My Day at OTC

By Peter Duncan
CEO & Founder, MicroSeismic, Inc.

A few weeks ago I made my way down to Reliant Stadium for the annual Offshore Technology Conference. This event is not one I regularly attend for many reasons, not the least of which is the logistics of getting there. The traffic lived up to my expectations and it took better than an hour to make my way around the loop to the South Main. After queuing up to get off the 610, I then crept along finally to reach the entrance to the Green Parking Lot. There seemed to be a bit of confusion at the gate and cars were not getting in all that fast. It turned out that the attendants had no change. You could enter if you had $10 exactly, but all I had was a Twenty. In a little while someone with a Ten came along and they could make change for me. I was in the lot at least. That left me about a 1 mile walk to the show entrance, but it was a pleasant May morning and I enjoyed the walk.

This year the OTC was attended by close to 110,000 people from all over the world. Fortunately only a small fraction of that number was at the registration desk when I arrived and before long I had my badge. Next up was to find the speaker’s check in room and to upload my slides. I managed to do that asking directions only twice. I needed the help because for some reason room 504 was on a hall between the 100 and 300 series rooms. Go figure.

I was participating in a panel that morning on the subject of “Emerging Marine Geoscience Technologies”.  It was a pretty heady group that I was matched up with. Besides me the panel members were Dr. David Monk of Apache speaking on new streamer technologies, Dr. Rocco Detomo of Shell speaking on permanent reservoir monitoring, Dr. Shuki Ronen of Stanford speaking on ocean bottom sensors and Paolo Johann of PetroBras giving a case history of their deep ocean bottom optical cable deployment at the Jubarte Field. Paolo even had some passive monitoring results supplied by MSI. I spoke on my ideas of how microseismic technology, which has become so important to unconventional development onshore, might have future applications in a marine environment. We each spoke for 10 to 15 minutes, and then the floor was opened for questions and discussion.

One interesting part of the session was the opportunity for the audience to vote on questions through an electronic polling facility. Of particular interest to me was the question:

“Of the areas of technology that the panel has discussed, which do you think will have the most impact on your operations and future production:"

  1. New streamer technologies
  2. Permanent reservoir monitoring
  3. Ocean bottom acquisition
  4. Microseismic technologies

Answer B, Permanent Reservoir Monitoring garnered the most votes and Microseismic Technologies came in second. That certainly bodes well for MSI’s business in the offshore. I believe offshore opportunities for microseismic are on the horizon, and from the survey it is definitely on the minds of many.

After the panel I decided to wander in the exhibit hall for a while. OTC 2014 had over 2600 exhibitors form more than 120 countries. I confess that most of the stuff on display was a mystery to me, all shiny pipes, valve levers and tubing. For about 2 hours I fought through the congested aisles up and down the floor in only one of the several exhibit halls before deciding that I had seen about all I needed to see. The 20 minute walk back to the Green Lot was a fair bit warmer in the afternoon sun, so the frozen margarita being served as part of the Cinco de Micro celebration at MSI was a welcome end to the day.

Peter

 

 

 

First Quarter Results Boost 2014 Outlook for Unconventional Oil & Gas

By Sarah Groen
Vice President, Strategic Marketing - MicroSeismic, Inc.

When thinking about industry outlook, it’s important to take a step back and think about how far the unconventional oil and gas market has come in just the past two years. Over the last few quarters the word of the day has been “efficiency.” This laser focus on efficiency has become a driver in everything from pressure pumping capacity, to completions techniques, to the way companies are reporting results to investors. There’s nary an oil and gas operator that doesn’t have the quintessential “how much cost we’ve driven out of our drilling and completions operations since 2012” slide in its investor presentation. This drive towards efficiencies seems to be propelling our market forward.

After a mixed bag of results in 2013, the first quarter of 2014 seems to be a turning point. In Halliburton’s Q1 conference call, CEO Dave Lessar stated, “I'm starting to feel the turn. I'm starting to feel the momentum swing. Not only that, I'm starting to see it happen. I’m more excited about North America now than I have been since late 2011.”

At MicroSeismic, we’re beginning to see the turn as well. Projected 2014 rig count is only expected to be up about 2%, however, because of the drive towards efficiencies (more wells per pad, more wells spud per rig, etc.), we believe number of wells frac’d, and number of stages frac’d are better indicators of the market outlook.

 In 2014, we expect number of stages frac’d in the US to be up about 18% and the number of wells frac’d to be up 10%. Increases in number of frac’d stages is growing at a faster rate than number of wells frac’d due to increasingly longer laterals and a trend towards shortened frac stages/spacing.

Efficiency is driving drilling days down, increasing the number of wells drilled per pad, increasing 24 hour operations, and driving new techniques such as zipper frac’ing. The ability of the operators to do more with less helps them to drive faster on the same capital budget. For the service companies tied to the well rather than the rig count, this should be good news for at least the next two years.

As incremental gains in terms of efficiencies become harder and harder to find, operators will focus on optimizing production. With MicroSeismic’s Completions Evaluation Services, operators can begin down that path now by optimizing well spacing, comparing completion techniques, and getting early estimates of production.

Sarah

 

 

 

Optimizing Production in the Utica

By Jaclyn Townsend
Marketing, MicroSeismic, Inc.

