Shale Gas A Major Contributor To Supplies

Here is more information on the abundance and viability of producing gas from shale. Perhaps the term "unconventional" should be dropped from the phrase "shale gas". It might make financing easier to obtain.
Peter



Laboratory Evaluation of Shale Permeability by InGrain RocksMonday, January 5th, 2009
A Houston company has developed new methods for assessing the production potential of shale based upon an examination of nanofractures in core and cutting specimens. Read more in an article at the Houston Chronicle.

Unconventional Natural Gas is AbundantWednesday, October 1st, 2008
Stephen Holditch of Texas A&M University described a research project at the Oil & Gas Journal’s Unconventional Gas International Conference & Exhibition that estimates volumes of recoverable unconventional natural gas in US sedimentary basis exceeds the amount of recoverable natural gas in conventional deposits by ten fold. More on his study at the Oil and Gas Journal.

Unconventional Natural Gas Production TrendsSaturday, September 6th, 2008
The Energy Information Administration includes the graph of natural gas production shown below in the natural gas section of their 2008 Annual Energy Outlook.


The graph shows onshore unconventional gas production shooting up between 1990 and 2006 but leveling off for the projected data. It seems that there are enough undrilled natural gas leases ticking towards expiration to steepen the production rate rather than allow it to go level.

Energy And The Role Played By Natural Gas

We are learning what a valuable fuel natural gas is. It burns more cleanly than oil or coal. The infrastructure to find, produce, and transport it to the end users is in place. Perhaps best of all, we're finding more of it than ever and some predictions are there may be enough to power our economy for 100 years or more.

This abundance is largely due to improved technology enabling the production of gas from tight sandstones and most importantly, shale. This technology involves horizontal drilling, new hydraulic fracturing methods, and the ability to interpret these long, "horizontal" well bores, or as they're called, "laterals".
Peter

(source of graphics)

Natural gas is vital to all aspects of the American economy, and it is not easily replaced.

Natural gas far less carbon (dioxide) emissions that does burning oil or coal.

Petroleum products, coal, and natural gas account for 85% all energy used in America. This can not be replaced by so-called "renewables" in the near term.

Natural gas burns far more cleanly than oil or coal.

Natural gas is the more efficient that oil, coal, or even nuclear energy.

Solving The Financial Crisis AND The Energy Crisis

Here is some positive news about the economy and America's need for abundant, inexpensive, clean energy. Somehow the credit markets must be re-established so these independent producers can do what they do best: find, produce, and deliver the abundant natural gas resources known to exist.

This will not be the only way to work out of this economic recession, but it will be a giant step in the right direction. See the following article and consider the added graphs and charts.
Peter


Financial Crisis = Energy Crisis? (source) posted Sept. 30, 2008

Up until a few weeks ago, energy was a front-page topic. Now its place has been taken by our financial crisis. But while all the mainstream media attention regarding the present financial crisis has focused on its threat to America’s financial sector, the fact is that threat very much includes our present and future ability to meet our energy needs.

Most of our domestic natural gas production is not the work of so-called “big oil,” but rather by independent producers who are entrepreneurial businesses that make their revenues only by producing natural gas. They utilize the futures market to reduce risk and to ensure a certain return on what they produce but have no retail or other operations that can offset big swings in price. Current domestic production is threatened because of the massive amounts of capital it requires to drill and produce that natural gas here in the U.S. Producers must have access to that capital.

At the same time, the financial crisis has increased the volatility of the energy markets. Bear Stearns, Lehman Brothers, Goldman Sachs and others all played a major role in the commodities markets, including energy. The buying and selling that has occurred, as the major players have had to liquidate some positions and cover others have roiled the markets, making it extremely difficult for independent producers to do any long-range planning. It also has left some holding the bag.

Tulsa, Oklahoma-based Semgroup LP’s bankruptcy, caused by the firms’ huge exposure to energy options trading, has left thousands of small producers who sold oil to the firm owed millions, and the producers unable to pay royalty owners. We don’t have to go far back in time to see what happens if the independent producers are harmed.

