BENTEK: Eagle Ford Crude Oil Production Expected to Grow Fivefold in Five Years [...]

Business Wire, Apr 18, 2011
Oil, gas and NGL production from the liquids-rich Eagle Ford Shale in South Texas set to boom, due to a highly attractive oil/condensate play, a solid base of midstream infrastructure, extensive planned infrastructure expansions and proximity to some of the largest energy markets in North America. [...]

“Horizontal drilling for oil has been highly successful in the northern part of the play, with production expected to increase [more than] fivefold from current levels of 71,000 barrels of oil per day (B/pd) to an average of 421,000 B/pd by 2015, [almost as much as Australia],” said BENTEK Managing Director E. Russell (Rusty) Braziel. “We are projecting that dry natural gas production, mostly located in the southern portion of the Eagle Ford, will increase [...] [Read more]

(For the current Eagle Ford production of crude oil and condensate, please also see, inter alia, here. Update: for the 2012 figures of crude oil -- here. The increase in U.S. crude oil production in 2010 was led by escalating horizontal drilling programs in U.S. shale plays---please see my post "United States: Oil Production From Shale Formations, 2005-2010 -- EIA," here. For the map of the Eagle Ford shale from the U.S. Energy Information Administration/EIA - map date Oct 6, 2010, please see here. For EIA's map of North American shale plays, including the United States, Canada and Mexico, as of May 9, 2011, please see here. Mexico has begun drilling its northern regions for shale gas which it regards as an extension of the US' frenzied Eagle Ford Shale in South Texas, a bonanza which contains both oil and gas---please see my post, here. Mexico's state-owned oil company Petróleos Mexicanos/Pemex, said in March it had produced its first shale gas from an exploratory well at the Eagle Ford Shale formation in the northeastern state of Coahuila in February. -- D.R.)

Chart: History of U.S. Crude Oil Production, 1970-2010

by David Rachovich, retrieved from Aaron and David Rachovich, "U.S. Crude Oil Production, 1970-2010 -- EIA"

To view the chart (PDF format), please click here.

Please view data source for my chart.

(United States crude oil output reached its all-time peak of 9.637 million barrels per day in 1970 and began to fall rapidly and steadily after 1985. Following declines in all but one year, 1991, from 1986 to 2008, U.S. crude oil output increased in 2009 and again in 2010. -- D.R.)

World Watch [Shale Gas Development in Europe]

by Jim Washer, London, EI, May 16, 2011
Shale gas is beginning to take off in Europe, as a subject of debate and as a plausible new energy supply option. France’s National Assembly last week voted to ban the controversial technique of hydraulic fracturing in shale oil and gas exploration, a move which threatens to strangle the country's shale gas sector at birth. But elsewhere in the region, interest in shale exploration is growing, with Total farming into two concessions in Poland operated by Exxon Mobil, which is also assessing unconventional gas prospects in neighboring Ukraine. Europe can’t match North America’s shale gas resource potential, nor its attractive framework for onshore gas development. But one factor which typically complicates energy development elsewhere -- politics -- may encourage shale development in Europe. Countries like Poland and Ukraine both depend heavily – and not always happily -- on Russia for gas. Developing more indigenous gas resources would improve these countries’ security of supply, as well as strengthening their hand in gas supply and transit negotiations with Moscow.

(Poland's technically recoverable resources of shale gas are estimated to be 187 trillion cubic feet/tcf or c. 5.3 trillion cubic meters/tcm, the highest in Europe, followed by France with 180 tcf or c. 5.1 tcm---please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," here. Also, please see my post "World Shale Gas Resources Outside US Assessed," here. For exploration of shale gas in Poland, please also see my post "Marathon, Nexen to Jointly Explore Shale in Poland," here. In theory, unconventional gas resources "might be able to cover European gas demand for another 60 years," said a recent study on unconventional gas – EUCERS Strategy Paper No 1, p. 30. -- D.R.)   

US Horizontal Rigs Drift past 1,000 Mark on "Shale Sail"

By Starr Spencer, Platts oil blog - The Barrel, May 13, 2011
Apologies to Bob Seger, but it seems just about everyone in the oil and gas industry these days is following the sentiment in this song, or at least doing a reasonable facimile.

