Tuesday, October 09, 2012

Rising US Shale Production and Impact on Employment

Growth in production of shale oil and shale gas is already having an impact on US employment, as seen in the graph below. If not for the economic growth in the US oil & gas sector, US unemployment would be well above 10% and the dismal state of the US economy would guarantee Obama's fate as a one-term president.
But shale happened, and everything has changed. And the change has just begun.
Separate studies released in the last week by two respected Canadian firms, one of Western Canadian shale gas resources and another of the U.S. shale gas base have moved the tally of North American potential to a new plateau, beyond the trillions (Tcf) to 3.3 quadrillion cubic feet (Qcf), according to reports by Natural Gas Intelligence (NGI).

Calgary-based Sproule Associates, the oldest and still one of the biggest Canadian petroleum engineering and geology consulting firms, last week announced its survey of just five of 50 shale basins that have been identified in Western Canada produced a resource base estimate of between 809 and 2,222 Tcf or 2.2 Qcf.

A new analysis by ITG Investment Research, also based in Calgary, entitled “No More Guessing: Hardcore IV,” shows the U.S. Lower 48 onshore has 1.1 Qcfe of recoverable resources across 450,000 drilling locations. While the total includes data from 37 U.S. shale plays, ITG estimates recoverable resources of 900 Tcfe in just 10 overlapping plays, compared to 426 Tcfe for those same plays as estimated in a recent study by the U.S. Energy Information Agency. _TheGWPF
That is likely to be an underestimate, since much of Canada and the US -- including Alaska -- was not considered. More to come.

Speaking of "more," the EIA graphic below illustrates the near term projected growth of shale oil production in Texas and North Dakota alone. Ten years ago, the EIA could not envision this type of rapid production growth, and yet suddenly, there it is.
All of this growth in North American oil & gas is occurring despite the Obama administration's intentional policy of energy starvation, as manifested by offshore drilling bans and moratoriums, closing off of federal lands to energy production, and business killing regulations out the as...trozone.

Peak oil doomers have predicted the early demise of shale production, but the reality is proving otherwise.
Rune Likvern [in The Oil Drum], has a bearish view of Bakken production. He believes Bakken production is close to hitting a plateau.

Mr. Likvern's conclusions are incorrect. Well costs are improving in the Bakken, and will continue to do so through 2012.

...the Red Queen article stated an oil price of $80-$90/barrel was needed for Bakken wells to make commercial sense. Using an $80/barrel oil price we see that the majority of middle Bakken wells produce enough revenue to pay back costs in the first year of production. The author also made the mistake of not including natural gas, as he stated the potential contribution is marginal at $3/Mcf. It is obvious the author is not familiar with Bakken production as wells in NE McKenzie County can produce up to 11% NGLs. Using a $40/barrel price, in the first year revenues from NGLs are over $730,000.... _Seeking Alpha
As innovation continues to pile on top of innovation, shale operators are learning squeeze more out of every well.
Innovative minds are at work developing new tools and techniques to improve production. These range from new ways to perform massive multistage stimulation jobs to small embellishments in mature processes....

The recent Society of Petroleum Engineers Annual Technical Conference and Exhibition in Florence, Italy, offered several examples of easy-to-implement, economical techniques to optimize production. In mature reservoirs producing with high water cuts, it is difficult to identify from where production is coming. Many wells in these depleted fields are produced using electrical submersible pumps (ESPs); therefore, running production logging tools to evaluate production can be costly and problematic. A novel idea was presented where a fiber-optic distributed temperature monitor was run below the ESP. The temperature profile log could not identify the zones producing oil but could easily identify those zones producing water from nearby injector wells. By systematically turning injectors on and off, it was easy to see which injectors were contributing to which zones. On a subsequent workover, the water zones were squeezed off or isolated using a casing patch, significantly increasing the oil recovery fraction from the producing well...

New fracturing techniques have been pioneered to maximize well performance on a field or reservoir basis. Using the “zipper frac” technique, adjacent wells can be fraced stage-by-stage sequentially. By holding pressure on one well stage while the adjacent well stage is fraced, the resulting stress field prevents the fracs from intersecting. Going back and forth between the wells at each successive stage is cost-effective and helps to optimize production from each well. _EPMag

As production methods grow more efficient and profitable, more jobs are added to the overall economy.
Shale and hydraulic fracturing are driving job creation in our industry but also in associated sectors. Ohio and other states are seeing a rise in manufacturing due to shale production, which one study says could create 1 million new jobs by 2025. Steve Sexton writes on the Freakonomics blog that shale gas offers the U.S. advantages all around... _EnergyTomorrow

While the Obama administration has been lavishing billions of dollars on politically connected big wind and big solar developers and investors -- many of which went promptly belly-up -- the real action in energy has been in areas far from Washington.
Up until now, the Obama vision has led to countless failures, bankruptcies and layoffs — bringing calls for more subsidies that are taken from hardworking, productive people and businesses and given by unaccountable bureaucrats to failed technology companies run by crony-corporatists, who then contribute substantial portions of this compulsory taxpayer largesse to the re-election campaigns of cooperative politicians. _Source

The Obama EPA has been biding its time, waiting until after the election before taking steps to regulate the profits out of the shale motherlode. Even if Obama's energy starvationist regime is defeated in the US November elections, the EPA will have time to enact regulations which pack a ruinous punch against North American energy production -- including shale.

We can only hope that the green bureaucratic ideologues ensconced within Obama's EPA will re-consider their plan of action.

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