Doing Our Part to Boost Demand for Natural Gas—for the Benefit of Everyone

April 16, 2010

Here we sit on top of the Marcellus Shale, with a whole lot of natural gas very close to the huge and highly populated Northeast market, which currently gets most of its electricity from coal. Even after a very cold and snowy winter, record inventories are keeping natural gas prices low. This week’s gas prices were $4.15 per million Btu (MMBtu) according to the U.S Energy Information Association website (  

This supply glut and low prices doesn’t constitute good news for anyone. It certainly isn’t good news for businesses in our industry that are paying millions of dollars to drill wells in these potentially lucrative, but unconventional and complex gas plays.  

But in the long run, it’s not good news for consumers either.  How do I figure that? Because eventually we will hit a fossil fuel supply crunch again.  We need to figure out how to maximize natural gas and put it to work for us—now—for long-term security and to maintain (regain?) a strong economic position.

It turns out that our industry not only needs to do our part on the supply side—which we are.  We also need to help boost the demand side—which, it also turns out, we are doing. But we need to do more.

How Our Industry is Helping Boost Gas Demand

By promoting alternative energy sources. When I commended 2009 SPE Digital Energy Conference program committee chair Mehrzad Mahdavi for including an alternative energy panel for the first time in conference history, he thanked me and explained that some people were not as pleased. Perhaps other industry conference goers were unhappy because they see alternative energy, or renewables, as competition to fossil fuel. But the message was, quite clearly, the opposite.

Michael  Skelly—alternative energy panel speaker, energy entrepreneur, and former officer of Houston-based Horizon Wind Energy—said  quite plainly and clearly: alternative energy sources such as wind and solar are not “potent” enough to fuel the world. Skelly explained that more robust energy sources are needed  to complement renewables. He explained the most likely supplemental source was natural gas, because of its: ability to be fired up or down quickly, fossil fuel potency, and reduced carbon foot print, compared to coal and oil.

By acknowledging that fossils alone will not meet demand forever.  Also back in 2009, Don Paul (executive director of the USC Energy Institute and holder of the William M. Keck Chair in Energy Resources; founder and president of Energy and Technology Strategies;  and former vice president and CTO of Chevron Corporation ) spoke about global energy demand at SPE Digital Energy and  at Microsoft’s Global Energy forum earlier in the year. His message: Bring it on—more oil and gas, renewables, nuclear and more—we’ll need all energy sources to meet global demand.  

By driving and supporting new energy and transportation initiatives. Perhaps no one in our industry  exemplifies this more than T. Boone Pickens.  The successful oil-man-turned-alternative-energy-entrepreneur is most recently famous for the wind farms he’s been building in Texas.  I recently heard him speak (on a free Hart Energy webinar, about  his latest plan to move America’s fleet of 18-wheelers to natural gas, in support of national security and reducing our dependence on foreign oil.

At our local SPE meetings, we’ve also had advocates of natural gas passenger cars show up with the hopes of joining efforts with the supply side to help further their cause.

I think these are all good things. There’s more that we are doing and more that we can do. I’ll write more about that in a later post.

Tell me what you think. Post a comment now.

Do you think that industry members can and should help drive demand? Are renewable and fossil fuels cooperative or competitive? What do you think of Pickens’ ideas? Let me hear from you.

Day 2 and 2 ½ of Unconventional Gas Conference

April 15, 2010

The last day and a half of the SPE Unconventional Gas Conference (UGC) in Pittsburgh was also jam-packed with content, though by the morning of the final day the crowd was noticeably sparser.

Some recurring themes throughout the conference papers on shale gas plays were the crucial role of microseismic for monitoring frac effectiveness, and use of proppant—the consensus being you can’t really use too much proppant in these shale gas operations.  I hope to cover these topics in more detail in later blog posts.

Matt Blauch from Superior Well Services delivered an excellent presentation based on his paper SPE 131784, Developing Effective and Environmentally Suitable Fracturing Fluids Using Hydraulic Fracturing Flowback Waters.  I plan to follow up with Matt for additional details for this blog; he discussed work that SWSI has been doing to re-use flowback water for safe and effective fracking operations.

Matt began by acknowledging that some people in our industry don’t like discussing the environmental aspects of our work, something I’ve observed but I’m not sure I understand.

It seems to me that as an industry we continue to improve in all aspects of our operations—which includes more effective and safer operations, including preventing and addressing environmental concerns. Yes, it adds expense and complexity to already expensive and complex operations. But as stewards of the energy industry—which is crucial to the health, safety, and quality of life that people around the globe strive for—safe, environmentally responsible operations are part of our work. 