There are all sorts of statistical goodies buried in the Baker Hughes weekly rig count. Here is one of them:

Apart from the fact that the US oil rig count is soaring and has now surpassed the number of rigs drilling for natural gas, which happened last month , US rigs drilling horizontal wells also passed the 1,000 mark in April [data showed on April 1st -- D.R.] for the first time.

And it continues its upward march. This past week ended May 13, 1,041 rigs were drilling horizontal wells, out of a total 1,830 total rigs. [Horizontal rigs now make up about 57 percent of the total rig count, up from a low of less than 4 percent in Sept 1998. Also, for the total drilling rigs in historical perspective, please see remarks below -- D.R.] That is the highest number since Baker Hughes began keeping track of such data in 1991, and probably [sic] is an all-time record.

The surge in horizontal drilling can only be traced to the shale explosion, which is truly one of the energy industry's Biggest Things. Everyone seems to be exploring for or at least reading about shale oil and gas these days, and in the process the purses of oil operators and also national economies are reaping the benefit.

Once companies hit on the idea, sometime in the early 2000s, that they could get a lot more natural gas by not only drilling down vertically, but then taking the well sideways or horizontally once they reached total depth, it was one of those "Eureka!" moments.

They then coupled that with fracture-stimulating or forcing fluid into rock at high pressure, and drilling increasingly longer laterals to access more of a reservoir from a single wellbore. The greater cost of a horizontal well was offset by more output. Once oil prices began to climb, they applied these notions to oil wells, with similar results.

Rig numbers tell the story. Horizontal drilling before the early 2000s wasn't unknown, but at that point it was more in the experimental stage. When Baker Hughes began keeping track of horizontal versus vertical wells starting the first week of January 1991, 100 rigs were drilling horizontally out of a total 1,108 rigs that week. Another 81 rigs were drilling directionally while the vast majority--927 rigs--worked on vertical wells.

In the succeeding years, horizontal drilling largely stayed below--sometimes well below--100 rigs. That is, until 2004, when the Barnett Shale [in Texas] began to glitter things up and everyone wanted to ride the shale trail. Then kicked off an upward trend of horizontal drilling that, except for the economic pullback of late 2008 to late 2009, continues to this day. [Also, horizontal rigs comprised less than one-third of oil-directed rigs in September 2008, and with a tripling of horizontal oil rigs since then, that share has increased to about 46 percent---please see my post "Domestic Oil Production Reversed Decades-Long Decline in 2009 and 2010," here. -- D.R.] 

Now the excitement of shale drilling is becoming an international phenomenon. Canada is several years into several shale gas and oil plays there; places such as Poland [please see my post "Marathon, Nexen to Jointly Explore Shale in Poland," here -- D.R.] and Germany are exploring their potential, and even Mexico has begun drilling its northern regions for shale gas which it regards as an extension of the US' frenzied Eagle Ford Shale in South Texas, a bonanza which contains both oil and gas [please see remarks below -- D.R.].

Still, not all shales require horizontal drilling. Small oil-focused Venoco, which held a nearly two-hour conference call this week and spoke at length about its pioneering Monterey Shale operation onshore southern California, said it expects vertical wells are the most likely way to develop that oil pool. However, with only one rig drilling Venoco's slice of the Monterey for the rest of the year, it appears to be the exception that proves the rule. [Full story]

(Since 1944 the highest weekly U.S. rig count was 4,530 recorded on December 28, 1981, the height of the oil boom. The lowest rig count of 488 was recorded on April 23, 1999. In Canada the highest weekly rig count of 718 was recorded on February 17, 2006. The lowest weekly rotary rig count of 29 was recorded on April 24, 1992---please see my post > remarks, here. Separately, please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," including China, Argentina, Mexico, Australia, Canada, Poland, France, etc., here. Also, please see my post "China Plans to Exploit its Shale Gas Resources," here.  Mexico's state-owned oil company Petróleos Mexicanos/Pemex, said in March it had produced its first shale gas from an exploratory well at the Eagle Ford Shale formation in the northeastern state of Coahuila in February. -- D.R.)

