Articles Posted in Oil and Gas News

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As production in Texas’ Permian Basin increases, so does the industry’s need for pipelines to transport production to treatment facilities and markets. Kinder Morgan, EagleClaw Midstream Ventures and Apache Corporation recently announced they have signed a letter of intent to build yet another oil and gas pipeline, to be called the Permian Highway Pipeline Project (PHP Project). The 42 inch pipeline will be designed to carry about 2 billion cubic feet per day and will be about 430 miles long, from Waha hub in Pecos County, Texas to several liquid natural gas facilities on the Texas Gulf coast. (Waha is a West Texas trading hub and pricing point). It appears from news releases that much of the pipeline capacity will be used to transport production by the three partners, but they are apparently also considering adding enough capacity to transport production from other companies.

ExxonMobil and Plains All American Pipeline have also announced that they have signed a letter of intent to build a common carrier pipeline from Wink and Midland, Texas to Webster, Baytown and Beaumont, Texas.

If you get a call from a landman representing a pipeline company, do yourself and your property a favor: do not try to negotiate a pipeline easement without the assistance of an attorney experienced in this area. The truth is that you don’t know what you don’t know, and in all probability you will have to live with your mistakes for many decades.

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Economists at IHS Markit  recently issued a report (summarized here) that predicts that oil production in the Permian Basin will almost double by 2023, increasing by 3 million barrels per day (mbd) to 5.4 mbd.  That level of growth will account for more than 60% of net global oil production. As Daniel Yergin, vice-chairman of IHS Markit indicates, “(i)n the past 24 months, production from just this one region—the Permian—has grown far more than any other entire country in the world. Add an additional 3 mbd by 2023—more than the total present-day production of Kuwait—and you have a level of production that exceeds the current production of every OPEC nation except for Saudi Arabia.”

In a separate report, summarized here, IHS Markit predicts that natural gas production will rise in the United States by almost 8 billion cubic feet per day (bcf/d) or more than 10 percent in 2018 alone. Altogether, U.S. production is expected to grow by another 60 percent over the next 20 years, the report says. In the Permian Basin alone, production of both natural gas and natural gas liquids (NGLs) are  expected to double from 2018 to 2023, reaching 15 bcf/d and 1.7 mbd, respectively.

The Permian Basin
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As readers may recall, the US Environmental Protection Agency published a draft report in 2015 that concluded that there was no evidence that hydraulic fracturing (“fracing”) led to widespread, systemic impacts on drinking water resources in the United States.

Environmental groups went ballistic over this conclusion. Bowing to public pressure, the EPA decided to rewrite the report. In 2016, the EPA published a redrafted final report that you can read here. That report concluded that activities in the hydraulic fracturing water cycle “can” impact drinking water resources “under some circumstances”.

Shari Dunn-Norman, associate professor in the petroleum engineering department at Missouri University of Science & Technology, was a member of the 31-person Scientific Advisory Board panel of “subject matter experts” that reviewed EPA’s work during the study. Professor Dunn-Norman recently shared her thoughts about the experience at a Hydraulic Fracturing Technology Conference put on by the Society of Petroleum Engineers in The Woodlands, Texas.

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The U.S. Geological Survey released an updated report (that you can read here) regarding the alleged link between induced earthquakes, defined as earthquakes triggered by commercial activities, disposal wells or and hydraulic fracing.

A Preliminary Forecast Model For Induced Quakes

USGS scientists studied 17 geographical areas spanning eight states, where increased seismic activity has been recorded that is presumably attributable to human activities and commercial endeavours, to try to develop a preliminary forecast model designed to determine how induced earthquakes could be assessed in geographical regions where increased oil and gas operations are occurring. The report is the first comprehensive study conducted on the hazard levels associated with human activity induced earthquakes.

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Graph courtesy of EOG Resources

EOG Resources has been experimenting with enhanced oil recovery (EOR) techniques that may be good news for Texas mineral and royalty owners. Specifically, EOG has been using injections of natural gas to increase oil production on approximately 15 wells. They report that the new technique can result in producing 30% to 70% more oil from the Eagle Ford shale, at an additional cost of about $6 per barrel of oil.

EOG cautions that the technique may not be suitable for all wells in all reservoirs, however the early results from the EOG wells have resulted in attempts by scientists and other oil companies to study and duplicate the EOG results. For example, David Schechter, a petroleum engineering professor at Texas A&M University, has altered his lab that has been used to test carbon dioxide (CO2) for EOR to safely observe how natural gas affects reservoir rock. BHP Billiton and its partner Devon Energy have two EOR pilot projects in the Eagle Ford. Marathon Oil and Core Laboratories are also reportedly beginning pilot projects.

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A company known as Biodentify, based in the Netherlands, announced that it can help predict oil and gas deposits based on DNA in the soil just a foot beneath the surface! Specifically, the company claims that by analyzing the microbiological DNA of shallow soil samples, it can predict “sweet spots” in shale reservoirs with 70% accuracy.

