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Oil and Gas Roundup — Jan. 13

January 13, 2014
TOPICS: In the news, OIPA
A roundup of oil and natural gas industry news from around the state, nation and world:

U.S. rig count rises by 3 to 1,754

Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. rose by three this week to 1,754.

The Houston firm said in its weekly report Friday that 1,393 rigs were exploring for oil and 357 for gas. Four were listed as miscellaneous. A year ago there were 1,761 active rigs.

Of the major oil- and gas-producing states, Oklahoma gained 14 rigs, New Mexico, Utah and West Virginia were up two, while Kansas and Wyoming rose one apiece.
Texas lost seven, Colorado and North Dakota each were down six, Louisiana dropped by two, and Alaska and Pennsylvania were off one. Arkansas, California and Ohio were unchanged.

The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

White House announces new energy review

President Barack Obama has launched the first regular review of the nation's energy infrastructure.

The project, titled the Quadrennial Energy Review (QER), will go toward "ensuring that federal energy policies continue to meet the nation's economic, environmental and security goals," according to a statement posted to the White House blog and websites for the Department of Energy and Domestic Policy Council.

The first review, the statement said, will focus on infrastructure for "transmitting, storing and delivering energy," including 200,000 miles of high-voltage power lines, 2.2 million miles of local circuits, 300,000 miles of pipelines, and hundreds of plants and storage facilities.

"The QER process launched today is designed to further address the challenge of leveraging America's domestic energy resources while strengthening our energy security and the health and resilience of our planet for future generations," the White House statement said.
The announcement comes amid a domestic energy boom – the United States is the world's top natural-gas producer, and it's producing more oil than it imports for the first time in decades – but also at a potentially fraught moment in energy policy.

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UT study: Fayetteville Shale still holds promise

HOUSTON — The Fayetteville Shale in Arkansas will be one of the nation’s most prolific regions for natural gas production, with reserves that can be economically extracted through 2050, according to a study released this week.

The Bureau of Economic Geology at the University of Texas at Austin analyzed the basin’s production history as well as areas that have not yet been drilled. The assessment showed that the Fayetteville has 38 trillion cubic feet of recoverable natural gas reserves. Of that, 18 trillion cubic feet will be feasible to extract at natural gas prices around $4 per million British thermal units, the researchers said.

Natural gas for February delivery is currently selling at around $4 per million British thermal units on the New York Mercantile Exchange.

The United States consumed about 25 trillion cubic feet of natural gas in 2012. The Barnett Shale play of Texas has about 45 trillion cubic feet of economically recoverable reserves, according to a prior study by the bureau.

The University of Texas study also identified different tiers of production within the shale play, delineating areas where natural gas could be extracted at lower costs.

If natural gas prices remain around $4 per million British thermal units, however, production from the Fayetteville Shale will plateau by 2015, with a gradual decline expected as well counts decrease in the play, the university said.

“The higher productivity tiers are, not surprisingly, more developed,” Svetlana Ikonnikova, an energy economist at the university and one of the study’s lead investigators, said in a statement. “The lower tiers remain uneconomic at almost any foreseeable gas price.”


Did the EPA's inspector general cover up the agency's wrongdoing?

An oil industry analyst says the Environmental Protection Agency colluded with environmental activists to go after a Texas natural gas firm, and the agency's inspector general whitewashed the issue in its report.

The EPA's Office of the Inspector General last month cleared former regional administrator Al Armendariz of wrongdoing in the case involving a 2010 emergency order to natural gas firm Range Resources after it found elevated levels of methane and benzene -- a carcinogen — in residential water. The EPA later settled with the company.

But oil industry analyst Steve Everley, who works for Energy in Depth, a public education project of the Independent Petroleum Association of America, said the EPA's watchdog ignored “the evidence that would suggest any wrongdoing on the part of EPA.”

Everley said Armendariz, who resigned in April 2012 under GOP pressure after being quoted as saying he would "crucify" companies that run afoul of environmental laws, colluded with activists on the order against Range Resources.

The IG report said Armendariz “informed environmental and citizen groups of the order and the Associated Press release after the [EPA regional office] issued the two documents.”

However, in a Dec. 7, 2010 email — sent the same day the order went out — Armendariz told activists the agency was “about to make a lot of news.” Armendariz informed activists that a news story had already been printed, but that there would be “an official press release in a few minutes.” He also told them to “Tivo channel 8.”

Channel 8 — Dallas-Fort Worth's WFAA-TV — published the original blurb about the order on its website 18 minutes before Armendariz sent the email saying the official press release would be issued “in a few minutes.” The original article on WFAA's website did not include the text of the press release, since it hadn’t been officially released.

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Total expected to seek shale gas in Britain

LONDON — The French oil giant Total is on the verge of becoming the first major oil company to explore for natural gas and oil in shale rock in Britain.

Under the deal, which may be announced as soon as Monday, Total would commit about $50 million for a roughly 40 percent stake in licenses held by a group of companies in Lincolnshire in the East Midlands, according to three people familiar with the matter who spoke on condition of anonymity because the agreement has not yet been signed.

Total’s participation would be a vote of confidence in the government of Prime Minister David Cameron, which has been trying to promote shale gas as an alternative to declining production of oil and gas in the North Sea, despite opposition from local communities and environmental groups. Total, a major offshore oil and gas producer in Britain, apparently wants to expand its role.

Surging production of oil and gas from shale rock has sharply lowered energy prices in the United States and helped make its industry more competitive, though it has also brought criticism from environmental advocates. Britain, however, is the lone country in Western Europe that has encouraged the exploration of shale gas, which is produced through hydraulic fracturing, or fracking, which uses a high-pressure mix of water, sand and chemicals.

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