Top 8 Oil Producers in Asia & Oceania, 2006-2010 -- EIA

by Aaron and David Rachovich

Production of Crude Oil including Lease Condensate (Thousand Barrels Per Day), 2006-2010

Rank	Country	Full Year 2010 Average	Full Year 2009 Average	Full Year 2008 Average	Full Year 2007 Average	Full Year 2006 Average
1.	China	4,076	3,799	3,790	3,729	3,673
2.	Indonesia	943	946	972	964	1,019
3.	India	752	680	694	698	689
4.	Malaysia	554	578	609	588	613
5.	Australia	436	475	477	465	429
6.	Vietnam	318	299	300	319	345
7.	Thailand	242	238	229	213	204
8.	Brunei	136	131	133	155	198
Top 8 countries		7,457	7,146	7,204	7,131	7,170
Asia & Oceania total		7,753	7,442	7,518	7,416	7,459
Africa total		9,997	9,757	9,989	9,949	9,641
All Countries (World)		74,043	72,259	73,655	72,986	73,428

Source: U.S. Energy Information Administration (EIA), International Energy Statistics, here.

(Figures above may be updated at any time by EIA. Also, please see Aaron and David Rachovich, "World's Top 22 Oil Producers, Full Year 2010 (including OPEC and plus 2009 production)," here. And our post "Top 25 World Oil Consumers, 2009-2010," here. -- D.R.)

North Dakota Oil Tax Revenue Breaks $100M Mark in March as Industry Booms

by Judson Berger, Fox News, May 9, 2011
North Dakota's booming oil industry has yielded record tax revenue for the state, breaking the $100 million mark in March at a time when other states are struggling to stay afloat.

The state in just the last few years has become an oil-producing powerhouse and is looking to overtake California in total production. [...]

Much of the recent increase is due to rising crude prices, which have shot up amid concerns over unrest in the Middle East. But North Dakota's oil production is also accelerating rapidly, and state officials expect the windfall to hold steady. [...]

The 350,000 barrels a day produced in March was actually about 2,000 barrels a day lower than in February. But [state Deputy Tax Commissioner Ryan] Rauschenberger attributed the dip to the weather, and said that even if crude prices return to prior levels the state expects to take in $2 billion in oil-related tax revenue over the next two years. [...]

Amid a debate on Capitol Hill over whether the U.S. needs to do more to encourage domestic oil production, North Dakota is charging ahead with expansion. The state industry was helped in no small part by efforts over the past several years to tap into a massive oil field known as the Bakken Shale deposit, where virtually all future expansion is happening [please see remarks below -- D.R.].

Production is expected to grow "substantially," Ron Ness, president of the North Dakota Petroleum Council, said. With 5,300 wells across the state and thousands more expected to come online, Ness projected that the state could reach up to 700,000 barrels a day by 2015.

North Dakota is the fourth-largest oil producing state in the U.S. behind California, Alaska and Texas [when output from the Federal Outer Continental Shelf/OCS is excluded from the total ranking -- D.R.], and Ness said California is in their "target zone." [Read more]

(Operators increased North Dakota's Bakken production from less than 3,000 bbl/d in 2005 to over 230,000 bbl/d in 2010. The Bakken's share of total North Dakota oil production rose from about 3 percent to about 75 percent over the same period---please see my post "United States: Oil Production From Shale Formations, 2005-2010," here. North Dakota produced an average of 307,000 barrels of crude oil per day in 2010 and comprised about 5.6 percent of the nation's total crude production---please see EIA data, here. For the U.S. crude oil production, please see also my post "U.S. Crude Oil Production, 1970-2010," here. North Dakota's crude oil production increased sharply in the late 1970s and peaked in 1984 at 144,000 barrels per day. Production declined through the late 1980s and early 1990s. After a small rise in 1995-97, production slowed again. Crude production dropped to 81,000 barrels per day in 2003. But since 2004, it has grown constantly to reach the above mentioned all-time peak of 307,000 barrels per day in 2010, surpassing the previous peak of 218,000 barrels per day in 2009. Also significantly, on a monthly basis, North Dakota's crude oil production rose from 138,000 barrels per day in January 2008, to 357,000 barrels per day in November 2010, before falling slightly to 344,000 barrels per day in December 2010. Update: North Dakota passed Alaska in March 2012 to become the second-leading state in crude oil production, trailing only Texas---please see my post "North Dakota Tops Alaska in Oil Production, Trailing Only Texas." -- D.R.)