The technology makes use of hydrocarbon micro-seepage from sweet spots. According to the Biodentify literature, bacterial DNA is extracted, producing tagged DNA data, and that data that is translated to bacterial species. The result is hundreds of thousands of biomarkers or the ‘DNA finger-print’ of the soil sample. A Biodentify spokesperson said that a single sample of soil may contain as many as 300,000 microbial species—some of which are newly discovered. But Biodentify has found that only 50 to 200 of them serve as key indicators of a positive or negative signal. The biomarkers are then inputted to a proprietary computer model, which render a sort of “sweet spot” map. The technology is similar to cutting edge technology in medicine that uses saliva to test for tumors as opposed to a much more invasive biopsy.

Obviously, if this new technology is effective, it could result in not only cost savings for oil companies because they may be able to drill fewer exploratory wells, but also less environmental impact from oil and gas exploration.
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The Deep Carbon Observatory at the Carnegie Institution for Science is using “Big Data” to locate deposits of minerals, using techniques similar to those used by Amazon to recommend books based on a buyer’s previous book orders, or by Netflix to recommend new movies to a subscriber based on past movie choices. In a paper published in the American Mineralogist, scientists at the Observatory report the first application to mineralogy of network theory. Network theory has also been used to analyze the spread of disease, the scope of terrorist networks or even Facebook connections. The study reported in the paper was led by Shaunna Morrison of the Deep Carbon Observatory and Robert Hazen, Executive Director of the Observatory.

These scientists are using network theory to analyze data on the vast amount of information on Earth’s more than 5,200 known mineral species together with with data on the surrounding geography, the geological setting, and coexisting minerals, and from this producing patterns of occurrence and distribution of minerals  that might otherwise be hidden. Dr. Morrison stated that “(t)he quest for new mineral deposits is incessant, but until recently mineral discovery has been more a matter of luck than scientific prediction.  All that may change thanks to big data.” According to Dr. Hazen “(n)etwork analysis can provide visual clues to mineralogists regarding where to go and what to look for. This is a brand new idea in the paper and I think it will open up an entirely new direction in mineralogy.”

In terms of oil and gas exploration, petroleum geologists can use this new tool to discover new oil and gas reservoirs. One benefit will be that data analysis will be a lot less expensive than drilling test wells. In addition, fewer dry holes and test wells will be a good thing in terms of environmental impact.

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As many Texans are aware, hydraulic fracturing (“fracing”) uses a lot of water. In fact, one of the important ways in which Texas oil and gas lawyers assist their clients is to make sure that the oil and gas leases they sign contain appropriate protections for the client’s freshwater sources.

ConocoPhillips recently announced the availability of its “Water Visualization Tool” to use in discussing their water use with landowners in the Eagle Ford Shale. This is a 3D modeling tool that contains a model of the subsurface based on data from state and federal public databases, such as the US Geological Survey. With this tool, the oil company can demonstrate to a landowner the location and depth of the reservoir from which it is obtaining water and the spacing between horizontal wells and water sources.

The Water Visualization Tool sounds like it will assist in clear communication between oil companies and landowners. However, the more important issue is the need to continue to push to find non-freshwater sources for water used in fracing. For example, ConocoPhillips itself used municipal wastewater from Karnes City, Texas in the fracing of its wells in Karnes County. Other companies have used brackish water or are recycling water to use in fracking.

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The U S Geological Survey (USGS) just published a revised assessment of oil and gas reserves in the Sprayberry formation in the Permian Basin in Texas. In the revision, USGS estimates the formation holds 4.2 billion barrels of recoverable oil and 3.1 trillion cubic feet of gas. This represents a 700% increase over its prior assessment in 2007. The researchers at USGS said that as more wells are drilled in this region, the more data they have with which to calculate assessments and the better their ability to map and understand these formations. This assessment is the largest ever released by USGS and represents the largest oil and gas reserve in the lower 48 states.

The Sprayberry formation is one of seven formations in the Permian Basin area of Texas.   The Permian Basin is the largest petroleum-producing basin in the United States and has produced a cumulative 28.9 billion barrels of oil and 75 trillion cu ft. of gas. This news probably means more oil and gas wells will be drilled on existing leases, and that oil companies may be seeking new leases as well.

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The Texas Railroad Commission regulates oil and gas production activities in Texas. The Commission has the authority to issue and suspend permits for production companies and Texas oil and gas lawyers can file complaints with the Commission on behalf of landowners who believe they have been harmed by a well’s operations. Periodically, an energy company’s drilling and wastewater injection permit will be challenged by landowners on the grounds that a well has caused earthquakes, and the Commission conducts hearings to review the evidence of whether the permit should be revoked. The issue of whether injection wells cause earthquakes has come before the Commission several times over the past few years.

The Commission’s investigations have consistently determined that the earthquake swarm activity experienced in Oklahoma and north Texas over the past few years has not been linked with any specific oil and natural gas drilling activity, and until the seismic activity can be linked to a specific producer’s drilling activity, wells should remain open and operational. While scientists at the United States Geological Survey and other research institutions have opined that there is a link, Texas oil and gas regulators have indicated that oil and natural gas production should not be terminated until there is definitive proof of a correlation between drilling/wastewater activity and earthquake activity.

Some of the specific incidents and findings by the Texas Railroad Commission are: