George P. Mitchell, who in the 1990s as the wildcatting boss of Mitchell Energy and Development pioneered hydraulic fracturing, favors more government regulation of fracking. “The administration is trying to tighten controls,” he told Forbes. “I think it’s a good idea. They should have very strict controls. The Department of Energy should do it.”
Mitchell said most drillers are entirely responsible in their drilling and fracking activities. “If they don’t do it right, there could be trouble,” he added. “There are good techniques to make it safe that should be followed properly.”
Mitchell, 93, is the largest shareholder of Devon Energy, which purchased his company in 2001.
Globe Energy Services of Snyder is expanding its rig fleet and also finalizing its acquisition of Stampede Oilfield Services of Midland, an oilfield construction and electrical services company, according to a report in the Midland Reporter-Telegram.
“Anything we can roll into a one-stop shop for our customers is a good thing,” Nathan Mastin of Globe told the Reporter-Telegram. Globe is acquiring an additional six rigs from Rig Works, Inc., of Odessa.
Since its founding in 2004 to do well completion and production and maintenance of existing wellbores, Globe has expanded to include fluid services, completion systems, well servicing, chemicals, water systems, and other environmental solutions. The firm operates in Texas, New Mexico, Oklahoma and Kansas.
Doug Robison, president of Midland’s ExL Petroleum, attributes the high level of oil and natural gas activity in the Permian Basin to improved technology. “This really is a new industry,” he told the Midland Reporter-Telegram. “It’s completely changed the paradigm. Resource plays have introduced a completely new industry. The risk of dry holes is greatly reduced.”
Commodity prices may fall, he added, “but we won’t lose technology. If anything, we’ll get better and better as we go along, more efficient and more productive. If you base activity on crude prices, you’re truly at the mercy of fate. But if what you’re doing is based on technology, you have more control.”
T. Boone Pickens said recently in Irving that the world has far more energy than he ever imagined thanks to hydraulic fracturing. Since oil and natural gas companies developed fracking and horizontal drilling, the amount of available fuel in the U.S. has boomed. Pickens, who runs BP Capital, told the Dallas Morning News that the boom is about to fundamentally change the world.
“You, me and the rest of America are sitting on a huge change in energy globally,” he said July 19 at the Energy Summit of the Texas Conservative Coalition Research Institute.
The Organization of Petroleum Exporting Countries (OPEC) “isn’t going to have near the power they have today in five years, maybe in three,” Pickens said.
In August, Pickens’ BP Capital sold all of its shares in Chesapeake Energy Corp. and most of its holdings in SandRidge Energy, while investing in other Oklahoma-based energy producers, notably Devon Energy. At the time, Pickens remarked that the transactions reflected commodity prices more than his opinion on the relative merits of the companies themselves.
In a recent Investor’s Business Daily, Dr. Merrill Matthews said energy-related carbon dioxide emissions are down significantly thanks largely to private sector innovations in energy production. Dr. Matthews, resident scholar at Institute for Policy Innovation in Dallas, wrote, “The most underreported recent environmental story has been the dramatic decline in energy-related carbon emissions—nearly back to mid-1990s levels.”
The U.S. Energy Information Administration’s June energy report says that energy-related carbon dioxide fell to 5,473 million metric tons (MMT) in 2011. That’s down from a high of 6,020 MMT in 2007 and slightly above the 1995 level of 5,314 MMT. Emissions in the first quarter of 2012 fell at an even faster rate—down 7.5 percent from the first quarter of 2011 and 8.5 percent from the same time in 2010.
Dr. Matthews said it would be difficult to credit either political party for the decline. He wrote, “As EIA figures show, energy-related carbon dioxide emissions had been rising steadily for decades—through both Republican and Democratic administrations and Congresses. They were rising in the 1990s when Bill Clinton was president and continued to rise when George W. Bush was in office. However, emissions began to fall after 2007, when Barack Obama was only a second-year senator—so he doesn’t get the credit.
“The most likely explanation for the decline is the shale gas revolution made possible by hydraulic fracturing. Increasingly, power plants are turning to natural gas because it has become abundant and therefore cheap. And though technology is improving our ability to reduce emissions from coal usage, natural gas is still a much cleaner source.”
There are other factors, of course. For one, Dr. Matthews said, a slow economy tends to use less energy, especially oil.