China Plans to Exploit its Shale Gas Resources

The Institute for Energy Research (IER), Apr 27, 2011
“America’s shale gas production alone has exceeded that of total Chinese gas output. That gives us a lot of confidence,” said Zhang Dawei, deputy director of the Strategic Research Center for Oil and Gas in the Ministry of Land and Resources [please see remarks below -- D.R.].

China is looking at the production and resources of shale gas in the United States and is planning to emulate them. China’s technically recoverable resources of shale gas are estimated to be about 50 percent higher than those in the United States, which ranks second to China in a recent assessment of shale gas resources in 32 countries [also, please see my post/table "Estimated Shale Gas Technically Recoverable Resources for Select Basins in 32 Countries -- EIA," here -- D.R.]. In November 2009, during a state visit to Beijing, President Obama signed a cooperation pact with China that provides for U.S. expertise in drilling for shale gas. [...] China’s goal is to have about a fifth of its natural gas production come from unconventional gas, mainly shale gas, by 2030.

China’s Natural Gas Production and Consumption

In 2009, China produced 2,929 billion cubic feet of natural gas and consumed 3,075 billion cubic feet, importing 146 billion cubic feet. The country relies on natural gas for only 3 percent of its energy consumption, getting more than 70 percent of its energy from coal, followed by 19 percent from oil and 6 percent from hydropower [in 2008]. The government is planning to increase consumption of natural gas to a 10-percent share by 2030, and will need to continue importing gas through liquefied natural gas facilities and pipelines from neighboring countries. The [U.S.] Energy Information Administration projects that gas demand in China will more than triple by 2035, growing at 5 percent a year.

China’s government is looking to foreign investors to help develop production of its unconventional gas resources—coal bed methane and shale gas. China’s technically recoverable resources of shale gas are estimated to be 1,275 trillion cubic feet and its technically recoverable resources of coal bed methane are estimated at 350 trillion cubic feet. According to the Ministry of Land [and] Resources, China’s goals regarding shale gas are to discover 35 trillion cubic feet of recoverable shale gas reserves, build 500 to 1,000 billion cubic feet per year of production capacity and produce 8 to 12 percent of China’s total natural gas from shale gas by 2020.

Shale gas is one of China’s top targets for technological breakthroughs in its five year plan for 2011-2015. China’s Ministry of Land and Resources intended to hold its first auction of shale gas blocks in the first quarter of this year [it is already overdue -- D.R.], delaying it from November of last year. The auction is for eight exploration blocks in four provinces covering 18,000 square kilometers [please see update below -- D.R.]. [CNPC's listed arm,] PetroChina, which produces about 80 percent of China’s total gas output and is the world’s second-most valuable energy company, completed its first [horizontal] shale gas well in the Sichuan province last month [March 2011]. In February, PetroChina announced it would buy a $5.4 billion stake in Calgary-based Encana Corp’s shale gas assets. A China National Petroleum Corporation executive indicated, “We don’t care much about whether the market believes it’s a good or bad price. The top priority is gaining access to a resource and mature technology. Price is only a secondary consideration.” [Also, please see remarks below -- D.R.] [...]

Six months after President Obama’s visit in 2009, China and the United States set up a task force and agreed to jointly conduct a shale gas project, assessing an aging oil basin in China that was not very fruitful. According to industry officials, the U.S. government and companies have invited Chinese geologists for technical workshops and field trips, but Chinese firms are less interested about sharing technical information, or opening up new blocks for resource studies.

As of the end of 2009, China is estimated to have almost 21,000 miles of natural gas pipelines and is expanding at a rate of 6 percent per year. The Chinese government plans to construct 14,400 miles of new pipelines between 2009 and 2015. The West-East Gas Pipeline, which was commissioned in 2004, is China’s largest natural gas pipeline at 2,500 miles, linking major natural gas supply bases in western China with markets in the east. The pipeline’s annual capacity is 424 billion cubic feet and there are plans to increase it to 600 billion cubic feet. Four additional west-to-east pipelines are also planned with the second one to be completed in 2012.

