Pioneer Natural Resources And Horizontal Drilling

Pioneer Natural Resources of Dallas announced the success of two projects in distinctly different settings, but with at least one thing in common: the utilization of horizontal drilling. The first is the completion of a gas and condensate well producing from the Eagle Ford Shale in south Texas. The second success is better-than-expected oil production from horizontal wells in the Nuiqsut Sand from the Oooguruk Field on Alaska's North Slope.

A significant factor in each case is neither project would be economic without utilizing horizontal drilling technology. This seems to represent a continuing trend in the oil and gas industry.
Peter

Pioneer Natural Resources updates Texas, ANS drilling

By OGJ editors
HOUSTON, June 10 -- Pioneer Natural Resources Co., Dallas, completed its first horizontal well in the Eagle Ford shale play.

The Friedrichs Gas Unit No. 1 well, drilled in Dewitt County, Tex., initially flowed 3.7 MMcfd of gas equivalent, including 2.7 MMcfd of natural gas and 160 b/d of condensate, after partially completing only five stages of a planned eight-stage completion.

Mechanical problems in the original lateral required a sidetrack with a modified well path that reduced the well’s exposure to the main reservoir section in the brittle shale at the base of the Eagle Ford formation. Pioneer estimates only two stages of the fracture stimulation, representing less than 500 ft of the 3,000-ft lateral, penetrated the brittle shale and are contributing to gas production.

Scott Sheffield, Pioneer’s chairman and chief executive, said, “We have drilled more than 150 wells through the Eagle Ford shale as we developed the deeper Edwards formation and recognize the potential that underlies our 310,000 gross acres in the play.” The company plans to drill a second Eagle Ford well more than 40 miles southwest of the first location in the third quarter. Additional wells are planned to high grade that acreage, including another well in the Friedrichs area.

Alaskan operations
At Pioneer’s Oooguruk project on Alaska’s North Slope, operations are under way to drill four horizontal laterals in the Nuiqsut formation during the second and third quarters. Two will be fracture-stimulated producing wells, and two will be water-injection wells.

The first water-injection well was completed and is being produced temporarily to measure the unstimulated productive capability of the Nuiqsut formation. It was tested initially at 2,500 b/d of oil and was put on production at a stabilized 1,000 b/d.

Initial production exceeded expectations, Sheffield said. Pioneer’s net production from Oooguruk was forecast to average 5,000 b/d in 2009, gradually increasing to 10,000-14,000 b/d in 2011 as development drilling continues. “Later this year, we will reevaluate our production profile to incorporate higher than expected performance from our Kuparuk wells, early waterflood results, and the performance of our planned fracture-stimulated Nuiqsut wells,” Sheffield said.

Pioneer operates the Oooguruk project with 70% working interest, and Eni Petroleum US LLC holds a 30% working interest.

US and Canadian Shale Gas Important Globaly

Study: US-Canadian shale could neutralize Russian energy threat to Europeans

New Baker Institute report looks at Russia and world energy balance (source)

Rising shale gas production in the United States and Canada as well as potential natural gas supplies from Iraq could be pivotal in curbing Russia’s ability to organize an “energy weapon” against European consumers, according to a new study released today by Rice University’s Baker Institute for Public Policy.

The study, "Russia and the Caspian States in the Global Energy Balance," examines Russia’s evolving energy relations with its Caspian neighbors, the Organization of Petroleum Exporting Countries and the West and considers potential scenarios for Russian and Caspian oil and natural gas strategies.

"Maintaining favorable tax conditions to support investment in onshore shale gas resources in the United States can play an important role of containing Russia’s leverage over an increasingly global natural gas market," said Kenneth Medlock, a Baker Institute researcher and lead author of the study. "In addition to North American resources, our scenario analysis shows that there are several supply sources that can serve as viable alternatives to heavy future global reliance on Russian natural gas."

The level of investment made by small U.S. independent oil and gas companies could be negatively affected by proposed new tax changes such as the abolition of IDC (intangible drilling costs) credits and adjustments in the depreciation allowance because in many cases, smaller drilling companies do not have the scale to absorb additional costs.

Medlock said that Russian efforts to organize a "gas troika" among three of the largest natural gas producers – Iran, Russia and Qatar – would result in all members of the troika losing significant market share over time with only minor, short-lived gains from higher prices. The development of alternative supplies from a variety of other sources, including North America, North Africa, Australia and Iraq, would serve as counterweights to attempts by the troika to exercise any market power. "Ironically, Russia could be one of the biggest losers in this scenario," Medlock said. Nonetheless, the Baker Institute recommends that the United States and Europe work together to promote the development of additional natural gas storage capacity (perhaps a strategic stockpile), particularly in Europe, to enhance energy security in the emerging global natural gas market. "Storage is vital to overcoming short-term market disruptions, but it is likely that market reform will be a precursor to substantially enhancing Europe’s storage capability," Medlock said. The study also notes that concerns about the vulnerability of Eastern European countries such as Ukraine and Poland could be best addressed by helping to finance projects to diversify the natural gas supplies of those countries.

