This week, shale gas was the focus of a major conference in Houston involving industry representatives, government officials and academics who gathered to discuss the technologies and future of this increasingly important source of energy.
For most of the nation, the contributions of shale gas may seem like a revolution. Shale gas has created thousands of new jobs, meant millions of dollars in new government revenues and enhanced energy security for America.

Of course, those of us who work in and around the energy industry understand that shale gas has been more of an evolution than a revolution.

The technologies used to develop these natural gas supplies aren’t new. Our industry began directional drilling in the 1920s, leading to substantial use of horizontal drilling in recent decades. And we have used the process of hydraulic fracturing since the 1940s. In that time, the industry has safely drilled more than a million wells.

The transformative impact of shale gas is challenging us all to think in new ways.

Not long ago many worried about a natural gas supply shortage in the U.S. But as President Obama recently stated, a “century’s worth … [lies] in the shale beneath our feet.” A decade ago gas from shale accounted for less than 2 percent of U.S. natural gas production. Today it is nearly 30 percent and growing.

As our nation considers this potential, we are reminded of the importance of reliable, affordable energy to our economy – especially during challenging economic times. Affordable supplies of natural gas – driven by the increase in shale production – have helped reinvigorate the domestic petrochemical industry, which relies on gas as a feedstock to make plastics and the other building blocks of modern manufacturing. These supplies are strengthening America’s steel industry, which is building new mills and hiring workers to support shale gas drilling. And areas where production of shale oil or natural gas is occurring are experiencing economic growth, job creation, and increased tax revenue.

For instance, in North Dakota, unconventional oil and gas production in the Bakken Shale has provided enormous economic benefits, with close to $5 billion in direct economic activity in 2009. In Texas, a study of the Barnett Shale formation near Fort Worth estimates it is now responsible for $11 billion in annual economic output and more than 100,000 jobs for the North Texas region. And in Pennsylvania, state labor statistics show 214,000 Marcellus Shale-related jobs at the beginning of 2011. Penn State researchers meanwhile calculate that Marcellus drilling could add nearly $10 billion in value to the Pennsylvania economy this year.

We also must not forget that hydraulic fracturing helps our nation reach our shared goals for responsible environmental stewardship. Natural gas produces about 50 percent fewer greenhouse gas emissions than coal when used to produce electricity for consumers and businesses, and significantly reduces other emissions such as mercury, sulfur and nitrogen oxide. It also uses a small fraction of the water used in coal, nuclear and solar power generation processes to produce a barrel of oil equivalent energy.

To ensure economic and environmental benefits continue, the people of the natural gas industry understand that we must remain firm in our commitment to properly manage the risks involved in drilling operations. That means meeting the highest standards of well design and well integrity. It means training our personnel and contractors to ensure adherence to established operating procedures. It means safely and efficiently handling the water and additives used to fracture wells. And it means working with state regulators to ensure protection of water and air quality.

The United States’ shale gas resources are an extraordinary energy endowment for our country, and our industry knows how to produce these resources safely and responsibly. We must keep these facts in mind as the public and policymakers discuss energy policies – and what increased access and technology mean for the energy industry.

With a commitment to operations integrity, wise development of our shale gas can provide new supplies of affordable, reliable energy in a safe, secure and environmentally responsible manner. And the rise of this resource comes at a time when our country – and the world – clearly needs the economic and environmental benefits that natural gas stands ready to deliver.

Mark W. Albers is a senior vice president at Exxon Mobil Corporation.

The rise in US shale gas production had transformed the energy industry in the US, driving down gas and electricity prices. “Shale gas makes the production of electricity from other sources not attractive enough,” said Ignacio Galán, chief executive of the Spanish energy group Iberdrola.

Installations of new wind capacity in the US dropped from 10,000 megawatts in 2009 to 5,100MW last year. Mr Galán said he expected there could be a further 5,000MW added this year, and perhaps as little as 3,000MW next year.

Government support for wind, which includes federal tax credits and legal standards for renewable generation adopted by 29 states, was adequate, he said, but added: “It’s hard to make an attractive return on investment at these prices.”

Several analysts and industry executives, including Lisa Frantzis of Navigant, were less downbeat than Mr Galán, with some believing that new capacity additions will pick up next year.  According to Frantzis, falling turbine prices meant new wind farms were now competitive on costs with new gas-fired power plants.  “Wind is one of the more attractive options for complying with states’ renewable energy mandates,” she said.

However, Mr Galán’s caution is a sign of the challenges still facing the US wind industry, which include uncertainty over the longer-term future of tax credits given the pressure on the federal budget, and generally weak electricity demand as the economy slowly emerges from recession.

The American Wind Energy Association estimates that employment in the industry fell by 10,000 jobs last year, to 75,000.

Alex Klein of IHS Emerging Energy Researchsaid he expected new installations to remain at about 5,000MW per year, and said: “It’s going to be very challenging for the next couple of years. There are a lot of issues hitting the industry.”

Iberdrola is the largest investor in new wind capacity in the US, and the second-largest wind generator, after NextEra Energy, the owner of Florida Power & Light. Other leading companies in the US wind market include MidAmerican Energy, owned by Warren Buffett’s Berkshire Hathaway, EDP of Portugal and Eon of Germany.

Source: Financial Times

Though OIL hasn’t said which US company the joint venture would include, the agreement will help OIL access shale gas not only around the world, but also in India.

Presently, OIL, a Navaratna company, has over 1-lakh sq kilometer of area for its exploration and production activities in India, most of it in the north-east, which accounts for its entire crude oil production and majority of gas production.