The Utica shale formation is one of the newest natural gas discoveries in North America. Estimates of natural gas deposits in the formation range from a low of about 2 trillion cubic feet (tcf) to a high of 60 to 70 tcf (UOGR). Currently, most companies active in the Utica shale are drilling exploratory wells on the Canadian side of the border and some production rates have tested up to 1 million cubic feet per day.

With underlying portions in New York, Ohio, Pennsylvania, Tennessee, West Virginia, Virginia and also present beneath parts of Ontario, Canada, some geologists have proposed the Utica gas-bearing formation as extensive. The most familiar shale formation in this area is the better-known Marcellus shale.

While the Marcellus fracture sets have been studied comprehensively, fracture sets in the Utica Shale are not as well known. Mary Ellison, Geologist III, at MicroSeismic was recently featured in the March edition of the American Oil and Gas Reporter where she revealed overlapping data from both the Utica and Marcellus shales. Mary’s article goes on to discuss how knowing the natural and induced fracture patterns will assist Marcellus and Utica operators in optimizing production.

Check out the full article here “Microseismic Reveals Fracture Patterns” or register for our FREE May webcast on May 20th where Mary will discuss the exact methods used to collect the data which revealed fracture patterns in both plays. To register for our May webcast, click here.

Understanding the natural and induced fracture patterns will support operators in optimizing production in a booming and forward-moving segment of the industry. MicroSeismic is consistently motivated to stay ahead of the curve. As we develop new methods and technologies to provide our customers with the best data possible, they are then able to design future wells and completion strategies more efficiently and cost effectively.

Jaclyn

Microseismic - a Geophysical measurement for the Engineer

By Kash Kashikar 
VP, Completions Evaluation, MicroSeismic, Inc.

Microseismic monitoring is the singular technology that provides measurement of fracture propagation away from the borehole. The process of hydraulic fracturing generates stress in rocks which is released in the form of fracturing, failure and movement along pre-existing structures. This stress release generates seismic waves that propagate outward from the source. These seismic waves are detected by an array of surface or down-hole geophones. The recorded signals are processed to determine the sub-surface location of the failure source. As such microseismic is principally a geophysical measurement. A lot of focus, research and engineering has been applied and continues to be applied to improve the geophysical understanding and rigor of the measurement.

One of the reasons for monitoring microseismic activity is to gain a better understanding of the results of hydraulic fracturing. There is a need to understand the efficiency and effectiveness of the realized fracture geometry. To fully optimize the completion and hydraulic fracture treatment it is important to understand various aspects of fracturing treatment such as differentiating propped and un-propped fractures, fracture growth and geometry, fracture overlap between stages and wells, stress shadowing effects, and treatment efficiency. These are primarily engineering questions. The challenge then for the industry is to translate a geophysical measurement into engineering answers. I have asked myself many times – how can we make a geophysical measurement a tool for the completion engineer, reservoir engineer and production engineer? Since microseismic is the only measurement away from the wellbore, how can microseismic become the measurement of choice for the engineer to help him/her improve the completion and maximize recovery from every well?

Most of the analysis using microseismic data to-date is qualitative and has provided limited value in optimizing completions. Today fracture evaluation is performed using various simulation techniques; geo-mechanical modeling, stochastic fracture modeling, reservoir simulation and history matching. These tools use microseismic data to qualitatively calibrate the model –trying to gain an understanding of the underlying fracture properties. I believe we need new methods that combine contextual information such as geology, well logs, treatment data, etc. with deterministic analysis of the microseismic measurements to gain a deeper level of understanding.

MicroSeismic, Inc.’s Completions Evaluation Services aim to do just that. This distinct process of Completions Evaluation consists of a workflow and tools to perform diagnostic analysis of microseismic data, enabling accurate evaluation of the fracture treatment. It is designed to precisely characterize the fracture network growth and complexity, while providing a methodology to evaluate the wellbore spacing, stage lengths, cluster spacing, and treatment parameters. It provides a framework and work-flow to answer critical questions that are relevant to the engineer.

At Microseismic Inc., our focus is to help customers design, monitor and optimize stimulation treatment and better understand the interaction between the reservoir, the operation and its impact on field and reservoir economics. I look forward to working closely with our customers to deliver a better frac.

Kash

Marcellus play-ers on top? Moody's thinks so.

By Jaclyn Townsend
Marketing, MicroSeismic, Inc.

In a recent report Moody’s said that natural gas producers in the Marcellus shale will benefit more than producers elsewhere in the US because of various promising conditions even if gas prices weaken.

"Technological advancements since the early 2000s have allowed US natural gas producers to reshape the industry largely through the development of the Marcellus," says Associate Analyst Michael Sabella, the author of the study. "The Marcellus has emerged as one of the most profitable regions in the US for producing natural gas, so even if prices return to the weak levels of 2012, producers there will be rewarded."

The optimism comes directly from the large producing wells in the northeast section of the 104,000-sq. mile play conveniently located near major markets in New York, Pennsylvania, Ohio and West Virginia, along with an increase in capital in the southwest section of the play which is rich in natural gas liquids.

What’s even more interesting is that the massive totals include gas from an area where a ban on hydraulic fracturing has prevented E&P companies from obtaining some of the more than 40 tcf of gas equivalent estimated recoverable reserves lying beneath the states.

So, even though the Marcellus boom has collided with the decline in natural gas prices, major Marcellus players and big spenders  - all of which entered the play early during a weak natural gas price environment—have and will continue to see huge profits, Moody’s states. As these midstream operators begin to increase production they will also begin to see a boost in EBITDA and cash flow.