The Baker Institute researchers recommend that the Obama administration consider new approaches to counter Russian interference in the energy sector of the Central Asian energy states and transit states in the Caucasus. The Baker Institute said U.S. diplomats should focus more on resolving territorial and ethnic conflicts in the region and on promoting overall energy market transparency and liberalization than on reviving stalled pipeline diplomacy. "For all the United States’ good intentions, U.S. pipeline diplomacy has not managed to significantly reduce the dependence of Central Asian states on Russia to transport their energy supplies," the study’s authors wrote. Although there was little damage to the U.S.-backed Baku-Tbilisi-Ceyhan pipeline and the Baku-Tbilisi-Erzurum pipelines that extended through Georgia during the Russo-Georgia war of 2008, the operation of Georgian ports was seriously disrupted, making apparent the risks that either accidental or deliberate damage could take place at Russian hands.

To access the executive summary of the study, visit here http://www.rice.edu/nationalmedia/multimedia/2009-05-07-RussEnergyExecSum.pdf.

For more information, or to speak to one of the authors, contact Franz Brotzen at franz.brotzen@rice.edu or 713-348-6775.

More Good News From Washington

Let us hope that Congress listens to the following message from The Ground Water Protection Council. The nations ground water resources are adequately protected. We do not need more oversight on the oil and gas industry from Washington.

The oil and gas industry has always tried to protect usable ground water reservoirs from damage during the drilling and production of wells. Historically this process is regulated by individual States, which makes sense because each area is different geologicaly and culturaly.

There is a proposal in Congress for the drilling and hydraulic fracturing (fracing) of wells to be controlled and regulated at the Federal Level, through the Enviromental Protection Agency (EPA). This would only confuse the issue, add unnecessary cost, harm the economy, and take control away from the local (State) level. Of course there are some who think Washington should control everything, but let us hope that wiser heads prevail.
Peter

GWPC: US state regulations adequately protect water resources

Nick Snow
Washington Editor (source) The Oil and Gas Journal

WASHINGTON, DC, May 31 -- Current US state oil and gas regulations adequately protect water resources, the Ground Water Protection Council said in a new report on May 28.

The assertion by one of the nation's leading groundwater protection organizations came as congressional discussions intensified on giving the US Environmental Protection Agency authority to regulate hydraulic fracturing, an essential part of producing natural gas from shale formations.

The study focused on eight regulatory aspects: permitting, well construction, hydraulic fracturing, temporary abandonment, well plugging, tanks, pits, and waste handling and spills. The resulting report was not intended as an evaluation of state programs, but rather, an evaluation of state programs, the GWPC said. (?????? Peter)

Each state covered in the study was invited to review the report's findings and provide any updated information, it added. Thirteen states provided responses, which were incorporated in the report, the council said.

GWPC also produced a regulations reference document containing excerpts from each state's oil and gas regulations related to the programmatic areas evaluated in the study, it said.

Oil from Canada's oil sands is also blended, without segregation, with other feedstocks at many US refineries, making it impossible to determine the content of fuels that are purchased, it added. The report and addendums are available online at www.gwpc.org.

Oil and gas organizations responded favorably. "The study confirms what the industry has been saying: Regulation of oil and gas field activities, including hydraulic fracturing, is best accomplished at the state level where regional and local conditions are best understood, and where state regulators are on hand to conduct inspections and oversee specific applications like well construction and testing and plugging as well as hydraulic fracturing," the American Petroleum Institute said in a statement.

"Hydraulic fracturing is a tried-and-true, more than 50-year-old technology, increasingly essential for producing the nation's natural gas," it added.

Some Uncommon Good Sense Coming From Washington

The following news comes The Financial Times of London. There has been talk about reducing American's use of oil and gas by increasing the taxes we pay on what we use. The idea is if it cost more, we would use less. This of course is economic insanity. It would only harm the consumer, the oil and gas industry, and put a damper on the entire economy.

