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Oil and Gas Roundup — August 23

August 23, 2016
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Oil and gas boom reducing GHG emissions, DOE says

The oil and gas boom is reducing U.S. greenhouse gas emissions, Energy Secretary Ernest Moniz said.

“The increased production of oil and natural gas in the United States has, obviously, been a major story in terms of our economy, and also our environment,” Moniz said at a field hearing in Seattle convened by Sen. Maria Cantwell of Washington, the top Democrat on the Senate Energy and Natural Resources Committee.

“The natural gas boom, in particular, has led to the displacement of high-carbon coal with low-carbon natural gas producing fewer [carbon dioxide] emissions,” Moniz said.

Moniz’s comments follow those by the head of the Energy Information Administration, the Energy Department’s analysis arm, earlier this month, indicating that carbon emissions are lower than they have been since 1992 because of increased reliance on natural gas from hydraulic fracturing, known as fracking.

Environmental groups have been heaping pressure on the Obama administration, Democrats and Republicans to support a ban on fracking, saying that the natural gas and oil produced from the process are raising greenhouse gas emissions and exacerbating climate change. Instead, they want 100 percent renewable energy.

The hearing was meant to examine the increased pressure that oil and gas production has placed on the nation’s infrastructure, especially for Cantwell’s state that has become a key chokepoint for shipping U.S. fossil fuels and other commodities to foreign markets.

Moniz said the increased demand for moving oil and natural gas around the country has placed “big strains” on the nation’s existing transportation infrastructure, where rail has been increasingly tapped to make up for the lag in pipeline capacity.

Nevertheless, slowing production has reduced pressure of rail shipments nationwide, except for the Northwest and Cantwell’s state where traffic remains steady. 

— Washington Examiner

Rig count up 1 in Okla., 10 nationwide

The number of rigs exploring for oil and natural gas went up by one in the Sooner State and 10 across the U.S. the week ending Aug. 19, according to Baker Hughes.

Largely bolstered by increased oil-directed drilling activity in the Permian basin, last week’s overall 17-unit rise in the US was the country’s largest since July 24, 2015 (OGJ Online, Aug. 12, 2016). The basin has represented more than two thirds of the total US gain during the recent rally.

Meanwhile, US crude oil production during the week ended Aug. 12 jumped 152,000 b/d to 8.597 million b/d, down 751,000 b/d year-over-year, according to data from the US Energy Information Administration. The Lower 48 accounted for 100,000 b/d while Alaska contributed the remaining 52,000 b/d.

Among the other major oil- and gas-producing states, Texas gained eight rigs to 238, Louisianna was up one to 43, New Mexico fell one to 30, North Dakota was off two to 27, Colorado was flat at 21, Pennsylvania jumped two to 17 and Ohio was flat at 14.

A year ago, 885 rigs were operating nationwide and 106 in Oklahoma.

Unconventional production more responsive to gas prices, study says

A new analysis of drilling data from more than 60,000 Texas gas wells offers evidence that shale production is more even-keeled and price-sensitive than conventional natural gas extraction, suggesting a boon for U.S. industries that can benefit from a more predictable, less volatile market for the commodity.

Shale gas production more closely resembles a “manufacturing process” than the high-risk, high-reward “big game trophy hunting” of conventional production, in which the output from dry holes and highly productive sites are averaged together to yield a reliable investment, according to the study by three economists with the independent think tank Resources for the Future.

The analysis, by RFF researchers Richard Newell, Brian Prest and Ashley Vissing, reviewed lease and production data from 62,000 gas wells across Texas tracked in the privately held Drillinginfo database. The leases were drilled from 2000 to 2015.

The analysis confirmed what the authors described as a widely held belief in the industry that unconventional oil and gas production is more responsive to prices, stemming in part from the greater knowledge of where to find extractable shale resources, as opposed to less predictable conventional gas wells.

The study also confirmed that while the time from initial drilling to production is shorter for conventional wells, production rates from the start are much higher from unconventional wells, with the effect of making unconventional production more responsive to natural gas prices.

The study found that initial shale production averaged 80,000 thousand cubic feet (mcf) per month versus conventional wells, which average 30,000 mcf per month of initial production. By the end of the first year of production, the average unconventional gas well would produce more than twice as much as the average conventional well in the same time period, and over the wells’ lifetimes the average unconventional well would produce 2.7 times the total of a conventional well.

Read more at EnergyWire (subscription required).

Exxon, Chevron, Hess in joint bid for Mexican oil

Exxon Mobil Corp., Chevron Corp. and Hess Corp. have agreed to bid together for rights to drill for crude in Mexico’s deepwater oil areas, according to a person with direct knowledge of the plans.

The three U.S.-based producers have reached a Joint Operating Agreement, which allows the consortium to bid to produce oil in the 10 areas up for auction on Dec. 5, according to the person, who asked not to be identified because the information isn’t public. A Joint Operating Agreement is a contract that establishes the role and obligation of each company in the accord, and designates the party that will act as the operator of a production area should it be awarded in the auction.

Mexico hopes to raise $44 billion in its first-ever sale of deepwater drilling rights in the Gulf of Mexico, located in the Perdido area near the maritime border with the U.S. and in the southern Gulf’s Cuenca Salina. Seventy-six percent of the country’s prospective oil resources are located offshore in deep waters, according to Energy Minister Pedro Joaquin Coldwell.

The country approved final legislation in 2014 to allow foreign crude producers to operate in Mexico for the first time since 1938, in an effort to reverse an 11-year decline in production.

Read more at Bloomberg.
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