MicroSeismic, Inc. continues to make its mark in the already profitable play. With over 1,100 stages already monitored in the Marcellus, and more to come, MicroSeismic’s commitment to our customers is simple - to provide high definition microseismic monitoring and state-of-the-art completions evaluation services. By doing so, we are able to continue to help our customers maximize production and increase revenue.

Jaclyn

AAPG Annual Convention & Exhibition 2014 Recap

By Jaclyn Townsend and Monica Vrana
Marketing, MicroSeismic, Inc.

This week the American Associates of Petroleum Geologists (AAPG) hosted their annual convention (ACE) in Houston, Texas.

Over 8,000 visitors from over 80 countries made their way to the George R. Brown Convention Center – including AAPG members, vendors, educational institutions, students and community leaders who gathered to hear the latest in industry technology and trends. Over 800 oral and poster presentations were featured based on 11 themes.

While frac'ing was at the top of everyone's minds at ACE, concerns about infrastructure, rather than frac'ing, seemed to be the biggest environmental challenge and concern at the convention. During an address on Tuesday, Scott Anderson, of the Environmental Defense Fund said that there were a number of environmental risks that needed to be addressed and controlled to minimize the effect on the environment and that frac'ing "is at the bottom" of those concerns. To read more visit aapg.org.

Also making news, AAPG launched AAPG Wiki - a public site dedicated to educational articles on geology and petroleum geology. You can visit the new site by visiting wiki.aapg.org.

In the exhibition hall over 200 exhibitors offered new technologies, services, presentations and hands-on opportunities with the very latest, industry-leading products. Many of MicroSeismic's customers and colleagues came by to visit our booth and over 300 people attended our booth presentations which featured innovative solutions and services including fracture monitoring, real-time monitoring, our completions evaluation services and more. One of the most attended presentations was "Comparison of Fracture Failure Planes in the Utica and Marcellus" presented by Mary Ellison. If you missed it, you can register for our monthly webcasts and tune in to hear the presentation again.

MicroSeismic also raffled an in-case football signed by Houston's own JJ Watt. Over 200 people entered the drawing and the lucky winner will be announced on Friday April 11, 2014.

In addition to the technical sessions and the exhibition, there were also many special events and activities including 10 pre- and post-conference field trips to NASA and the Eagle Ford Basin (just to name a few), 19 short courses and several forums, technical luncheons and networking events. It was great to see everyone out at the event. We look forward to another successful year and hope to see you at AAPG 2015 Annual Convention & Exhibition in Denver, Colorado – May 31 through June, 3, 2015.

Jaclyn & Monica

Perspectives on CERAWEEK 2014

By Peter Duncan
CEO & Founder, MicroSeismic, Inc.

Earlier this month, I was privileged to attend Daniel Yergin’s annual gathering of the world’s energy leaders here at home in Houston, Texas, CERAWeek 2014. CEO’s, Energy Ministers, bankers, lawyers, policy makers, pundits and a few techies like me get together once a year at this first class event to network and to listen to lectures and panel discussions around the state of the world in general and the energy business in particular by people who really do know about the subject. It’s a heady, instructive, insightful and often entertaining event.

The situation in the Ukraine was on everyone’s mind this year and several panels were gathered to help us understand the history and possible future of what is happening there. No simple solutions were offered.

The economics of the oil business are always a subject of interest at this conference and, as usual, provided a platform for many different points of view. Senior executives of North American focused unconventional oil and gas producers bragged that they were reducing drilling times and the costs of shale production, while multi-national major CEO’s complained of rising costs against a stable oil price killing their margins, a situation that called for service companies to cut back on costs at once. There seemed a contradiction there.

Keynote addresses by the likes of John Watson, Chairman and CEO of Chevron and Andrew Mackenzie, CEO of BHP Billiton provided a rousing affirmation of the change in the balance of economic power that shale gale has brought about to the immense advantage of the US and Canada. Speaker after speaker confirmed that these shale resources are real though not without challenges, some technical and some political. Calls for the US to accelerate the approval of LNG export facilities and to end the ban on exporting crude came from politicians and producers while industry leaders like Joe Kaeser, Chairman of Siemens spoke in terms of their increased investment in facilities in the USA to take advantage of cheap energy and plentiful hydrocarbon feedstock.

A humorous counterpoint came from Harald Schwager, an Executive Director of BASF. He told us that a defining difference between the US and Europe is that here we look for energy prices to be low in order to promote jobs, while in Europe they want energy to be expensive to promote conservation. He then commented on the efficiency of Germany, suggesting that with the closing of its nuclear power plants and the banning of unconventional drilling and frac’ing, the country is efficiently marching in “the wrong direction”.

The conference ended with a candid interview with Ben Bernanke, recently retired Chairman of the Fed and arguably the savior of the world economy through the banking crises of 2008 and 2009. His front row seat account of that adventure was fascinating and I believe we were lucky to have him sitting in that seat at that moment. He seemed mildly optimistic that the financial crises are largely behind us for now, although he certainly encouraged ongoing caution and care.

At MicroSeismic, our purpose is to help our customers produce clean, abundant energy through better frac’ing. I heard mention of this as a wider energy industry goal so many times throughout the week, that although I left the conference with a bit of information overload, I was sure of one thing: our daily work here at MicroSeismic is truly helping to advance the industry and meet the needs of all the different stakeholders – something I’m extremely proud of.