The following article indicates that Steven Chu, the Obama Administration's new US Secretary of Energy understands this, if not from an economic perspective, then from a political one. With some more common sense like this coming from Washington, maybe there is hope for economic recovery.
Peter

Rise in taxes on US petrol ‘not feasible’

By Carola Hoyos, Fiona Harvey and Clive Cookson in London

Published: May 27 2009 22:29 Last updated: May 28 2009 00:44 (source)

Steven Chu, US secretary of energy, on Wednesday said that it would not be politically feasible for the country to lower its reliance on oil by raising petrol prices to Europe’s levels through higher taxes or regulation.

In the past Mr Chu, a Nobel laureate, has argued that if the US wanted to reduce its carbon emissions, policymakers would have to find a way to increase petrol prices to levels in Europe. But in an interview with the Financial Times, he said: “At this moment, let me be frank, it is not politically feasible.”

Mr Chu’s comments come as oil prices surged to their highest level this year after Saudi Arabia’s oil minister said the global economy had strengthened enough to cope with oil at $80 a barrel.

Prices rose to $63.82 a barrel, almost double their February low of $32.70, after Ali Naimi, speaking in Vienna ahead of Thursday’s Opec meeting, said the world could withstand prices of between $75 and $80. This is a shift in policy for the oil cartel, which this year gave the impression it would not push prices higher too quickly.

Mr Chu’s move against using taxes to raise US petrol prices is likely to frustrate environmental advocates who believe the only way to change Americans’ consumption habits is through higher prices. US fuel taxes are much lower than in Europe, leading to pump prices that are often one-third lower and to the average American consuming double the amount of oil as his European counterpart.

But Mr Chu warned that Americans will have to learn to live with higher petrol prices even if Washington does not enact policy that boosts them. “Regardless of what one does in any sort of taxation, I believe that prices of oil and natural gas will go up in the coming decades,” he said, adding: “They will naturally go up just because of fundamental supply and demand issues.”

Congress is considering a cap-and-trade system that opponents say will substantially increase petrol prices as oil prices soar to their highest level in six months.

Higher petrol prices are likely to be one of the biggest potential sticking points of the proposal when the bill moves from the Democrat-controlled House of Representatives to the more conservative Senate this year.

Mr Chu was adamant that a cap-and-trade system would be necessary to cut emissions. “We need to begin to put a price on carbon,” he said.

A key question, however, was “how to help the US make the transition”, as many states are heavily dependent on coal or have energy-intensive industries.

Additional reporting by Javier Blas in Vienna

Copyright The Financial Times Limited 2009

Hydraulic Fracturing To Produce Shale Gas

http://all-llc.com/shale/GWPCMarcellusFinal.pdf

Federal Regulation of Hydraulic Fracturing? June 6, 2009 Reuters Two members of Congress are working on a bill that would give the federal government regulatory authority over hydraulic fracturing. They are motivated by a concern for ground water protection. Drillers are concerned that new federal regulations will cause permitting delays and increased costs.

Federal Government Regulation of Fracing Shale Gas Wells?

This is an issue worth following. I imagine the average person can be quite alarmed at the idea of an oil and gas company pumping enough water and chemicals into the Earth to fracture rocks enough to produce oil and gas. This technique is referred to in the industry as "fracing" and it is a common practice, but as its use spreads more people are becoming aware of it.

The question here is do we really need Federal regulation of the process of fracing? The states already regulate this activity and it has not been a problem. Why is there this sudden concern now? Is it part of a larger overall plan to hamper oil and gas production? Aren't we trying to limit our dependence on foreign oil and gas?
Peter

House Natural Resources Committee hearing testimony on shale gas drilling today

9:01 AM Thu, Jun 04, 2009 Dave Michaels/Reporter (source)

A hearing of the House Natural Resources Committee this morning will focus on the art of hydraulic fracturing and, more broadly, shale gas production. Some Democrats, including Rep. Diana DeGette of Colorado, have charged that hydraulic fracturing can cause groundwater contamination and should be regulated by the Environmental Protection Agency. (Gas drilling is currently regulated by state agencies.) A couple weeks ago, EPA Administrator Lisa Jackson suggested her agency might reexamine the impact of drilling on drinking water. This further spooked the industry.

Even though DeGette has yet to introduce her bill, the industry has launched a preemptive strike with a coalition called Energy in Depth. Its case got a boost last week, when a report by the Ground Water Protection Council said state regulation was adequate. There are no known cases of contamination due to gas drilling in Texas, according to the Texas Railroad Commission and the Texas Groundwater Protection Committee.

The witnesses include Douglas Duncan of the U.S. Geological Survey; Scott Kell of the Groundwater Protection Council; and Mike John of Chesapeake Energy, a major player in the Barnett Shale. You can watch the hearing here