READ THE FULL ARTICLE

Range Resources CEO John Pinkerton said in an interview yesterday his company may be a partner or target for oil companies, like Apache Corp. and Occidental Petroleum Corp., seeking to expand shale holdings in North America.

Exxon said last month it would buy XTO Energy Inc., a Fort Worth, Texas-based gas producer, for about $37 billion in stock and debt. Petroleum companies are “clearly sniffing around,” said Pinkerton, who declined to identify companies that have approached him.
Oil companies, previously focused overseas, are now “seeing that natural gas is half the carbon footprint of coal, it’s a third cleaner than oil, and now you’ve got these gigantic shale plays in the U.S.,” said Pinkerton.

Natural gas produces less carbon dioxide, the heat-trapping gas blamed for accelerating global warming, than crude oil or coal, according to the U.S. Environmental Protection Agency. Shale gas is produced from rock formations using water, sand and chemicals.
Range Resources, based in Fort Worth, Texas, holds 1.4 million acres of leases for the Marcellus Shale, a formation that may hold 20 years’ worth of U.S. gas supplies. Improvements in shale-gas extraction technologies have helped U.S. gas reserves reach a record 1,836 trillion cubic feet, according to the Potential Gas Committee.
Shell, based in The Hague, wants Marcellus Shale acreage, said David Todd, onshore asset manager for the company’s U.S. unit.

‘Very Interested’

“We currently are very interested in the Marcellus and are looking for an entry,” Todd said in June at the Bentek Energy Market Fundamentals Symposium in Houston. “We do not have a sizeable position.”

Total SA, Europe’s third-largest oil company, agreed this month to pay as much as $2.25 billion for a 25 percent stake in Chesapeake Energy Corp.’s Marcellus fields. Chesapeake Energy, based in Oklahoma City, has raised $10.8 billion in the past two years by selling joint-venture interests in its shale-gas properties.
Partnerships may be more common than takeovers because they cost less, Range Resources’ Pinkerton said.

“The idea that you’re going to have a rash of these is a little bit naïve,” Pinkerton said. “There aren’t many Exxons and there aren’t many XTOs.”
Range Resources, which increased gas output for 27 straight quarters, has its most promising holdings in the Marcellus Shale with its leases in Pennsylvania, Pinkerton said.

Breaking Even

Wells in the Marcellus Shale break even with gas prices at $3.19 per million British thermal units, the third-cheapest break-even rate among the most productive U.S. gas fields, Bentek Energy LLC Chief Executive Officer Porter Bennett said at an investor conference in New York this month.

The Marcellus probably will yield 489.2 trillion cubic feet of gas, equivalent to a 20-year supply for the U.S., Terry Engelder, a Pennsylvania State University geologist, said in an Oct. 21 interview. Chesapeake Energy, holder of 1.5 million Marcellus acres, predicted last year it will be the largest U.S. gas field.
Gas stocks are less expensive because the price of crude oil on commodities markets is 58 percent higher than natural gas based on the amount of energy each can produce, Pinkerton said.

Oil, Gas Prices

Crude oil futures fell 3 cents to $73.64 a barrel yesterday on the New York Mercantile Exchange. An energy-equivalent price for gas would be $12.27 per million British thermal units. Natural gas fell yesterday 14 cents to $5.14 per million British thermal units.

Exxon affirmed the economy and productivity of shale-gas wells by paying a 25 percent premium to XTO’s previous closing price, Pinkerton said. Devon, based in Oklahoma City, is selling as much as $7.5 billion of offshore and overseas assets this year to cut debt and focus on U.S. shale-gas production. “We had an opportunity to get into the Marcellus in a big way a couple of years ago,” Devon President John Richels said in response to a question during in a Nov. 18 conference call. “Maybe it was a mistake, but we chose not to.”

Devon spokesman Chip Minty and Occidental spokesman Richard Kline said yesterday the companies don’t comment on merger speculation.

By Jim Polson BUSINESS WEEK

What gives? The U.S. shale gas boom. Halliburton is the biggest player in North America, especially in providing drilling and well completion services in the booming shale gas plays in basins like the Haynesville and Marcellus.

For the quarter, Halliburton’s international results suffered in part from a downturn in drilling in Mexico, but its North American profits were “more than double what we had modeled,” notes Deutsche Bank analyst Michael Urban.

“Halliburton is the one you want to own,” says Paul Coppola, portfolio manager with Arrowhawk Capital Partners in Houston. “There’s a well-completion cycle coming, and that’s right in Halliburton’s wheelhouse.”

Shales are tough to drill, necessitating wells with lots of horizontal laterals snaking their way into thin pay zones. Plus, the rock is tight, meaning gas doesn’t flow readily unless it is cracked open; that process, called fracture stimulation (or “fracking”), is done by injecting millions of gallons of water down a well at intense pressures to break fissures into the rock.

Halliburton leads the industry in all these services, and has more exposure to North America than its large-cap peers, the premium-priced Schlumberger and the international-focused, but riskier Weatherford. Halliburton spun off its much-maligned government contracting division KBR two years ago, and redomiciled its headquarters in Dubai. Though it counts nine national oil companies among its top 10 customers, Halliburton still gets most of its business in North America. Coppola expects the company to take market share from Baker Hughes, which is busy restructuring around recently acquired BJ Services.

The shale boom should be sustainable too; in time federal carbon legislation will likely enshrine clean-burning natural gas as the bridge between fossil fuels and a wonderland of windmills and solar panels.

By: Christopher Helman, the Southwest Bureau Chief of Forbes, based in Houston
Source: FORBES.COM