Archive for April, 2010

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 (http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp).  

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, http://www.oilandgasinvestor.com/Events/Webinars/) 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.

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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.