In the late 1990’s, Venezuela flooded the U.S. market with below-cost Venezuelan oil. Oil fell to $8 a barrel, if you can imagine that now—less than 10 years ago. This was done with the goal of driving America’s independent oil producers out of business, about a million barrels of oil a day. Thousands of independent producers who had hung on through the boom and bust 1980’s were put out of business, and our reliance on foreign oil, and the transfer of American wealth overseas, increased accordingly. But it wasn’t only our domestic oil production that was lost.

Many of the independents were also natural gas producers. But we were able to move from a position of natural gas want to natural gas abundance with new, more expensive technology and new ideas that unlocked natural gas from shales and sands. That brings us to a less tangible, but no less real aspect to the present threat, and it is the fact that independents also bring the kind of “outside the box” thinking needed to solve our energy and environmental problems.

In the 1970’s, while the best and brightest of the biggest oil companies were busy telling Congress we were running out of natural gas, such small independents as GHK’s Bob Hefner had the gall to challenge them both in words and deeds, in the end proving that natural gas could be found even where no oil existed, and at depths never before thought possible. Independents were way ahead of the curve in jumping in with both feet when it came to natural gas, to the point where today in America, more than 90 percent of the working rigs are exploring for the natural gas that is so critical to our present and future energy needs.

The shale production techniques that have played such a key role in just the past four years in providing abundant supplies of clean-burning natural gas were developed by an independent producer and it is the American independent producers that are leading the way in developing these clean energy sources for the future right now. This kind of entrepreneurial thinking is also driving the current development of wind, solar, and biomass, which, in conjunction with natural gas, can form an energy portfolio that will secure a green energy future for us. But these sectors are also facing the same threats. Access to capital is essential for these “plays” to develop to their full potential. The need for wise, forward-thinking policy decisions has never been greater. You cannot have a sound economy without American energy to fuel that economy. A strong capital market is essential to any energy policy. And an energy policy that ignores the environment is self-defeating. It’s not just financial institutions that are at stake in this debate, but our energy and environmental future as well.

Where Do We Go From Here? Bust, or Boom?

Here is some sobering news about the oil and gas industry in western Colorado. I have great affection for the area as my first job as a geologist was with the U.S. Geological Survey studying the oil shale in Piceance Basin of Colorado and the adjacent Uinta Basin in Utah. Years later I had relatives living in Parachute and I enjoyed my trips there to see them.

It seems there is an over-supply of natural gas coming from these western states, (Colorado, Wyoming, Utah, and New Mexico). One reason for the supply glut is a lack of transportation pipelines to move the gas to eastern and western markets. We're in for some "interesting" and challenging times with the economy in crisis and a new administration in Washington D.C. that is anything but friendly to the oil and gas industry. Yet I do not see solar and wind energy replacing oil, gas, and coal any time soon. Comments?
Peter

IN COLORADO: A natural gas well sits idle. Prices suddenly began to drop in September — natural gas is down 50% from its peak, and oil has plummeted from a high of $136 per barrel to about $40. Towns like tiny Parachute feel the pain.

http://www.latimes.com/news/nationworld/nation/la-na-energy-bust-town7-2009feb07,0,5750036.story
From the Los Angeles Times

An energy boomtown goes bust
Even as the national economy went into a tailspin, resource-rich towns like Parachute, Colo., were doing fine. Then natural gas prices began to plunge, and the pain began to rise.
By Nicholas Riccardi February 7, 2009
Reporting from Parachute, Colo. — Robert Knight was about to install wireless transmitters on eight new drilling rigs joining the thousands that dot the ravines and mesas here when he got the startling news: All but one of the rigs were coming down. Falling natural gas prices had led energy firms to abruptly curtail their work here last month, battering the last sector of the U.S. economy that had prospered despite the recession. "Boy, it was quick," said Knight, who has a business installing communication equipment and who serves as the town manager. "It was like the difference between night and day. "The sky-high oil and natural gas prices that burdened consumers during much of the decade were a blessing to residents of this tiny town and other energy-rich communities from Alaska to Arkansas.

Even as the national economy went into a tailspin in early 2008, home prices in boomtowns like Parachute kept rising and the streets were packed with shiny new pickups. But prices suddenly began to drop in September -- natural gas is down 50% from its peak and oil has plummeted from a high of $136 per barrel to about $40. The plunge brought some relief to recession-racked consumers, but has raised anxieties in Parachute, a town of 1,500 that bears the scars of busts that followed previous energy booms.

