Methane Emissions from Two Main Sources says UT Study

December 10, 2014 Elizabeth Alford

A new study led by researchers from The University of Texas hopes to provide clues to better understand the correlation between well technology and methane emissions during the natural gas production process.

The findings, published December 9th in Environmental Science & Technology, indicate that the overwhelming majority of methane emissions are from two types of wells; those that use pneumatic devices and those that use liquid unloading.

According to the study, 19% of Pneumatic Devices were responsible for 95% of methane emissions and were highest in the Gulf Coast Region, which was a similar result to the first part of the study conducted in 2013. As for Liquid Unloading, 20% of these devices account for 65-85% emissions. Conversely, this finding showed emissions were highest (~50%) in the Rocky Mountain Region due to the higher number of wells that utilize Unloading.

“David Allen, principal researcher and professor at Cockrell School gives some perspective on the findings by sharing that “over the past several decades, 10 percent of the cars on the road have been responsible for the majority of automotive exhaust pollution,” said Allen. “Similarly, a small group of sources within these two categories are responsible for the vast majority of pneumatic and unloading emissions at natural gas production sites.”

Hopefully this study, and others like it, will provide important data to help industry leaders as they work to create solutions to the growing concern over methane emissions in the Bakken and around the country.

To view a full research summary, visit Cockrell School of Engineering.

Falling Oil Prices: How Low is Too Low for Bakken Producers?

December 4, 2014 Elizabeth Alford

In light of falling crude oil prices, there is growing speculation about how low will be too low for U.S. producers. In just a few short months, prices have plummeted from $100 a barrel to around $70 today. This has left analysts and industry leaders worried about the effects this will have on the booming shale industry, including investment and drilling interests in the Bakken play. Since extracting shale oil is currently a more expensive process than conventional production methods, Bakken producers may be more vulnerable to lower crude prices.

OPEC turned up the heat on Thanksgiving Day and sparked what some are calling an 'oil war’, by announcing that it will hold steady on current production. This has garnered worldwide attention and assured that this downward trend in price will continue. (Read more: OPEC Challenges Bakken Shale Drillers) Certainly, this ‘war’ will have its casualties, as some shale producers will not be able to keep up. One indication of this was that drilling permits declined sharply over November, anticipating a slump for the near future. However, the deafening cries of doom are probably premature.

Keeping in step with the IEA estimate that most production in the Bakken play will remain profitable at or below $42 per barrel, Exxon Mobil CEO, Rex Tillerson told Houston Business Journal on Wednesday that the energy giant can maintain profitability until crude prices hit $40 a barrel. He also maintained his confidence in their Bakken shale initiatives.

“What you do is ensure that you can invest and be successful at the bottom of the cycle,” Tillerson said. “We test across a range that’s all the way down to $40 and up to $120.”

OPEC Challenges Bakken Shale Drillers

December 2, 2014 Elizabeth Alford

Halliburton Reports 2015 Q1 Loss — Bakken Stock Declines |Click to Enlarge

In a decision that caused energy stocks to plunge on Friday, OPEC announced last week that it will not decrease production in order to curb the falling price of crude.

Viewed by many as a sort of Thanksgiving Day game of ‘chicken’, this effort is meant to drive oil prices down further in order to force U.S. shale drillers to fold in the face of falling profits. This announcement comes as the boom in shale production has produced a growing worldwide oil surplus, thus changing the global energy landscape and status quo. Some are making dire predictions about what this may mean for U.S. interests, including one Russian oil tycoon who announced to Bloomberg that he predicts a huge crash in the industry that will necessarily weed out the weaker players.

Whether this tactic by OPEC will be effective remains to be seen. In October, Continental Resources CEO, Harold Hamm, announced that prices would have to fall another 20% before Continental would cut back significantly. That precise scenario happened Friday as crude hit its lowest rate since 2010 and energy stock plummeted. Other Bakken interests similarly affected include Apache (- 11%), Marathon (-11%), EOG (- 8%) and ExxonMobil (-4.2%).