Billions of barrels of oil that could increase domestic supply, help reduce imports, and improve U.S. energy security may be potentially recoverable from residual oil zones, according to a study conducted by researchers at the University of Texas-Permian Basin supported by the U.S. Department of Energy.
The recently completed study in the Artesia Fairway is one of several DOE-supported research projects providing insight that, as the Oil and Gas Journal has reported, will help tap this valuable but overlooked resource. ROZs are areas of immobile oil found below the oil-water contact of a reservoir. The reservoir has essentially been waterflooded by nature and requires enhanced oil recovery techniques, such as CO2 flooding, to produce the residual oil.
The Journal said UTPB is conducting additional ROZ research in the Goldsmith Field in Ector County and other areas of the Permian Basin in west Texas and eastern New Mexico.
The U.S. Chamber of Commerce has launched an advocacy campaign to show the benefits of shale development to states, counties, and communities. The campaign, called “Shale Works for US,” started in July in Ohio, Pennsylvania, West Virginia, and New York and will spread to other states.
“Shale energy is in 20 states,” Karen A. Harbert of the chamber’s Institute for 21st Century Energy, said. “It potentially could provide economic benefits for another 100 years.”
Bernard Weinstein of the Maguire Energy Institute at Southern Methodist University in Dallas said recently at an energy forum in Arlington that the sand industry is one of several secondary markets profiting from oil and natural gas production and hydraulic fracturing.
Global demand for sand reached 22 million tons in 2011, almost double from 13 million tons in 2010, according to research firm Spears and Associates. The U.S. leads the world in sand and gravel production with Australia a distant second, according to the U.S. Geological Survey.
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of July 20, 2012, was 899, representing about 48 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 451 million barrels of oil and 7.3 trillion cubic feet of natural gas.
The commission’s estimated final production for May 2012 is 46,141,297 barrels of crude oil and 540,191,926 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary May 2012 production totals of 38,960,818 barrels of crude oil and 460,443,169 Mcf of gas well gas by a production adjustment factor of 1.1843 for crude oil and 1.1732 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for June 2012 was 397,791,208 Mcf compared to 394,643,580 Mcf in June 2011. The July 2012 gas storage estimate is 399,490,097 Mcf.
The RRC Oil and Gas Division set initial August 2012 natural gas production allowables for prorated fields in the state to meet market demand of 9,975,562 Mcf (thousand cubic feet). In setting the initial August 2012 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 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
The EIA projects that the Brent crude oil spot price will average about $103 per barrel during the second half of 2012, about $3.50 per barrel higher than forecast last month. The forecast Brent crude oil spot price falls to an average of $100 per barrel in 2013.
The projected West Texas Intermediate (WTI) crude oil spot price discount to Brent crude oil narrows from about $14 in the third quarter of 2012 to $9 by late 2013. These price forecasts assume that world oil-consumption-weighted real gross domestic product (GDP), which increased by 3.0 percent in 2011, grows by 2.8 percent in 2012 and 2.9 percent in 2013.
With higher crude oil prices, the EIA has increased the average regular gasoline retail price forecast for the third quarter of 2012 to $3.49 per gallon from $3.39 per gallon in last month’s forecast. The EIA expects regular gasoline retail prices, which averaged $3.53 per gallon in 2011, to average $3.53 per gallon in 2012 and $3.33 per gallon in 2013.
The EIA expects U.S. total crude oil production to average 6.3 million barrels per day (bbl/d) in 2012, an increase of 0.6 million bbl/d from last year and the highest level of production since 1997. Projected U.S. domestic crude oil production increases to 6.7 million bbl/d in 2013.
As a result of drought conditions affecting corn harvests and prices throughout the Midwest, ethanol production fell from 920 thousand bbl/d for the week ending June 8, 2012, to 809 thousand bbl/d for the week ending July 27, 2012. EIA has reduced its 2012 ethanol production forecast from 900 thousand bbl/d (13.8 billion gallons) of last month to 870 thousand bbl/d (13.3 billion gallons). EIA expects ethanol production to recover in the second half of 2013 and average about 880 thousand bbl/d for the year.
Natural gas working inventories ended July 2012 at an estimated 3.2 trillion cubic feet (Tcf), about 17 percent above the same time last year. EIA expects the Henry Hub natural gas spot price, which averaged $4.00 per million British thermal units (MMBtu) in 2011, to average $2.67 per MMBtu in 2012 and $3.34 per MMBtu in 2013.
—compiled by Garner Roberts