With a national “frac act” being discussed in Congress, discusion of natural gas as the “bridge fuel to the future,” and fracking reaching national attention, we as an industry want to be in front of this. More in later posts.

The Grand Finale—Marcellus Shale Overview
Those attendees who were able to stay until the closing keynote were not disappointed with Bill Zagorski’s presentation. In 2008, Zagorski, who is VP of geology in the Marcellus Region for Range Resources, was awarded the title “Father of the Marcellus” by the Pittsburgh Area Petroleum Geologists, for his crucial role in leading his team to successful development practices in the Marcellus.

Zagorski gave an overview of the geology and development history, and chronicled Range’s history leading to the company’s current success in the play. He described their first Marcellus fracking effort in 2004 as putting the “biggest Barnett Shale frac on it” and “the biggest frac east of the Mississippi.” Of course, it wasn’t until 2007 that they reached the kind of success they were seeking, with their first well with initial production rate of 4 MMcf/day.

I spoke with a Houston-based colleague who attended the conference but had to leave on Thursday morning (in the snow) before the final closing session; he was disappointed to have missed this information. By the looks of the sparse crowd on Thursday morning, he wasn’t the only one who could afford to take the full 2 ½ days for the conference. While the conference was billed broadly as unconventional gas, most attendees were most interested in the Marcellus. It would have been great to have kicked off the conference with Zagorski or at least constrained the program to 2 days so that more people could have heard his great presentation.

SPE Unconventional Gas Conference: Day 1

February 24, 2010

It was a full and busy day at SPE’s inaugural Unconventional Gas Conference, with conference committee member Tom Blasingame kicking off the day at 8:00a.m. sharp and the final technical session ending at 6:00pm. The crowd was estimated at 800-plus for the day, which was a bit taxing for the facility, but we managed.

I talked with several people for reactions to the conference. Many thought the technical sessions were generally good and useful. Others thought that some of the presentations were not so new and had too much overlap between papers within sessions.

Though the event was not billed as being solely about the Marcellus, some people were disappointed that there wasn’t an orientation to the play, especially since the conference was being held in Pittsburgh, a major hub of Marcellus development.

Clearly one of the crowd-pleasing presentations was by C.H. Sondergeid, University of Oklahoma, (SPE 131771) who walked through work the University is doing with Devon Energy to better understand shale permeability and porosity using a new, state-of-the-art DualBeam™ scanning electron microscopy (SEM) from FEI.

The presentation included a “movie” of the “slicing,” photography and three-dimensional reconstruction of the sequentially ion-milled surfaces of a shale sample measuring about 250 microns by 250 microns. The movie included computer imaging of the volumetric distribution of pores and organics and their connectivity, constructed from the photos. It was very cool!  

And the crowd responded enthusiastically “yes” when Sondergeid asked if we wanted to see it a second time.

Were you at the UGC? What did you think? Post a quick comment now.

Pipeline Upgrade for Marcellus Gas from Chesapeake and Statoil

February 22, 2010

On February 16, 2010, El Paso Corporation announced that Tennessee Gas Pipeline Company (TGP, a wholly owned subsidiary of El Paso Corp) will develop a Northeast Upgrade Project to accommodate Marcellus Shale production and transport it to Northeast markets. TGP’s 300 line in Pennsylvania will increase capacity by 636,000 dekatherms per day to an interconnect in New Jersey.

TGP has a binding 20-year contract with Chesapeake Energy Marketing, Inc. (a wholly owned subsidiary of Chesapeake Energy Corp.) and StatOil Natural Gas LLC (a wholly owned subsidiary of Statoil) for 100 percent of the project capacity.

Most of the capital expenditure on this approximately $400-million project is expected to happen in 2013, with an in-service date scheduled for Nov 1, 2013.

In a webinar interview, Oil & Gas Investor editor-in-chief Leslie Haynes discussed the newly announced project with El Paso president, chairman, and CEO Doug Foshee.

Foshee explained that, in addition to this Northeast Upgrade Project, TGP had previously announced a 300 line expansion to support Marcellus Shale production for EQT. TGP has also signed up a number of back haul contracts in the Marcellus that will increase revenue by $50-60 million with no capital investment.

Foshee also discussed the E&P side of El Paso’s business, explaining how the company has embarked on an unconventional gas strategy, with development projects in the Haynesville Shale and new projects planned in the Eagle Ford Shale.

