have contributed to our belief that these projects are no longer viable.”
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Fountain Quail Water Management, a Roanoke-based subsidiary of Aqua-Pure Ventures, has been contracted by Pioneer Natural Resources of Irving to install two Nomad recycling water treatment units at Pioneer operations in Upton and Reagan counties. The Fort Worth Business Press said the two units are expected to begin operating in the third quarter of 2013.
Fountain Quail provides recycling alternatives for both shale gas and shale oil producers. Pioneer is drilling in the Spraberry and Wolfcamp.
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Atlas Pipeline Partners said it will construct a new 200 MMcfd cryogenic processing plant in West Texas to accommodate rapidly increasing production in the Permian Basin. The new facility, to be known as the Edward plant, will have initial capacity of 100 MMcfd and is expected to open in the second half of 2014. As production increases behind the system, placement of additional compression and refrigeration equipment to increase the plant’s capacity to 200 MMcfd will come in service as needed.
“We are excited to announce another major expansion of 200 million cubic feet per day of future processing capacity at our West Texas facility,” CEO Eugene N. Dubay said. “By the time Edward is fully implemented, our capacity will have more than tripled in West Texas in less than six years.”
Completion of the full facility will increase processing capacity at the WestTX system from 455 to 655 MMcfd, expanding further beyond the 200 MMcfd Driver plant expansion that was brought into service in April. The expected cost for the Edward plant is estimated to be $100-120 million.
Atlas Pipeline’s partner on the WestTX system, Pioneer Natural Resources, which owns a 27.2 percent interest in the facility, will participate in the project’s costs and cash flows and will anchor the production growth behind the expansion, complemented by numerous third party producer customers.
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Cardinal Energy Group signed an agreement to complete its acquisition of the Conway-Dawson leases in Shackelford County. Cardinal now has an 85 percent working interest in the 618-acre field that currently has 46 wells and one injection well. The acquiring company will retain the services of the present operator, who anticipates that remediating 11 of the wells over three weeks will increase current production significantly.
Shackelford County is known for its prolific and famous Cook Ranch oil field, which produces from a very permeable lens of Cook Sand of lower Permian or upper Pennsylvanian age, occurring at an average depth of 1,300 feet. The field was discovered in 1926 and has been operated with low pressure gas injection since July 1927—one of the first such projects in Texas. Cardinal said oil recovery to the present has been at least 14,701,131 bbl of crude oil.
The Cook Ranch Field is the largest of a number of relatively small, shallow producing areas near Albany in Shackelford County. This field is one of the first to be operated by gas injection in Texas and probably the most successful low pressure gas injection project ever attempted, according to Cardinal.
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Magellan Midstream Partners said it has closed on its previously announced acquisition of pipeline assets in Texas and New Mexico from Plains All American Pipeline. The pipeline system includes about 250 miles of common carrier pipeline that transports refined petroleum products from El Paso north to Albuquerque and south to the U.S.-Mexico border for delivery in a third party pipeline into Mexico.
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Chevron USA and Cimarex Energy have merged acreage held by both in the Delaware Basin for an eight-year joint development to be operated by Cimarex. The agreement covers 104,000 acres of liquids-rich unconventional portfolio in Culberson County. Chevron’s mid-continent business unit based in Houston will obtain infrastructure that includes a gathering system, roads, and utilities.
“Our complementary acreage positions in West Texas and New Mexico, along with our common development outlook, make Chevron and Cimarex natural partners,” Alan Kleier of Chevron said, “and the large contiguous lease position will enable the optimum development of these resources.” Tom Jorden of Cimarex said that “optimal well placement for both Second Bone Spring wells and longer-lateral Wolfcamp Shale tests can now be achieved.”
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Globe Energy Services is constructing a new field office and yard complex for Midland-based Parsley Energy Operations. Groundbreaking ceremonies were held recently two miles east of Midland for the complex, which will include an office and a pipeyard of 13,000 square feet—facilities where the company will conduct safety meetings and training seminars and maintain inventory. Parsley’s headquarters will remain in Fasken Center in downtown Midland. The Midland Reporter-Telegram said Parsley has tripled in size in the last year in number of employees and in production.
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Ridgeline Energy Services is adding a new water processing plant south of Odessa and expanding its existing plant in southeastern New Mexico. The New Mexico plant is already capable of processing 2,500 barrels of waste water per day. Both plants for the Calgary-based company serve single unnamed clients.
