Tracing a Path to Better Oil & Gas Shale Production

Tracerco, patented, pioneered and continues to enhance technology that enables the measurement of individual gas, oil, and water stage production along the length of a wellbore, without well intervention. This inexpensive technology provides confirmation that a wellbore is open to flow, identifies and quantifies stage flow contribution of each phase, and provides measurement of drainage area connectivity – simply by adding small amounts of unique chemical tracers to each stage’s stimulation fluid.

The accurate knowledge of individual stage production allows a correlation between zonal productivity and wellbore position within a formation, stimulation, and production design. Using this knowledge, future well development plans can be adjusted with confidence to ensure that any changes made, will result in enhanced ultimate hydrocarbon recovery…

 

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The One Indicator OPEC Must Watch

“We will not let go of our current approach until we reach a balanced market,” Saudi oil minister Khalid al-Falih said Monday at a news conference in Riyadh.

OPEC ended months of speculation last week when it decided to extend its production cuts through the end of 2018, easing concerns that the limits would be lifted before the oil market was ready. But while it put some uncertainty to rest, the next question is what OPEC does when the oil market becomes “balanced”? What is the exit strategy?

There isn’t one at the moment, and we can assume OPEC doesn’t know what comes next. But we do know that the group has one key metric in mind: inventories. The target is to bring global oil inventories back down to the five-year average…

 

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The One Indicator OPEC Must Watch

“We will not let go of our current approach until we reach a balanced market,” Saudi oil minister Khalid al-Falih said Monday at a news conference in Riyadh.

OPEC ended months of speculation last week when it decided to extend its production cuts through the end of 2018, easing concerns that the limits would be lifted before the oil market was ready. But while it put some uncertainty to rest, the next question is what OPEC does when the oil market becomes “balanced”? What is the exit strategy?

There isn’t one at the moment, and we can assume OPEC doesn’t know what comes next. But we do know that the group has one key metric in mind: inventories. The target is to bring global oil inventories back down to the five-year average…

 

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Natural Gas Power Generation Share Grew in Southern States for a Decade as Coal Declined

Coal’s share of total electricity generation in the South declined over the past decade, from 50% in 2006 to 29% in 2016. As the use of coal has declined, the use of natural gas has increased. In 2016, southern states used natural gas for 42% of their electricity generation, a bigger share than the U.S. average of 34%.

The mix of fuels used to generate electricity varies among southern states, but the overall mix is dominated by natural gas and coal. At the state level, natural gas made up as much as 89% of in-state electricity generation in Delaware to as little as 2% in West Virginia.

Competition between the fuels for electricity generation has resulted in U.S. net generation of electricity from natural gas surpassing coal for the first time in 2016. For the South as a whole, natural gas surpassed coal for electricity generation in 2012, 2015, and 2016…

 

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Appalachia Region Drives Growth in U.S. Natural Gas Production Since 2012

Shale gas production in the Appalachia region has increased rapidly since 2012, driving an overall increase in U.S. natural gas production. According to EIA’s Drilling Productivity Report, natural gas production in the Appalachia region—namely the Marcellus and Utica shale plays—has increased by more than 14 billion cubic feet per day (Bcf/d) since 2012. Overall Appalachian natural gas production grew from 7.8 Bcf/d in 2012 to 22.1 Bcf/d in 2016 and was 23.8 Bcf/d in 2017, based on EIA data through October 2017.

Drilling wells in the Appalachia region has become very productive. The average monthly natural gas productionper rig for new wells in the Appalachia region increased by 10.8 million cubic feet per day since January 2012. EIA attributes this increase to efficiency improvements in horizontal drilling and hydraulic fracturing in the region, which include faster drilling, longer laterals, advancements in technology, and better targeting of wells.

For example, in West Virginia, the average lateral length per well has increased from about 2,500 feet in 2007 to more than 7,000 feet in 2016. Some operators have recorded lateral lengths as long as 15,000 feet in Appalachia and 19,000 feet in the Utica. Along with longer horizontal drilling, the days it takes for completion have decreased from about 30 days in 2011 to 7 days in 2015…

 

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OPEC Puts Icing on the Cake

As expected, OPEC and its non-OPEC partners have extended their production agreement through 2018 and even assigned “soft targets” to include Nigeria and Libya. Saudi Arabia’s Energy Minister, Khalid Al Falih made it clear in his opening remarks that the goal of the year-old deal had not been fully achieved, notably referring to the IEA’s five-year average stock levels, and indicating that the job of reducing inventories was only half done.

On a more practical note, the coalition of countries in this deal, and the special treatment of some members, has been a tremendous diplomatic accomplishment, one not easily reconstituted. So, it makes sense to agree to carry on at this juncture. You can always abandon an agreement. It is much harder to recreate one of this breadth.