-        Peter

 

MicroSeismic Appoints Vice President of Completions Evaluation

HOUSTON, TEXAS - February 26, 2014: MicroSeismic, Inc. (MicroSeismic) announced today that Sudhendu “Kash” Kashikar joined the company as Vice President of Completions Evaluation, the company’s newest division.  In this position he will combine MicroSeismic’s vast knowledge of unconventional shale plays with its new Completions Evaluation Services to help customers better understand their completions programs and optimize long term production. 

“We are pleased to have Kash join our senior management team,” said Terry Jbeili, COO, MicroSeismic.  “We are focused on helping customers evaluate and optimize completions and ultimately increase recovery.  Kash brings significant experience in running multi-disciplinary teams and we are certain he will add substantial value as part of the leadership team.”

Kashikar has over 20 years of experience in the oil and gas industry.  He specializes in commercializing multi-disciplined technical solutions while bridging the gap between engineering and geophysics.  Kashikar began his career with Schlumberger as a field engineer and held numerous international assignments in operations, sales, marketing, and new technology development.  Prior to joining MicroSeismic, he was the Vice President, Sales – Oil and Gas at Silixa.

“I am excited to join the MicroSeismic team during such an important time in the company’s development,” stated Kashikar.  “We are expanding our engineering capabilities and focusing on solutions which will increase cross-disciplinary insight, optimize completions, and ultimately improve production for our customers.”

Kashikar earned a Bachelor of Science in Petroleum Engineering from the University of Poona and a Master of Science in Petroleum Engineering from the University of Oklahoma.  He has authored numerous technical papers and patents.

MicroSeismic, Inc.is an oilfield services company providing microseismic-based completions evaluation services in seventeen countries.  Founded in 2003, MicroSeismic is the leading provider of microseismic monitoring activity utilizing surface, near-surface and downhole arrays.  The company continually pushes the boundaries of new technology and delivers services that allow oil and gas companies to gauge the quality of their completions, improve production, and reduce costs. 

For more information, visit www.microseismic.com.

*MicroSeismic, Inc. trademarks are registered marks in the USA, Canada and other countries.

Media Contact:
Suzanne Lammers
slammers@microseismic.com
713-457-8832

This press release is featured on OilVoice.com.

Peter Duncan, Founder and CEO, MicroSeismic Hosts August’s Webcast

Join us August 20th at 10 a.m. for our FREE webcast entitled, Advanced Microseismic Analysis for Enhanced Reservoir Characterization. This month's webcast will be led by MicroSeismic's Founder and CEO, Peter Duncan.

The analysis of microseismic monitoring data can make a contribution to reservoir management that extends well beyond the design of the best completion procedures. Tune in as Peter Duncan, Ph.D. shares new insights on how an old technology is being re-engineered to provide insights on structure, stress and reservoir dynamics. 

Register on the MicroSeismic website today.

US Maintains Shale Advantage

The U.S. is not only far ahead of the rest of the world when it comes to the exploration and production of shale oil and gas, but KPMG's national sector leader for energy and natural resources said it will remain the best place in the world for investment for a significant time to come, too.

In a conversation with SNL Energy on KPMG's new report on global shale development, John Kunasek said the U.S. is in the midst of a long-term upward trend for both shale oil and gas. The primary motivator for the time being, he said, is the opportunity to profit on holdings in liquids-heavy plays.

"With the price differential that currently exists between oil and liquids and dry natural gas, the majority of the investment right now is going into oil shale plays," Kunasek explained. "The Eagle Ford and the Bakken are two good examples of that. There's not much interest in dry gas plays for the short term."

While much of the development and a large portion of current M&A activity is targeted at liquids-rich plays such as the Bakken and Eagle Ford shales, the emerging Cline Shale in Texas, and the Permian Basin, Kunasek said, interest in drier gas plays remains from companies that can afford to look several years into the future.

"The big integrated companies, the big majors, they're in it for the long run," he said. "The very large independents and majors, they see things in the long term. … It's a sustained interest. There's plenty of interest in the long run."

KPMG said in its report that it believes the U.S. could be exporting between 6.5 Bcf and 8.5 Bcf of LNG by the end of this decade, which would play a significant role in boosting the prospects of dry gas plays.

"Globally, natural gas has a very strong marketplace," Kunasek said. "If you get LNG terminals built and start exporting, you begin tapping in to higher-priced global markets."

When looking at other potential shale oil and gas producers around the world, KPMG mentioned China, Argentina, Australia, Indonesia and the United Kingdom as countries that could eventually take advantage of the shale revolution. Even for better-prepared nations such as China and Argentina, however, that day is a long way off, as the U.S. has benefited from a number of unique advantages.

"One thing that's very different in the North American marketplace than the rest of the world is the ability to deploy capital quickly," Kunasek said. "You can literally drive up to a rancher's house and ask him if he'd like to sell his mineral rights, and that happens routinely. You don't have that anywhere else in the world."

Along with the ability to deploy capital at a greater speed than anywhere else, Kunasek said, the U.S. benefits from having a "mature" infrastructure system — something other nations lack. One advantage that could evaporate faster than many expect, however, could be the technological edge the U.S. currently enjoys in the shale revolution.

"I do think that gap can be closed very quickly," Kunasek said. "If [Exxon Mobil Corp.] starts doing business in a country that has a good, fair kind of economic governance system that allows them to get a return on their investment, they'll deploy the technology."

August Webcast Registration is LIVE

Join us August 20th at 10 a.m. for our FREE webcast entitled, Advanced Microseismic Analysis for Enhanced Reservoir Characterization. This month's webcast will be led by MicroSeismic's Founder and CEO, Peter Duncan.

The analysis of microseismic monitoring data can make a contribution to reservoir management that extends well beyond the design of the best completion procedures.

Tune in as Peter Duncan, Ph.D. shares new insights on how an old technology is being re-engineered to provide insights on structure, stress and reservoir dynamics. 

Register on the MicroSeismic website today.

July Webcast Registration is OPEN!

MicroSeismic’s complimentary July webcast will be held on July 23, 2013 at 10AM CDT. Visit the website to register.

John Detring, Geophysicist with MicroSeismic, Inc. will present, “Using Microseismicity to Understand Subsurface Fracture Systems and Increase the Effectiveness of Completions: Eagle Ford Shale, TX”.

This month's webcast focuses on utilizing microseismicity to ascertain an understanding of the subsurface fracture networks and how this information can increase the effectiveness of completions. This presentation is a case study from within the Eagle Ford formation.

US Tight Oil Reshaping Geopolitics

Substantial US tight oil resources could reshape global energy geopolitics, three experts suggested at a Bipartisan Policy Center conference on the subject. But the changes could be subtler and more gradual than some people think, they added.

“A better supplied world is a safer world, but it doesn’t mean there still aren’t above-ground and below-ground risks,” said Daniel Yergin, chairman of IHS CERA. “It could help us play a leadership position in the world that wouldn’t have been possible a decade ago, however.”

Carlos Pasqual, special envoy and coordinator for international energy affairs at the US Department of State, stated, “We have an incredible moment of opportunity that will be good for US business, the US economy, and the rest of the world. If we manage it with environmental responsibility, it will be historic.”

Luis Giusti, a senior advisor at the Center for Strategic & International Studies, said he does not expect the US to change its military commitments to defend overseas oil-producing countries because markets would become very volatile. He also agreed with Yergin’s statement that producing crude from tight shales and deepwater deposits will be more challenging than many believe.

US tight oil resource estimates have indisputably given the nation more clout in its foreign affairs, the trio agreed. More US production has let the federal government successfully encourage countries which buy Iranian crude to reduce their orders, Pasqual said.

“It’s important to sustain this policy,” Pasqual maintained, adding, “Countries understand the need to restrain Iran’s nuclear ambitions. They’re likelier to do something about it if they’re confident they can buy the oil elsewhere.”

Changing relationships

Europe’s natural gas relationship with Russia is changing because the European governments realize supplies are available elsewhere, according to Yergin. Russian Prime Minister Vladimir V. Putin and Chinese President Xi Jinping’s recent meeting in Moscow suggests the two countries’ future relationship will be based more on oil and gas than Marxism, he said.

Giusti said Saudi Arabia’s government has accrued enough cash to sustain lower crude prices, and is willing to spend what’s necessary to keep the kingdom stable. “They also would enjoy seeing Iran squirm under sanctions and Putin fail in his Arctic aspirations,” he added.

Pasqual said the US can’t retreat from its overseas commitments because oil and gas are global commodities that react to events, there’s not that much spare crude production capacity outside Saudi Arabia, and Asian and other countries outside the Organization for Economic Cooperation and Development now account for virtually all the growth in global oil demand. “If we can help Asia diversify its gas supplies, its positive influence on global markets will be important,” he indicated.

Yergin said the US should begin to export hydrocarbons, particularly gas, but added that it will be a net oil importer for some time. Pasqual said the US would be exporting LNG into a market where growth is limited. “But a large supply in those markets will help keep domestic prices at a reasonable level,” he added.

Increasing US gas production and using it instead of coal to generate electricity has put the country’s carbon emissions levels at a 16-year low, Pasqual said. Studies in China show that its greatest near-term reductions in carbon emissions would occur with a combination of more gas and increased efficiency, he noted. “In the short term, we’re trying to create a better market for gas so it can be a base fuel as more alternatives are introduced,” he said.

Pipeline is the Safest Transport Option

Friday’s jobs numbers from the Labor Department show that President Obama needs to approve the Keystone XL pipeline. Even with 175,000 jobs created in May, there are 2.4 million fewer jobs in America than at the start of the recession in December 2007.

Approval of the Keystone XL pipeline, to bring oil from Canada to our refineries near the Gulf of Mexico, would create jobs, both for constructing the pipeline and for refining the oil. But President Obama has delayed the pipeline’s approval, citing safety concerns.

Pipelines have been used to transport natural gas and oil, including from Canada to the United States, for three-quarters of a century. Almost 500,000 miles of interstate pipelines crisscross America, carrying crude oil, petroleum products, and natural gas, and over 2 million miles of natural-gas distribution pipeline send natural gas to businesses and consumers.

This extensive infrastructure network is heavily regulated by the U.S. Department of Transportation, which monitors the very issues central to the Keystone controversy: safety and reliability.

A review of accident statistics provided by the Department of Transportation shows that, in addition to enjoying a substantial cost advantage, transporting these substances by pipeline results in fewer spillage incidents and personal injuries than transporting them by road or rail. Americans are more likely to get struck by lightning than to be killed in a pipeline accident. The full paper can be found here.