Haynes asked Foshee if El Paso had any plans to enter in the Marcellus Shale. Foshee replied that right now El Paso’s only footprint in the Marcellus was in TGP pipelines, but the company is always interested in good opportunities.

About Hart’s Webinars

Full disclosure:  I previously worked for Hart Energy Publishing as the Drilling & IT Editor for Hart’s E&P magazine. Through its various publications, Hart’s now offers a series of webinars. Some they charge for; others, like this live interview with Doug Foshee, are free. Audience members can submit questions in writing online. If you register or pay for a webinar, it’s available for online viewing for up to 1 year.

I’ve found these webinars to be timely, relevant and informative—and a great alternative to traveling to conferences. (Just thought I’d share the info.)

Chief Drills First Marcellus Well in Blair County

February 5, 2010

Chief Oil & Gas, LLC, an independent operator based in Dallas, Texas, held a community meeting at the Blue Knob Conference Center in Blair County, Pennsylvania, on Feb 3, 2010, to announce the first Marcellus Shale gas well in that county. Chief has been operating in the Barnett Shale in Northern Texas since 1997, and in the Pennsylvania Marcellus since 2007. 

Chief regulatory manager Jason de Wolfe was the main speaker. He explained that the purpose of the meeting was for Chief employees to introduce themselves to their Blair County neighbors, educate them about the company’s drilling and operations process, answer their questions, and try to address their concerns. 

Well Overview
The well, Ritchey Unit #1H, is located in Juniata Township and was drilled in just under 20 days. (Apparently the company offered a last-minute tour of the drill site earlier in the day, but I hadn’t heard about that, so I missed it.) 

Using a new, first of-its-kind rig designed specifically for Marcellus Shale, the Patterson #255 has 1600-horsepower for faster drilling and longer laterals. At 150 ft tall, the rig is also 3 times the height of a standard derrick, which allows longer pipe joints. The new rig design also means it can be hauled on smaller, lighter truck loads to more easily navigate smaller township roads and local terrain. 

Chief reports that it has a 3-year contract on the rig and plans to continue using it for its 2010 drilling program, which has an estimated budget of $325-350 million. Currently the company is working on 45 wells throughout its Marcellus lease holdings. 

Thoughtful Questions, Good Discussion
I attended the meeting because I wanted to see for myself how such things actually go. TV covereage of these types of events often feature 10-second clips of angry people yelling. While de Wolfe calmly but candidly explained that they were prepared for that possibility, there was no yelling at this 2-hour meeting, just concerned, thoughtful, and persistent questions. 

Questions ranged from “how does this work?” in reference to leasing and drilling operations, to concerns about the environment, specifically water issues. 

Several of those persistent questions came from Tim Clingerman, Director of Bob’s Creek Stream Guardians, an environmental group whose mission is “To protect Bob’s Creek and tributaries so that future generations can enjoy recreational and other uses in a high quality watershed.” 

The Ritchey Unit is in Bob’s Creek watershed, and the group has concerns about the environmental impact of drilling and fraccing operations.

During the presentation, de Wolfe explained that Chief  had pledged $10,000 towards the cost of water-monitoring equipment for Bob’s Creek.  Among Clingerman’s persistent questions, “Where’s the money?” Chief representatives gave Clingerman a check later that evening. 

On hand to field environmental questions was Chief’s senior regulatory advisor Rich Adams. Adams is a native Pennsylvanian and formerly of the Pennsylvania Department of Environment Protection (DEP), Watershed Management. I thought he did a good job answering questions and providing appropriately detailed explanations. 

Take Away: Safe Operations are in Everyone’s Best Interest
With an area history of environmental damaged caused by mine drainage, you can’t blame area residents for their concern. Part way through the evening, Chief acknowledged that  history, but the response I heard was a somewhat simple, “this is different.”   A stronger message might have been: We are a different industry, a different company, and these are different times. 

In the late 19th and early 20th century, environmental pollution and even worker deaths were considered acceptable collateral in the name of industrialization and progress. That, of course, is no longer the case. Companies recognize their roles as corporate citizens, neighbors, and stewards of the environment. 

Let me know what you think. Take a minute and post a comment now. 

For more information about the oil and gas industry’s environmental performance, come to the SPE Pittsburgh meeting on March 2, featuring Distinguished Lecturer, Michael Godec. Read More (scroll down to March Section Meeting).