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Oil and Gas Roundup — Nov. 4

November 04, 2013
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Mexico unlikely to tap its Eagle Ford Shale, expert says

Despite the huge potential of the Mexican Eagle Ford Shale, the high costs and low potential returns likely will deter Mexico’s national oil company from developing those resources for decades to come, an industry expert said Thursday.

Petroleos Mexicanos, or Pemex, is not likely to develop its shale gas resources because of the high number of wells needed, the high labor costs and the company’s lack of experience, said Luis Miguel Labardini, a partner with Mexican energy consulting firm Marcos y Asociados, speaking at an energy forum hosted by the Rice University’s Baker Institute in Houston.

Shallow-water plays and a huge deep-water offshore play, Cantarell, have higher internal rates of return, drawing Pemex’s limited investment capital, Labardini said. That leaves its natural gas resources almost untouched, despite Mexico’s dependence on natural gas, he said.

Foreign interest: Eagle Ford’s future might lie in Mexico’s demand
Pemex drilled its first shale gas well in 2010. There are only five shale gas wells in the country today.

The relatively untouched shale resources could provide opportunities for US companies if Mexico implements a proposed constitutional change that would open it up to international investment.

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New Bakken gas pipe welcome, but officials want more

With crude oil production and natural gas flaring on a record-setting pace in the Bakken Shale, North Dakota and industry officials welcomed a new gas pipeline link, but pipelines are only part of the problem.

Officials continue to emphasize that more infrastructure is needed to cut into the state's nagging problem of large volumes (29% most recently) of flared gas.
That is why state Pipeline Authority Director Justin Kringstad qualified his praise for the opening of the 80-mile, 12-inch diameter Alliance Pipeline last Tuesday (see Shale Daily, Oct. 29). Kringstad told NGI's Shale Daily he is still anxiously anticipating the completion of a major expansion to the Hess Corp. Tioga gas processing plant, which connects to the new lateral.

Right now, the expanded plant is expected to be online before the end of this year, and at the latest early in the first quarter, Kringstad said.

"There are three items that need to line up for flaring to be reduced," Kringstad said. "More gathering pipelines need to be built, along with more processing plants and transmission pipelines. Alliance will play an important role in solving the third piece of the challenge."

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Ethane outlets coming soon to Marcellus

A one-two punch will help knock down some of the Marcellus Shale ethane glut.

First, in November, Sunoco Logistics' Mariner West ethane pipeline from Houston, PA, to Sarnia, Ontario (see Shale Daily, March 25, 2013; Sept. 8, 2011), will be fully operational, Mariner West shipper Range Resources Inc. said in announcing its third quarter results recently.

"Once fully operational, Mariner West will allow us to continue our planned growth without concern for pipeline quality requirements for our residue gas," Range said.

The first delivery of ethane into Mariner West commenced in July and as of September it was flowing about 20,000 b/d. Ramp-up to 50,000 b/d is expected by the first quarter, according to a recent Sunoco Logistics presentation to investors.

And on Thursday, Enterprise Products Partners said its Appalachia-to-Texas (Atex) Express ethane pipeline will be up and running during the first quarter.

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Coast Guard considering allowing barges to haul shale wastewater

The U.S. Coast Guard (USCG) has proposed a policy that would enable it to give conditional approval for barges to transport wastewater from hydraulic fracturing (fracking) in bulk, a move that could potentially open the nation's waterways as transit options.

In a policy letter, Capt. J.W. Mauger, commandant of the USCG's Office of Design and Engineering Standards, said the guard needed to specify the conditions under which a barge owner could request an inspection certificate for transporting wastewater. The USCG would also need to define what information barge owners would need to provide, and any additional requirements.

"There is commercial interest in transporting [wastewater] from northern Appalachia via inland waterways to storage or reprocessing centers and final disposal sites in Ohio, Texas and Louisiana," Mauger said. But wastewater "cannot be treated as 'listed cargo' because the specific chemical composition of [wastewater] varies from one consignment load to another and may contain one or more hazardous materials...including radioactive isotopes such as radium-226 and radium-228, which are known to be elevated in the Marcellus Shale," he said.

The USCG may, at its discretion, provide an inspection certificate on the condition that the barge owner conducts and records an appropriate analysis of the cargo beforehand.

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Oklahoman reviews 'The Frackers'

The rise of shale oil and natural gas in the past decade gets top billing in “The Frackers,” but it's the personalities who end up shining.

Oklahoma energy executives and visionaries Harold Hamm, Aubrey McClendon and Tom Ward feature prominently in Gregory Zuckerman's book. Its subtitle, “The Outrageous Inside Story of the New Billionaire Wildcatters,” might be marketing bluster, but it's an accurate description of how those men, and others before them, fought the conventional wisdom that oil and gas exploration in the United States was waning.

The book traces the shale boom to George P. Mitchell, whose company pioneered the use of hydraulic fracturing to unlock natural gas from the Barnett Shale in North Texas. Mitchell's persistence paid off, but much of the credit also goes to advancements in horizontal drilling technology and computing power, which allowed oil and gas companies to better pinpoint the “pay zones” in rock formations.

Zuckerman, whose last book, “The Greatest Trade Ever,” detailed hedge fund manager John Paulson's huge bet just before the subprime mortgage market collapsed, is a writer at The Wall Street Journal. In “The Frackers,” he focuses on the larger-than-life personalities so frequently found in the oil patch. But Zuckerman also takes the time to tease out the stories of a few of the more humble people caught up in the new energy boom.

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