The question of how to transport oil and natural gas safely and reliably is broader than Keystone XL. Petroleum production in North America is now at nearly 18 million barrels a day, and could climb to 27 million barrels a day by 2020, attracting manufacturing from abroad and creating yet more jobs. Natural-gas production in Canada and the United States could rise by a third over the same period, climbing to 22 billion cubic feet per day.

U.S. oil and natural-gas production is outpacing the transportation capacity of our inadequate national pipeline infrastructure. The Keystone XL pipeline is only one of many pipelines that will need to be constructed in the years ahead. Much of America’s refining capacity is located in the Gulf states, but large and expanding reserves of petroleum are being discovered in the north-central part of America and in Canada. Bringing oil to refineries, and then to end users, requires pipelines.

If this oil and natural gas can easily travel to where it is needed, all America will be able to benefit from lower energy prices and thus from increased economic activity and employment. New environmental regulations are closing coal-fired power plants, increasing the demand for natural gas. Large fleets of buses and trucks are switching to natural gas, and General Motors and Chrysler are making dual-fuel pickup trucks.

Approximately 70 percent of crude oil and petroleum products are shipped by pipeline on a ton-mile basis. Tanker and barge traffic accounts for 23 percent of oil shipments. Trucking accounts for 4 percent of shipments, and rail for the remaining 3 percent. Essentially all natural gas, except liquefied gas, is shipped by pipeline to end users.

If personal injuries and environmental damage caused by accidents in the transportation of oil and natural gas were proportionate to the volume of shipments, one would expect the vast majority of incidents to occur on pipelines. But the opposite is true — the majority of incidents occur on road and rail, as shown by Transportation Department data, even though more road and rail incidents go unreported.

States Target Frac'ing with Bans, Fines

As the North American natural gas boom continues, state legislators across the country have targeted hydraulic fracturing for new regulations, proposing a range of 50 bills involving bans, moratoriums and increased disclosure requirements, according to a new Colorado State University study.

Much of the new legislation tries to address issues such as water use, air and water quality monitoring and fluids disclosure, as many non-industrial communities grapple with the impacts of hydraulic fracturing and the changes it brings.

For example, Illinois passed new rules in May requiring drillers to publicly disclose the chemicals they use, and on water testing.

And while hydraulic fracturing has existed for more than 50 years in parts of the country, such as Texas, the bulk of the new state rules are coming from the East Coast, where the shale boom has led to a new surge of oil and gas activity.

“Bans are clustered on the northern seaboard,” wrote Colorado State University’s Center on the New Energy Economy.

For example, New York State has introduced 10 new bills – the largest number of any state – as environmental concerns led New York legislators to extend the state’s moratorium on the practice until 2015.

Federal regulators have also begun to develop plans for increased natural gas regulation. The Obama administration introduced a new plan in May to tighten standards for drilling on public lands, including more rigorous chemical disclosure requirements.

The proposal would be the first major federal rule governing hydraulic fracturing but would apply only to U.S. land under the Interior Department’s control.

State lawmakers also have tried to address growing concerns about surface and mineral rights, introducing 50 bills in 2013 that made proposals regarding notification periods before drilling, post-drilling property restoration and setback or right-of-way property restrictions, the Center report said.

Concern over how natural gas drilling impacts local communities was another hot topic, with 30 new pieces of legislation introduced to address it. Issues such as permitting and zoning ordinances, requirements for safety monitoring devices and regulations on underground storage have been the focus on these proposed rules.

Additional bills have sought to provide revenue for local infrastructure and social program needs.

An additional 33 bills have targeted taxation issues, most of which address severance or production issues.

“States seek to strike a balance between attracting development and maintaining funding for a variety of programs,” the Center wrote.

Australia, the Next Shale Frontier?

Australia could be sitting on more than 1,000tn cubic feet of untapped shale gas, but effective environmental regulations and a fall in costs are needed before this resource can be fully exploited, according to a new report.

The report states that shale gas infrastructure costs in Australia will be double that of the US, where the industry is relatively mature, and will require a high price to make it profitable.

Around $500m will be spent by businesses over the next two years on shale gas exploration, the report predicts, with resources company Santos already working on an initial well in Queensland.

Shale gas extraction is similar to coal seam gas in that both processes gather methane for energy use. However, shale gas involves drilling at far greater depths than coal seam gas.

The report is sanguine on the environmental impact of coal seam gas, with some caveats.

“A large number of impacts are possible, but the likelihood of many of them occurring is low and where they do occur, other than in the case of some biodiversity impacts, there are generally remedial steps that can be taken,” it states.

“Nonetheless it is important that the shale gas industry takes full account of possible adverse impacts on the landscape, soils, flora and fauna, groundwater and surface water, the atmosphere and on human health in order to address people’s concerns.”

Prof Peter Cook, co-author of the report, told Guardian Australia that rigorous background work would need to be done on shale gas for it to avoid the controversy that has dogged the coal seam gas industry.

“You need a regulatory regime that is transparent,” he said. “One problem with coal seam gas is that people didn’t do the work needed before they started. You need to know what the impact is going to be, rather than rely on a high degree of speculation. That has caused angst around coal seam gas.

“Groundwater clearly needs to be safeguarded and used in careful way to ensure it doesn’t get contaminated. Fragmentation of landscapes through roads and drilling is another thing you need to be careful of.”

He added: “We won’t see a shale gas boom here as we have in North America. It will be more modest growth, but what might really push it along is the oil associated with the gas.

“Oil is what is driving the industry in North America. Gas is almost a byproduct. Things will move very quickly if they find oil amongst the shale gas here, because Australia doesn’t have much oil. But we just don’t know what’s down there yet.”

Increased Shale Demand is a Good Thing!

A new report from Barclays Capital predicts a “Tectonic Shift” in demand for natural gas in the United States by 2020. While this report will no doubt be used by the prophets of “peak gas” theory as ammunition for the construction of new strawman fright scenarios, the reality is this is nothing but good news for the American public.

The new reality of extremely abundant and reasonably priced natural gas has already led to significant national benefits in the following areas:

  • lower carbon emissions in the power generation sector;
  • lower utility bills for consumers;
  • the creation of hundreds of thousands of new, high-paying jobs;
  • tens of billions of additional tax collections at the state, local and federal levels;
  • billions of dollars in royalty payments to hundreds of thousands of mineral owners;
  • massive new investments and new job creation by industries that use natural gas as a feedstock, such as plastics, fertilzer and chemicals;
  • hundreds of billions in economic impact across the breadth and depth of the nation;

That’s all happened in just the last five years, and during a time in which the price for natural gas became quite depressed, and the number of rigs actively drilling for natural gas wells fell from about 1600 in 2008 to around 400 today. The reality is that many of these deep, high pressure wells that typify many of the prolific shale plays in the U.S. simply are not economic to drill at the $2 to $3 prices we’ve seen from 2010 through 2012. As a result, the great majority of natural gas wells that were drilled during that time frame were wells operators were obligated to drill in order to hold their leases by production.

As we’ve pointed out before, this means that there is an enormous amount of excess drilling capacity in the system all over the country, given that lease obligation wells represent a small fraction of the potential wells that are ultimately available to be drilled.

As the price has risen in recent months back to the $4 to $4.30 range, we’ve already begun to see leasing activity in dry gas areas like the Haynesville Shale and the Eastern third of the Eagle Ford Shale begin to pick up, and will no doubt begin to see increased natural gas rig counts if the price holds in that range, where so many more projects are in fact economic to drill.

The Golden Age of Shale is Upon Us

To the handful of petrochemical scientists, engineers and industry executives who have spent a lifetime trying to unlock America’s domestic energy potential, the country’s current shale-oil and -gas boom is the result of a half-century of technological trial and error. But to the rest of the world, it has seemed like an overnight miracle. In less than a decade, the United States has gone from importing $30 billion worth of natural gas to the cusp of becoming an energy exporter.

Thanks to improvements in hydraulic fracturing and horizontal drilling, wells can be dug into rock formations that are nearly 100 m thick and tap reserves that are nearly two kilometres wide. That has the potential to unleash enough oil and gas to power America for nearly a century—a feat unthinkable just a few years ago.

The golden age of gas, as it has been dubbed, is already reshaping the economies of newly energy-rich states from California to North Dakota. It is helping to rebuild America’s industrial landscape and holds profound implications for global politics. “North America has set off a supply shock that is sending ripples throughout the world,” declared Maria van der Hoeven, executive director of the International Energy Agency (IEA), which, in May, issued a prediction that America’s oil and gas boom “will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15.

If soaring demand from Asia and political instability in the Middle East has defined the last few decades of oil politics, the agency predicts that America’s shale-gas and -oil revolution will define the future. The transformation is happening faster than anyone would have predicted. After decades spent tracking the global price of crude, North American natural-gas prices have recently become unglued from the rest of the world, plunging from $13 per thousand cubic feet in 2008 to below $2 last year. (They’re now closer to $4.)

The glut of cheap gas has helped drive the U.S. economic recovery by slashing the price of natural-gas by-products—valuable petrochemicals such as ethylene, propane and butane—that are used to manufacture everything from shampoo, to window panes, to fertilizer. That has unexpectedly brightened the prospects of American manufacturers and farmers, who analysts estimate now have the lowest cost of raw materials in the world outside of Qatar. Less expensive materials could slash costs to manufacturers by as much as $12 billion a year by 2025 and create a million new manufacturing jobs, according to an analysis byPricewaterhouseCoopers.

ANGA Heartened by Obama's LNG Support

Heartened by a brief mention of liquefied natural gas exports by President Barack Obama, the new head of the US trade group for shale gas producers said Thursday he thought Obama should hasten a permitting process that has issued only two permits thus far.

"The great news, here in America, is that by 2020 we'll be a net exporter of natural gas," Obama said Wednesday evening at a fundraising speech in Chicago. "We will over the next couple of decades have the capacity to be energy independent for the first time, incredible change."

"Obama's behind this," America's Natural Gas Alliance CEO Marty Durbin told roughly 100 lobbyists and trade industry representatives Thursday at the American Gas Association's monthly Natural Gas Roundtable in Washington.

"We'd like to see a little faster pace on the permitting side," Durbin admitted.

Texas Leads the Nation in Drilling Activity

Texas continues to lead the nation in drilling activity, and by a bunch.

The state has 840 rigs drilling for oil or gas – about 47.7 percent of all U.S. rigs and 26.3 percent of all rigs worldwide, according to the latest Baker Hughes Rig Count.

