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Oil and Gas Roundup — August 5

August 05, 2013
TOPICS: In the news
A roundup of oil and natural gas news from around the state, nation and world:

A tribute to pioneer of hydraulic fracturing

George Mitchell, who died on July 26th, was a one-man refutation of the declinist hypothesis. From the 1970s America’s energy industry reconciled itself to apparently inevitable decline. Analysts produced charts to show that its oil and gas were running out. The big oil firms globalised in order to survive. But Mr Mitchell was convinced that immense reserves trapped in shale rock deep beneath the surface could be freed. He spent decades perfecting techniques for unlocking them: injecting high-pressure fluids into the ground to fracture the rock and create pathways for the trapped oil and gas (hydraulic fracturing) and drilling down and then sideways to increase each well’s yield (horizontal drilling).

The result was a revolution. In an interview with The Economist last year Mr Mitchell said he never had any doubt that fracking might turn the American energy market upside down. But even he was surprised by the speed of the change. Shale beds now produce more than a quarter of America’s natural gas, compared with just 1% in 2000. America is on the way to becoming a net gas exporter. Traditional petro-powers such as Saudi Arabia and Russia are losing bargaining strength.

Mr. Mitchell was the embodiment of the American dream. His father was a poor Greek immigrant, a goatherd who later ran a shoeshine shop in Galveston, Texas. Mr Mitchell had to work his way through university, but graduated top of his class. He left a fortune of more than $2 billion and a Texas landscape studded with examples of his philanthropy: he was particularly generous to university research departments and to Galveston.

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Shale explorers outperforming international oil titans

Oil explorers focused on high-margin shale drilling from Texas to North Dakota are set to outperform Big Oil this year.

EOG Resources Inc. (EOG), Pioneer Natural Resources Co. (PXD) and Continental Resources Inc. are poised to reap bigger returns for investors than energy titans 15 times their market values as they devote almost all their drilling capital to higher-margin, domestic crude wells, said Gianna Bern, founder of Brookshire Advisory and Research Inc. in Chicago. Houston-based EOG is estimated to more than triple profit in 2013 to $1.92 billion.

The domestic price rally “is bullish for U.S. shale development and benefits producers with a high U.S. production profile,” Bern, a former BP Plc (BP/) crude trader, said in a telephone interview. U.S. shale “is where the growth is.”

West Texas Intermediate, the benchmark crude for onshore U.S. oil, has risen 16 percent this year as new pipelines and rail links eroded a supply glut in the Great Plains. London-traded Brent, the basis for two-thirds of international prices, fell 1.9 percent, undermining major international producers and contributing to second-quarter earnings from Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA) that disappointed investors last week.

Exxon and Shell already are lagging behind some of the dominant domestic shale explorers in delivering returns to investors. Pioneer has risen 70 percent this year, while Oklahoma City-based Continental has increased 33 percent. EOG, the biggest owner of drilling rights in the Eagle Ford Shale in southwest Texas, has risen 27 percent.

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Chickasaw Nation upgrades Marietta facility

A once nearly abandoned warehouse down the street from the Marietta cemetery has become the heart of a booming oil and natural gas operation.

Chickasaw Nation Industries Inc. is nearly complete with an overhaul of the former Siemens plant that will allow its Innovation One to build and repair pressure tanks, hydraulic fracturing tanks and other equipment used in the oil fields throughout the region.

“I’m excited about the opportunities we have in front of us and the opportunity to grow,” CNI Chairman Neal McCaleb told The Oklahoman.

The Chickasaw Nation bought the manufacturing plant in 2004 after Siemens announced plans to close its operations in the area.

Innovation One began its upgrade early this year and hopes to be fully operational by the end of August.

The facility had boasted one of the largest powdercoat dry-paint processes in the state. Innovation One is adding a blasted-paint system similar to what is used in automotive painting. The bay is large enough to handle a semitrailer or a hydraulic fracturing tank.

The upgrade also includes three 10-ton cranes to move the large oil field equipment throughout the facility.

“By the investment of the Chickasaws through CNI, we have saved 60 jobs and are trying to expand on that,” McCaleb said.

McCaleb said the facility plans to add 80 to 100 employees over the next 14 months.

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Chesapeake reports boost in Marcellus production of more than 40 percent

The Marcellus and Utica shale formations have become known for their untapped reserves of natural gas. The formations also may hold vast amounts of oil - something Chesapeake Energy is learning as it drills in the local area.

The company pumped 44 percent more oil from April to June than it did during the same period in 2012 from its local operations. And more could be on the way.

Chesapeake is the largest leasehold acreage holder in the Marcellus Shale, which spans from northern West Virginia across much of Pennsylvania into southern New York. The company also holds substantial acreage in Ohio's Utica Shale.

Steve Dixon, Chesapeake's chief operating officer, said the company should produce 40 million barrels of oil this year.

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Is hydraulic fracturing in New Jersey's future?

When the state’s ban on fracking expired this year, there was no immediate rush to resuscitate it in the Legislature because most believed there was no natural gas to be mined in New Jersey.

Turns out, however, an underground formation stretching from Trenton to Bergen County may contain more than 1 trillion cubic feet of natural gas — enough to meet the needs of every New Jersey household for five years.

While no energy companies have expressed interest in drilling in the state, geologists and industry experts say it could be a commercially viable gas reserve, one that could bring New Jersey many benefits — lower winter heating bills, cheaper electric rates, job creation and new sources of revenue for state and local governments.

“Clearly the ability to extract natural gas in this area would be game-changing, while raising new questions and excitement,” said Jim Benton, executive director of the New Jersey Petroleum Council.

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