The challenges of unconventional oil and gas
SANTA FE — Unconventional oil and gas has its name for a reason.
It generally involves getting product from rock or tight sands, requires horizontally-drilled wells, and requires hurculean efforts to fracture the reservoir rock to pull the product out of the ground.
It costs more to get on a per-barrel or per-thousand cubic feet basis than oil or natural gas from vertically-drilled wells, meaning its development depends upon attractive prices for companies to achieve acceptable returns on their investments.
This week, it also is the titlel of the Interstate Oil and Gas Compact Commission’s annual meeting, meaning that’s what the conference will focus on.
On Sunday, a panel of industry and governmental experts gathered to dissue the issue during an event called the Governor’s Roundtable.
They included C. Michael Ming, president of the Research Partnership to Secure Energy for America, Foster L. Wade, a deputy assistant secretary of the U.S. Interior Department, Tom Price Jr., Chesapeake Energy Corp.’s vice president of corporate development, and Denise Hamser, Enbridge Energy’s director of public, federal and regulatory affairs.
Natural Gas part of solution
Price told conference participates said a recent study estimated the nation has 120 years of natural gas supplies at current consumption levels. And just in the Marcellus Shale natural gas field, Price said the industry estimates there is about 1.1 quadrillion cubic feet of natural gas there alone.
“That’s 50 years of U.S. supply at current consumption levels,” he said.
Price said it is important that oil and natural gas companies engage in practices that educate their consumers and other stakeholders about the roles the companies play in delivering not only affordable energy to the country, but also to improve people’s lives in other ways.
“We need people to understand our business and understand the products that we provide them, and that natural gas is a fuel that is viable in terms of cost, cleanliness and availability.”
Getting the product to market
Hamsher said a challenge for the natural gas and oil industry is to get the product to markets that can be thousands of miles away.
Enbridge is helping to meet that challenge, she said, by building $12 billion of expansions underway in North America to get oil from Alberta’s Oil sands and the Bakken Shale oil field south into Illinois and even to refineries on the Gulf Coast. Meanwhile, the company is working to get natural gas from the Barnett Shale in north Texas to other parts of the country.
Enbridge has expanded ownership at the terminal in Cushing, she noted, so the company is working hard to increase its pipeline capacities to and from that terminal.
Hamsher said challenges she sees for the industry include getting the right numbers of suppliers lined up to make projects suitably profitable. Capital and labor costs are up, and so are stakeholder resistance issues, particularly in Illinois, where getting lines across private lands can be quite difficult.
Cooperation is needed between state and federal agencies on pipeline projects, she added.
Don’t forget research and development
Ming told conference attendees that the nation is not running out of gas. In fact, the amount of proved reserves for natural gas continue to grow, he said.
“If you put a value on it, it would be worth $15 trillion,” Ming said of today’s natural gas reserves.
But, much more could be done, Ming added.
He praised government-funded research in development in Norway and in Brazil, and called for similar types of efforts in the United States. A $35 million amount provided by Congress in 2005 for the research partnership won’t go far, he said.
“If we want the status quo, we can keep doing what we are doing. But if we want to make breakthroughs, we need to spend 10 to 100 times more than we are today.”
When asked about cyclical price swings in natural gas and how that impacts the industry, Ming said the industry needs to be profitable at much lower prices, and the way it can do that is through lowering its costs.
“Steps are needed to make gas affordable and reliable to the nation’s population,” Ming said.
Governmental steps to obtain new oil
Wade said the government agrees that all of its resources must be developed, not just conventional ones.
“We have to be working on our coal natural gas, petroleum, nuclear and renewables in order to close that gap.”
Wade said oil shale holds tremendous potential of 800 billion barrels of recoverable oil … three times aas what Saudi Arabia has, in parts of Colorado, Wyoming and Utah.
“That is a huge resource,” he said.
Wade spent much of his time talking about a programmatic environmental impact statement for tar sands and oil shale developments.
It looks at ammending a dozen land use plans where oil shale and tar sands reserves are present.
The agency’s goal is to identify areas that will be open to application for commercial leasing, exploration and development.
While he acknowledged the process takes time, he added it is just as important to involve the public in every step of the work as it is to produce the reserves.
“The government has to be doing everything it can to close the gap between supply and demand. The only thing to do is to go after and develop all of our resources, whether it be conventional, unconventional or renewables,” he said.