The existing production deal was a rich layer cake, this extension puts icing on the cake…

 

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Pushing the Boundaries of Decommissioning

Today, the energy business is changing how it operates, whether drilling for oil and gas or generating electricity from the wind. This means acting in a sustainable and environmentally-responsible manner by applying corporate social responsibility principles to the planning, funding, and eventual decommissioning of projects. Simply walking away, is no longer an option, and the public and governments expect businesses to plan, implement and fund a complete lifecycle through to decommissioning.

For such firms, this means the planned closing down and making safe oil fields and the removal of wind farms when they come to the end of their operational lifespan. However, decommissioning costs money. For many firms finding such financial resources can prove challenging.

This is where Quatre Ltd founder and CEO Paul Jardine saw an opportunity to meet the challenge of funding of such decommissioning, in solving legal remediation issues and environmental liability challenges that energy firms face in tackling the decommissioning of energy projects…

 

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Dr. Daniel Fine on Oil and Gas: Prices and Supply Short of War in Middle East

One day after the OPEC annual meeting, although composed for publication two weeks ago, this column moves the clock forward to early 2018.  There is a background noise of regional “hybrid war” intruding on the market price of World and West Texas Intermediate oil.

Most analysts both commercial and government have failed to account for a Middle East “shock” or upset in the commodity market determination of oil and gas prices.  With Southwest and Dakota shale oil predominance, this “shock” is not about an oil supply disruption of imported foreign oil from OPEC Producers.  It is a test of confidence that domestic oil offsets Middle East oil dependence.

With the ISIS state having been destroyed in Iraq and Syria, the region reverts to the fundamental conflict over hegemony in the Middle East — Saudi Arabia against Iran.  The outline for the struggle for regional supremacy appeared after the Gulf War in the early 1990s…

 

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Natural Gas Production in Bakken Region Increases at a Faster Rate Than Oil Production

In North Dakota’s Bakken region, the ratio of natural gas production relative to crude oil, known as the gas-oil ratio, has been gradually increasing since 2008 and has increased at a faster rate since 2014. More than 90% of North Dakota’s crude oil and natural gas production comes from the Bakken region, which includes the Bakken and Three Forks formations.

Total North Dakota crude oil production peaked at more than 1.2 million barrels per day (b/d) in December 2014, but production has since dropped to 1.07 million b/d (as of August 2017), based on data in EIA’s Monthly Crude Oil and Natural Gas Production Report. The record crude oil production in late 2014 was the result of increasing crude oilproduction from the Bakken and Three Forks formations. Despite production declines in 2016, North Dakota remained the second-largest oil-producing state, accounting for 11% of total U.S. crude oil production.

While oil production has slowed in North Dakota, natural gas production has continued to grow, reaching a record high of 1.94 billion cubic feet per day (Bcf/d) in August 2017, or the energy equivalent of about 334,000 b/d of crude oil. Despite the increasing gas-oil ratio, North Dakota still produces more than three times as much energy from crude oil as from natural gas…

 

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Russia’s Mixed Feelings on Extending Production Deal

For Mr. Putin, the deal with OPEC has lifted oil prices, liquidated a global oil glut, and paid dividends in the form of improved relations with Saudi Arabia, boosting Russia’s real and perceived influence in the Middle East. At this juncture, however, the benefits for Russia and thus Mr. Putin may be more fleeting. The expected deal to extend production cuts would further postpone significant Russian production capacity increases, especially for the influential Rosneft. On balance, we believe the deal will be extended, perhaps in phases, but Russian producers will increasingly resist compliance, leading to its eventual unraveling in 2018.

One year ago, President Vladimir Putin’s personal involvement brought Russia into the OPEC-non-OPEC production agreement. It is noteworthy that in the weeks leading up to the original deal, Rosneft CEO Igor Sechin, who in the past has often been entrusted with sensitive issues in Russian energy relations, opposed Rosneft and Russian production cuts. Other Russian producers including Lukoil, Surgutneftegaz and Novatek encouraged the deal. Mr. Sechin has again spoken out against prolonging the deal, but, like last time, his position is unlikely to prevail, at least in the beginning.

Developments at a handful of Rosneft greenfield projects makes Mr. Sechin’s opposition to prolonging the deal understandable. For Rosneft, the longer Russia freezes production, the more disruptive it will be to the development of these projects. For example, there are five Rosneft greenfield projects that together should add 260,000 b/d of new production in the 2018-2019 time frame. The chart below highlights pre-December 2016 production, current production and targets planned for either 2018 or 2019…

 

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