June 30, 2011
A severe drought and temperatures soaring past 100° F make it
tough to be a roughneck in the Eagle Ford this summer.
But at least there’s job security.
The Eagle Ford, a shale formation that
starts at the Mexican border southwest of San Antonio and meanders in a
northeasterly direction through 14 counties, is nirvana for those in the
black-gold business. In the last few years, the hydrocarbon industry has fine-tuned
horizontal drilling and hydraulic-fracturing techniques. It finally makes
economic sense to assault shale deposits. Natural gas garners most of the press
coverage of the “fracking”
revolution, but the process is used to harvest crude, too. So swaths of oil-rich
shale in North Dakota, the Rockies,
and the Southwest suddenly have scores of new best friends.
The San Antonio
Express-News reports that the Eagle Ford, “the
hottest play in the country,” has “brought
newfound prosperity to South Texas’ hardscrabble farming and cattle country.”
Investors and landowners are benefitting, to be sure, but so are rig workers
and the substantial number of support staff needed to provide housing, food,
clean clothes, and entertainment. U.S. Bureau of
Labor Statistics data show that since bottoming out in September 2009,
employment in the San Antonio
region has risen by more 19,000.
moment, there’s no end in sight. At a Houston
conference in March, Pioneer
Natural Resources CEO Scott Sheffield predicted that the Eagle Ford will surrender
800,00 barrels a day within five years. That’s 70 percent of the
Lone Star State’s total 2010 production.
isn’t the only reason for the rebirth of Texas Tea. Enhanced oil recovery (EOR)
is bringing “played-out” fields back on line. The tactic is being employed both
east and west of the Eagle Ford. Conventional drilling sucks a small share of a
cavity’s potential -- as little as 10 percent. EOR pumps carbon dioxide (yes,
the same stuff that hysterical warmists say is frying the planet) down into older
wells to reduce the latent crude’s viscosity. Denbury Resources has used the
process to boost extraction rates eightfold in previously tapped fields. The
company is building a 320-mile,
$825 million pipeline to funnel carbon dioxide from Louisiana
to a site south of Houston.
On the other side of the state, in the Permian Basin,
EOR improves yields for Occidental
Petroleum, Kinder Morgan, and ExxonMobil.
Oil’s on fire
in sizzling Texas, but it’s also poised for a
comeback in icy Alaska.
In May, President Obama, blundering into a sound energy decision, directed the
Department of the Interior to sell leases in the National
Petroleum Reserve-Alaska (NPR-A). The tract’s 23 million acres probably do
not contain as much crude as the Arctic National
Wildlife Refuge -- sacred ground for elites in Manhattan
and Malibu -- but drilling in the NPR-A would help
oil implosion. The Trans-Alaska Pipeline System’s throughput is 600,000 barrels
a day. That’s a 71 percent decline since
its 1988 peak. According to the Alaska
some point in the near future … flow is expected to dwindle enough to cause
potentially major operational issues.”
The NPR-A has enthusiasts
and skeptics in the industry, but no oilman questions the potential of Alaska’s offshore reserves.
In 2008, the U.S.
Geological Survey estimated that the Arctic Circle contained 90 billion
barrels, with more than 80 percent found beneath water.
The oil is there
for the taking, but bureaucracy, as well as eco-obstructionism -- it won’t be
long before professional alarmists claim that offshore drilling in the Arctic threatens The
Island of Misfit Toys -- have caused delays. A recent
report by the U.S. House of Representatives Committee on Oversight and
Government Reform described one multinational’s nightmare: “Shell has spent
more than $3 billion on leases, environmental analyses, and permitting so far
with no return on their investment. The company holds 137 leases in the
Beaufort Sea and 275 leases in the Chukchi
Sea alone. Initially,
Shell planned to begin drilling in 2007 in the Beaufort Sea, just north and
east of the North Slope and the Trans-Alaska
Pipeline and associated infrastructure. Because of regulatory and legal
challenges, its schedule slipped to 2010, and then 2011, and now 2012.”
New technologies and investment-inducing high prices raised U.S.
crude production in both 2009 and 2010. It was the first back-to-back annual increase
since the mid-1980s.
With the right policies in place at the state and federal
can pump petroleum for decades, if not centuries, to come. Sorry, peak oilers,
but the profit motive, innovation, and geologic realties always trump apocalyptic
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
# # # # #