What unconventional resources are out there?
Gov. Brad Henry, incoming chairman of the commission, started off Sunday’s meeting.
“I don’t think we could have addressed a more timely or more important topic,” Henry told the ore than 100 commission representatives who gathered at the event.
“As dicussion begins in our nation’s Capital about energy independence, the IOGCC needs to be – must be — right in the middle of that discussion,” Henry said. “Unconventional oil and gas issues are a critical component of that discussion.”
Jim Dilay, a member of the Energy Resources Conservation Board in the Canadian province of Alberta, said his province has unconventional crude oil in the form of the oil sands and has unconventional natural gas, either from coal beds, shales, or tight sands.
Brad Field, the environmental conservation division director of New York’s Department of Environmental Conservation, said unconventional reserves are his state’s bread and butter. Historically, its tight sands have been developed. Today’s gas reservoirs in the Marcellus Shale are a big issue there. Also other shale fields are ready to be developed as well, he said.
John Baza, a director with Utah’s Division of Natural Resources, said his state has a great diversity of hydrocarbon resources, everything from light crude production to coal. Baza said coal bed methane really has been getting developed the past decade. Utah also has tar sands similar to Alberta’s, also mines Gilsonite … also, the state has oil and natural gas shale reserves that are just now being explored.
Don Likwartz, an oil and gas supervisor with Wyoming’s Oil and Gas Conservation Commission, said 65 percent of the state’s oil and gas is on federal lands, managed by the U.S. Bureau of Land Management. The state has 250 year supply of coal resources, he said.
Larry Bengal, director of Arkansas’ Oil and Gas Commission, said his state’s natural gas resources are being produced from the Fayetteville Shale. By the end of this year, 50 percent of the state’s gas will come from unconventional resources, he said.
Victor Carrillo, a commissioner with Texas’ Railroad Commission, noted his state produces a third of the nation’s domestic natural gas. 900 active drilling rigs in the state — nearly half in the nation — are in Texas. Calls the Barnett the grandaddy of unconventional fields. MT 10,000 producing gas wells there. Vast majority are horizontal, with virtually all subjected to massive multi-stage fracture jobs. There are more than 200 operators in the Barnett, alone.
Kevin Banks, director of the Alaska Division of Oil and Gas, said his state is most excited now about natural gas trapped in the ice of the state’s North Slope. Some 85.4 trillion cubic feet of gas could be technically recoverable, Banks said.
“If we can get a handle on how to make this gas flow, it will be a tremendous asset that could fill a gas pipeline from Alaska to the lower 48 states,” Banks said.
Joe Pettey, the president of Pettey Oilfield Services in West Virginia, said wells there have changed during the years, and hold great promise for his state and nation today. But that development depends upon attractive prices, Pettey noted.
Don Bradshaw, a board member of Montanna’s Board of Oil and Gas, said his state has a lot of coalbed natural gas, vast coal reserves and that some shale drilling is being is being tried. The state is working on plans to export carbon dioxide to other parts of the country. Some producers also are trying to use carbon dioxide injection within the Bakken oil field in Montanna.
Lynn Helms, a director in North Dakota’s Department of Mineral Resources, said North Dakota’s production is coming mostly from the Bakken Shale oil field, a state representative said.
Other notes about Santa Fe:
Driving into the Sun on Saturday afternoon on my way through New Mexico at times was challenging. But once the sun slipped below the horizon, I realized the most amazing thing. Even though the sun had set, the sunset it left behind lasted –I swear — for more than an hour.
Pink and rose shades gradually gave way into darker reds, purples and blues in the western sky, even as darkness swooped in overhead and pushed Mother Nature’s painting closer and closer to the horizon.
At the very end, nearly 90 minutes after the sun had set, bright stars twinkled in a night sky just above a thin strip of red sky on the horizon’s west edge.
If you’ve never seen anything like that before, see it at least once. It’s worth the drive.
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With the proven reserves of natural gas in the U.S. has, why isn’t congress pressing for cars and trucks using liquified natural gas. This would reduce carbon emmisions and domesticate our markets rather than relying on foreign imports. The technoloty is there and you can today order a Honda civic which burns liquified NG and if the government was to push it, other companies would soon market similar
vehicles.