“Clients want Ridgeline to treat as much water as possible for beneficial use,” CEO Dennis M. Danzik told the Midland Reporter-Telegram. “That use will be to go back into more hydraulic stimulation or for whatever the oil and gas company wants to do with it. It cuts back on the use of water dramatically.”
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Range Resources said its second-quarter production volumes reached a record high of 910 million cubic feet equivalent per day (Mmcfe/d)—up 27 percent over the same time last year. Production was 79 percent natural gas, 15 percent natural gas liquids (NGL), and 6 percent crude oil condensate. Compared to the second quarter of 2012, Range said oil and condensate production increased 39 percent, NGL production rose 35 percent, and natural gas production increased 24 percent.
The Fort Worth-based company said the record production was driven primarily by the success of its drilling program in the Marcellus shale, but Matt DiLallo of The Motley Fool said Range is “watching closely… the Cline Shale and Wolfberry Play in Texas.” DiLallo added: “Range is again going to study the industry activity of peers like Devon, which is planning to drill several wells into each formation this year. The key here for Range is to let its peers spend the more risky exploration capital, which will enable it to earn its stockholders steadier returns as its own risk is reduced.”
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FROM THE RAILROAD COMMISSION OF TEXAS
[issued 30 July 2013]
The Texas average rig count as of July 19, 2013, was 836, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 583 million barrels of oil and 7.4 trillion cubic feet of natural gas.
The commission’s estimated final production for May 2013 is 62,874,983 barrels of crude oil and 540,081,284 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary May 2013 production totals of 52,221,747 barrels of crude oil and 450,819,102 Mcf of gas well gas by a production adjustment factor of 1.2040 for crude oil and 1.1980 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the Commission for June was 378,241,222 Mcf, compared to 395,609,358 Mcf in June 2012. The July 2013 gas storage estimate is 386,800,901 Mcf.
The RRC Oil and Gas Division set initial August 2013 natural gas production allowables for prorated fields in the state to meet market demand of 8,061,885 MCF (thousand cubic feet). In setting the initial August 2013 allowables, the commission used historical production figures from previous months and producers’ demand forecasts for the coming month, then adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for August 2013 is reported.
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FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 09 July 2013]
The U.S. Energy Information Administration (EIA) expects that the Brent crude oil spot price will average $102 per barrel over the second half of 2013 and $100 per barrel in 2014. This forecast assumes there are no disruptions to energy markets arising from the recent unrest in Egypt. After increasing to $119 per barrel in early February 2013, the Brent crude oil spot price fell to a low of $97 per barrel in April and then recovered to an average of $103 per barrel in May and June (about the same as its average over the same two-month period last year).
The discount of West Texas Intermediate (WTI) crude oil to Brent crude oil, which averaged averaged $18 per barrel in 2012 and increased to a monthly average of more than $20 per barrel in February 2013, fell to less than $5 per barrel in July 2013. The narrowing of the WTI-Brent price spread is supported by several factors that have depressed Brent prices or raised WTI prices. EIA expects the WTI discount to widen to $8 per barrel by the end of 2013 as crude oil production in Alberta, Canada, recovers following heavy June floods and the growth of Midcontinent production.
Regular-grade gasoline prices have fallen from an average of $3.66 per gallon June 10, 2013, to $3.49 per gallon July 8, 2013. Midwest gasoline prices recently returned to normal levels relative to the U.S. average price—helped by the resumption of regional refining activity after planned and unplanned outages and the movement of gasoline from other parts of the nation. EIA expects the annual average regular gasoline retail price to decline from $3.63 per gallon in 2012 to $3.48 per gallon in 2013 and to $3.37 per gallon in 2014.
Consumption in OECD (Organization for Economic Cooperation and Development) countries averages 45.5 million barrels per day (bbl/d) in 2013 compared with 44.5 million bbl/d for non-OECD countries. EIA forecasts annual average non-OECD total liquids consumption to surpass OECD levels in 2014, averaging 45.9 million bbl/d (non-OECD) and 45.4 million bbl/d (OECD). EIA projects non-OPEC liquid fuels production will increase by 1.2 million bbl/d in 2013 and by 1.6 million bbl/d in 2014. North America accounts for most of the projected growth in non-OPEC supply over the next two years because of continued production growth from U.S. tight oil formations and Canadian oil sands.
U.S. crude oil production increased to an average of 7.3 million bbl/d in April and May 2013, which is the highest level of production since 1992. EIA forecasts U.S. total crude oil production will average 7.3 million bbl/d in 2013 and 8.1 million bbl/d in 2014.
—contributed by Garner Roberts