Most of the Texas rigs are working in the Permian Basin (402), the Eagle Ford Shale in South Texas (232), the Granite Wash in the Panhandle (41), the Barnett Shale in North Texas (32) and the Haynesville Shale in East Texas (17).

Peter Duncan's Squawk Box Segment, Now Available Online

If you missed MicroSeismic's own Founder and CEO, Peter Duncan, on CNBC's Squawk Box this morning, you can check out the recording on CNBC's website now.

Peter spoke about microseismic technology and how it's helping to revolutionize the industry. Let's hear it for technology and for MicroSeismic!

MicroSeismic's CEO on Squawk Box

Don't forget to tune in to CNBC's Squawk Box, this Thursday, May 30th as MicroSeismic's own Founder and CEO, Peter Duncan speaks live on the popular program. The segment will air at 5:30 a.m. EST.

Texas' Record Breaking Shale Plays

Texas, the second largest state in the Union, rich in oil and renewable resources alike stands as an internationally recognized energy capital. Already a leader in oil drilling activity, Texas now has at least ten shale plays of production potential that could very well reshape the future of the industry in the US.

Although only a few of those plays are being tapped, Texas oil production reached a 25-year record high of 2.139 million barrels a day last November. According to a study conducted by the University of Texas-San Antonio, the Eagle Ford shale production gave a $25 billion economic boost to the area in 2011. It also supported some 48,000 jobs in the oil and gas market alone.

Before 2011, shale production was practically nonexistent. Once it took off in 2011, it nearly tripled by 2012.

The latest UTSA study revealed something even more spectacular: the 2012 economic impact from Eagle Ford was $61 billion—the biggest oil and gas development in the world last year.

According to an article in Forbes, “there are several studies that point to the Eagle Ford Shale eclipsing the East Texas Field as the biggest oil field ever discovered in the lower 48 states.”

That also accounted for a whopping 116,000 jobs in once sparsely populated parts of the state.

While the US Geological Survey (USGS) estimates that the Eagle Ford recoverable reserves is around 10 billion barrels of oil (two and a half times North Dakota's Bakken shale), complete development of the field is set to take the patience of decades.

But Eagle Ford represents just one of Texas' numerous shale play in a state where more than half of the country's (20 percent of the world's) drill rigs are turning. Initial estimates of Texas' Cline Shale play point to recoverable reserves of 30 billion barrels of oil.

Devon Energy Corp, an independent oil and natural gas exploration and production company, has stepped up as one of Cline's early-in players. Under a partnership with Sumitomo Corporation, which has invested $1.4 billion in Devon's activities in that play, Devon's 2013 plans to drill in the area are aggressive (up to 140 wells).

Chemical Jobs on the Rise, Thanks to Shale

As many as 46,000 permanent jobs in the chemical industry will be created if all of the chemical and plastics projects that have been announced to take advantage of plentiful and low-cost supplies of natural gas are built, according to a study released Monday by the American Chemistry Council.

By 2020, the report found the projects could lead to another 264,000 jobs in supplier industries and 226,000 additional jobs in communities where workers live and spend money, generating $200 billion in additional payroll.

“The United States has become a magnet for chemical industry investment, a testament to the favorable environment created by America’s shale gas, as well as a vote of confidence in a bright natural gas outlook for decades to come,” Cal Dooley, president and CEO of the council said in a statement.

The report examined 97 announced chemical and plastics projects, totaling $71.7 billion in potential investment in the United States.

The report said about 1.2 million additional temporary jobs will be created during the capital investment phase between 2010 and 2020.

Natural gas: Feds give Texas project license to broadly export LNG

Dooley said about half of the announced investments are from firms based outside the United States.

Many of the planned expansions are in Texas, including a $4 billion expansion in Freeport by Dow Chemical. That includes restarting an ethylene cracker, building a new ethylene cracker and other projects.

>growing in Texas.

Exxon Mobil Chemical has announced plans for an ethylene cracker and two polyethylene plants in Baytown, while Eastman Chemical has said it will build an ethylene cracker and a propylene unit in Longview. Other companies expanding or building new chemical plants include Chevron Phillips Chemical, LyondellBasell and Mitsui & Co.

API Pushes for LNG Exports

The U.S. Department of Energy needs to ensure that remaining requests for licenses for liquefied natural gas exports get approved, the API said.

The U.S. Energy Department gave its consent last week for the Freeport liquefied natural gas terminal on Quintana Island, Texas. The facility could export up to 1.4 billion cubic feet of LNG per day for 20 years once it gets cleared by the Federal Energy Regulatory Commission.

Freeport LNG becomes the second facility to get preliminary consent to export LNG to countries that don't have a free trade agreement with the United States. The government in 2011 approved Cheniere Energy's terminal in Louisiana in May 2011.

Upstream director for the American Petroleum Institute Erik Milito said the government has several LNG projects that it could approve for natural gas exports.

"(The Energy Department) has had the remaining applications on its desk for months and should ensure that these applications are approved without any further delay so that the U.S can achieve its full energy and economic potential," he said in a statement.

There are at least 60 international projects under consideration, API said. The organization didn't say how many FTA and non-FTA projects are up for regulatory review in the United States.

New technologies used to tap into shale formations are creating a natural gas boom in the United States. Environmental groups worry that LNG exports would lead to more hydraulic fracturing, a drilling practice that's seen as a threat to groundwater.