China’s first import natural gas pipeline, the Central Asian Gas Pipeline, began operations in December 2009, carrying natural gas imports from Turkmenistan, Uzbekistan, and Kazakhstan. The pipeline spans 1,130 miles and [had an initial] capacity of 200 billion cubic feet per year with plans to increase gas supply to 1.4 trillion cubic feet per year. China has signed agreements with Uzbekistan, Kazakhstan, Russia and Myanmar for gas supplies and additional pipeline construction in the future.

China imported its first shipment of liquefied natural gas in the summer of 2006 and imported 730 million cubic feet per day in 2009 and 1,120 million cubic feet per day in the first half of 2010. China has three regasification terminals, four under construction, and others in the approval process. China receives its liquefied natural gas from Australia, Indonesia, Malaysia, Qatar [and Russia -- D.R]. Because international liquefied natural gas prices are higher than domestic gas since their contracts are indexed to oil prices, competition may be greater from domestic gas, particularly shale gas, and neighboring sources in the future. For China to develop its shale gas resources, its natural gas pipeline system, which is about a tenth of the size of the system in the United States, would need to be significantly expanded, requiring billions of dollars. [...]

Conclusion

China has found another avenue for increasing its much needed energy supplies—shale gas. China is estimated to have more technically recoverable shale gas resources than any other country in the world. And, its people are very good at learning from and imitating experts around the world in extracting resources. Here again China is oblivious to environmental issues as it is in its use of coal for over 70 percent of its energy and its mining of rare earth minerals used in making certain renewable technologies and in weapon systems, where China dominates the global market.

For the United States, the country with the second largest technically recoverable shale gas resources, environmental concerns are at issue with demonstrations in Texas, New York, and Pennsylvania; public forums sponsored by the Environmental Protection Agency; and the threat of more studies to discredit the strides that hydraulic fracturing and horizontal drilling have made to provide reasonably priced natural gas. While the United States has the technical expertise to develop its shale gas resources, it is challenged by those who want the American public to pay high energy prices. China, on the other hand, wants to provide a better standard of living for its people and is developing any resource that will pave the way. [Read more]

(In 2009, U.S. shale gas production amounted to 3.11 trillion cubic feet/tcf vis-à-vis total Chinese dry natural gas output of 2.93 tcf. In 2010, U.S. shale gas production jumped to 4.87 tcf, constituting 23 percent of total U.S. natural gas production, compared with 0.39 tcf in 2000. Сhina's natural gas production rose to 3.3 tcf in 2010, compared with 0.96 tcf in 2000. Separately, China's third-largest oil company and the country's largest offshore oil and gas producer China National Offshore Oil Corporation/CNOOC struck two deals with leading U.S. shale gas player Chesapeake in October 2010 and January 2011, giving it access to drilling leases in Texas, Wyoming and Colorado. "Chesapeake has accumulated abundant experience in drilling and completion in various U.S. shale plays," CNOOC said in a statement emailed to Reuters. "The techniques and experiences we learn from the U.S. shale projects will benefit our potential participation in other areas in the future." UPDATE: Four blocks were offered in the first tender issued June 27, 2011, all located in the Sichuan basin. The blocks in the tender are mostly in the southwestern Chongqing municipality and Guizhou province and cover an area of 11,000 square kilometers, smaller than an earlier announced plan to offer eight blocks with an area of 18,000 sq km. Only Chinese state-owned companies were invited to bid: PetroChina, Sinopec, CNOOC, Shaanxi Yanchang Petroleum, CUCBM and Henan Provincial Coal Seam Gas. China has awarded two out of four shale gas blocks offered in its auction of the unconventional gas resource to China Petroleum & Chemical Corp., i.e. Sinopec, and Henan provincial coal seam gas company, a Chinese government official said Wednesday July 6, 2011. "Both blocks covering about 2,000 square kilometers [each - D.R.] are in the Chongqing area. The contracts will be signed shortly," an official with the Ministry of Land and Resources said. Sinopec won the Nanchuan block and Henan Provincial Coal Seam Gas was awarded the Xiushan block---please see Exhibit 2 or map from the Bernstein Research, July 7, 2011. A second round will take place later this year. -- D.R.)