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Experts deliver another round of Eagle Ford bullishness
Welding crews are busy laying pipelines such as this one east of Karnes City, Texas in order to get oil and gas extracted from the Eagle Ford shale formation to market. Pipelines are critical because hauling by truck is more expensive. JOHN DAVENPORT/jdavenport@express-news.net
SAN ANTONIO – The development of the Eagle Ford shale continues to prompt dazzling assessments and predictions from experts, who said at an energy symposium Wednesday that in four years, the oil-rich formation could become the nation’s second-most productive shale play.
Production in the Eagle Ford could reach 1 million barrels a day by 2016, said Trevor Sloan, director of energy research at ITG Investment Research in Calgary, Alberta.
“So the growth rate out of there would be pretty spectacular,” he said.
But before production can reach that level, some problems have to be solved.
About 1,400 Eagle Ford wells are waiting to be completed or to be tied into pipelines, ITG research shows. There are also shortages of crews and water and too few pipelines.
Once the problems of getting the oil and natural gas to market are gone, production from the Eagle Ford could double, and “the Eagle Ford would be the second-largest producing area if you could bring all those to market,” Sloan said.
The Bakken shale in the western U.S. is No. 1.
His remarks were addressed to a crowd of more than 100 at the seventh annual Energy Symposium, sponsored by South Texas Money Management Ltd. The event focused on natural gas, oil and the effect of geopolitics on oil and gas development.
There are about 240 rigs now in the shale, a tenfold increase from January 2010, according to ITG research.
The Eagle Ford produced 30.5 million barrels of oil in 2011, up from 4.4 million barrels in 2010, Texas Railroad Commission figures show. Natural gas production rose to 243 billion cubic feet in 2011, compared with 108 billion cubic feet in 2010.
“It’s truly historic what’s happened,” said Jeanie Wyatt, CEO of South Texas Money Management.
By mid-2013, pipeline expansions will relieve most of the bottlenecks in the Eagle Ford, and more crews are being hired to complete wells. There’s still a shortage of water for fracturing, but some operators are treating brackish water, said Manuj Nikhanj, managing director and head of energy research at ITG.
The nation faces a glut of natural gas, so companies are moving into the oil-rich parts of the Eagle Ford, Nikhanj said. But the Eagle Ford is blessed because, in contrast to many other U.S. shale plays, it is richer in oil and oil-rich liquids.
“Natural gas is a victim of its own success,” Nikhanj said.
Natural gas closed at $2.618 per million British thermal units on Wednesday. Peter Zeihan, vice president of analysis at Strategic Forecasting, doesn’t expect the price of natural gas to exceed $6 per million British thermal units over the next decade.
Amy Myers Jaffe, fellow in energy studies at the Baker Institute at Rice University and an expert on the geopolitics of oil, titled her talk “Adios OPEC,” saying that the U.S. is headed toward an energy renaissance.
“The center of the energy world is moving back to the Americas,” she said, in part because she doesn’t foresee a big increase in production from the Middle East that many have expected.
With increasing oil production in this nation, the price of oil might come down somewhat, Jaffe said, but it isn’t likely to go below $70 a barrel. That’s because of jitters over the uprisings and unrest in the Arab world. In addition, hostilities between Israel and Iran aren’t going away.
Still, the price of oil continues to decline amid expectations that world markets will be flush with extra supplies this year.
Prices fell Wednesday as a report showed that U.S. crude supplies had climbed to the highest level in 22 years. Supplies grew last week by 2.1 million barrels, according to the Energy Information Administration. That’s a bigger increase than analysts expected, and more could be on the way.
Benchmark U.S. crude on Wednesday fell $1.17 to finish at a seven-month low of $92.81 per barrel in New York. Oil is down nearly 13 percent since the beginning of May.
Brent crude, which helps set the price of oil imported into the U.S., fell by $1.70 to finish at $109.75 per barrel in London.
Japan’s Kyodo news agency reported that the U.S. will ask other countries to release spare oil reserves when the Group of Eight meets this Friday. The report follows rumors earlier this year that Western nations were planning a coordinated release of spare supplies.
White House officials wouldn’t comment about the report.
“Shale has given us the upper hand,” Jaffe said, but it’s important to extract the oil and gas in an environmentally responsible way, or bans on hydraulic fracturing could result.
The Associated Press contributed to this report.
vvaughan@express-news.net
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