In better times, "you couldn't find a hotel room, you couldn't find a campground, you couldn't find a place to rent," said Laura Diaz, the town planning clerk. That's changing fast. "On Christmas Day there were three U-Hauls in my neighborhood," she said. "It is a little frightening for the people who have been here and know the history."

According to the energy service company Baker Hughes, the number of active oil and gas drilling rigs in the U.S. has dropped 13% since its peak in August. Gary Flaharty, the company's director of investor relations, said the decline matches the industry's response to previous price drops. Energy experts say the state of the economy could prolong this energy downturn. "The boom, absolutely, is over for the moment," said Pete Stark, vice president for industry relations at IHS in Englewood, Colo.

But energy-rich communities still have stronger economies than much of the rest of the nation. The seven states with budget surpluses can thank the energy industry, said Arturo Perez, a budget analyst with the National Conference of State Legislatures. Wyoming posts the nation's lowest unemployment rate, 3.4% -- less than half the national rate. Nonetheless, the reversal has been striking. Last summer, New Mexico held a special legislative session to spend a $200-million surplus fueled partly by energy revenue. Now it is scrambling to close a $400-million deficit. Alaska, which socked away billions in oil revenue over the last decade, warns that unless oil prices rise, it will face a budget deficit.

In Parachute, 200 miles west of Denver, the change has been dramatic. The town straddles I-70 along the Colorado River, in the shadow of massive mesas and buttes. On the slope of one mesa sits a subdivision of about 5,000 people that relies on Parachute businesses. Built to house expected oil and gas workers in the 1980s, the development emptied out when the energy industry killed oil shale exploration in the Grand Valley in 1982. It had filled back up by this decade, as high natural gas prices made exploration in the rugged land of the Piceance Basin economically feasible.

The streets of Parachute and similar towns were clogged with flatbed trucks hauling drilling equipment. Hotels were booked for months in advance. The region barely felt the recession that followed the dot-com bust in 2001, the recovery that followed, or the brutal downturn that began in late 2007. "We've had an economic bubble over us for some time," Knight said. "We've been pretty well sheltered. "Then in December, it all changed. Rumors began circulating about energy companies cutting jobs. "For Rent" notices appeared on homes and in local newspapers. Three hotel projects were put on hold, and the few existing hotels began to post vacancies. "We were known as the only one-stoplight town that had a traffic congestion issue," Knight said. "Compared to that, it's almost like a ghost town."

At VJ's Outlaw Ribbs, the regular flow of customers slowed to a trickle. Some began stopping in to say goodbye -- they'd been laid off and were heading back to their home states of Texas, Louisiana and elsewhere. "People we used to see every day, we just don't see anymore," said waitress Lori Ross. She tried to look on the bright side -- when she rented a house last year there were 50 applications per open rental. Now, she said, "there are rentals everywhere."

Last week, Del Dawson, a local real estate agent, did what had been unthinkable in Parachute for several years: He cut the prices on two homes. Like some other local business leaders, Dawson remains optimistic about the region's long-term prospects. He expects energy firms to redouble their efforts when the price of gas creeps back up -- local expectations are that will happen this summer or spring 2010. And many companies are maintaining a sizable workforce for their already drilled wells.

"We still feel it's a boom," said Hayden Rader, a developer who has two projects underway in Parachute. "People are saying there's not enough work here, but we've still got more than anyone else. "Yet residents are feeling the pain. Amy Beasley and her husband run the Old Mountain Gift & Jewelry store downtown and a neighboring shipping business. Their revenue has fallen this month, and people they know in the energy industry who had talked about an unending boom have abruptly lost their jobs. A fourth-generation Parachute native, Beasley, 35, has been ambivalent about the industry that keeps the town alive but has industrialized the wild lands where her family homesteaded. She and her husband have discussed whether to close their shops given the severity of the downturn. "We're going to stick it out and try to weather the storm," she said. "It may slow down for a few years, but it's going to be back. They're never going to leave us alone."nicholas.riccardi@latimes.com