While these numbers are alarming, the IEA estimates that most production in the Bakken play are profitable at or below $42 per barrel, (which is significantly lower than the ~$70 per barrel price we see today). It is our opinion that this $42 number is certainly shy of a threshold number on which to continue investing significant capital.

IHS: U.S. Shale Production Growth Will Slow, but Still Remain High

November 25, 2014 Kirk Eggleston

The dip in oil prices isn't making a huge impact yet on the vast majority of U.S. shale production.

According to a report by research consultancy IHS Energy, most shale plays are economic and ~80% of potential drilling in 2015 would remain strong at WTI crude oil prices as low as $70 per barrel.

“Since 2008 the cumulative growth in U.S. tight oil production has been 3.5 million b/d—far exceeding supply gains from the rest of the world combined—making tight oil the key driver of global supply growth,” said Jim Burkhard, Vice President, IHS. “While current lower crude oil prices do present challenges for new investment, IHS analysis shows that the vast majority of potential U.S. supply growth in 2015 remain economical at $70 for WTI.” Jim Burkhard, VP IHS”

WTI traded at ~$76 on Monday, a nearly 20% drop since September. As a result, Bakken operators, including Emerald Oil, Inc., have already announced plans to potentially scale back their drilling programs in 2015.

North Dakota’s Department of Mineral Resources (DMR) Director Lynn Helms updated lawmakers in October on the status of oil & gas development in the state. Helms said two factors could negatively impact oil production – lower oil prices and new flaring regulations.

Growth Still High, But Expected to Slow in U.S. Shale Plays

At lower prices, growth will slow, but still remain high, according to the report. In 2015, IHS estimates U.S. shale production will grow by 700,000 b/d at an average price of $77 per barrel in 2015. By contrast, in 2014, growth from U.S. shale plays was more than 1-million b/d.

“Expectations of the future—and the trajectory of oil prices—means that prices do not need to fall to the breakeven price before psychology, investment, and thus output, is affected,” Burkhard said.”

Approximately 80% of anticipated production has a break-even price between $50 to $69 per barrel, according to the report.

North Dakota Breaks Records for Oil & Gas Activity - Sep. 2014

November 20, 2014 Kirk Eggleston

The State of North Dakota hit 1,184,635 b/d oil in September 2014, setting a new record, according to the Department of Mineral Resources’ (DMR) November Director's Cut. That's 50,000 more b/d than August. During the same month, North Dakota also had record monthly gas production (1,403,448 mcf/d), and reported the highest number of producing wells to date (11,741).

But this month, the state's record breaking oil and gas activity is overshadowed by falling crude oil prices. September was a relatively good month for oil at ~93.00 on average for a barrel of West Texas Intermediate (WTI), but prices have dropped nearly ~$20 in the last two months.

According to the DMR's report, released on November 14, 2014, the current rig count is down 15% in the states five most active counties:

Divide - down 54%
Dunn - down 29%
McKenzie - down 4%
Mountrail - down 24%
Williams- down 19%

DMR Director Lynn Helms blames the recent drop in the Bakken rig count directly on lower oil prices. The cost of drilling a Bakken well is high - anywhere between $8-million to $9-million. If the price of oil continues to fall, some producers, depending on their location in the play and a host of other factors, will scale back their Bakken drilling programs.

Flaring Down in North Dakota Bakken

The natural gas flaring rate dropped from 27% in August to 24% in September. By comparison, the highest flared percent of natural gas was 36% in September of 2011.

New regulations have called for producers to reduce flaring to below 26%, starting with their October production figures. Helms recently pointed out that in addition to lower oil prices, flaring regulations could also impact Bakken development, because producers may face production restrictions if they fail to meet the new standards.

Beginning on June 1st, the North Dakota Industrial Commission (NDIC) began implementing its first in a series of policy changes aimed at reducing flaring in the Bakken.

Seismic Activity Up in North Dakota Bakken, But Leasing is Down

Seismic activity is up with seven surveys active or recording and five permitted. New leasing on the other hand has dropped off sharply. Most leases consist of renewals and top leases in the Bakken - Three Forks area.