Penn State Study Finds Smaller Marcellus Jobs Impact; 'Still Big Numbers'

- Penn State Study Finds Smaller Marcellus Jobs Impact; 'Still Big Numbers'

Tuesday, August 30, 2011
Pittsburgh Post-Gazette
by Bill Toland

Jobs related to natural gas drilling in Pennsylvania's Marcellus Shale field were about half what previous studies had estimated for 2009, but the industry still supported about 23,500 jobs that year, according to a new study issued by Penn State researchers.

"It's still big numbers," said Timothy W. Kelsey, professor of agricultural economics with Penn State's College of Agricultural Sciences, and one of the study's authors.

"It's just not as big as what the industry is talking about."

The study, issued Monday by the Marcellus Shale Education & Training Center, a partnership of the Pennsylvania College of Technology and the Penn State Extension, also said that about half of the land being leased by drillers was owned by people living in those counties in 2009 -- the rest was owned by people or firms based out of state or elsewhere in Pennsylvania, or owned by the state itself.

That means much of the leasing and royalty money derived from drilling goes out of the county in which the drilling takes place, according to the study.

It's an economics phenomenon known as "leakage" -- money that looks as if it is benefitting a particular area is actually going elsewhere. And it's not an economic phenomenon native to gas drilling: Coal interests, limestone and gravel deposits and other mineral-related economic activity is subject to the same kind of leakage.

The study, "Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009," bills itself as the first paper to look at not just the number of jobs and amount of revenue generated by drilling but also where that money is going and how quickly it's being spent.

The jobs figure, as with previous studies, accounts for actual jobs created -- front office jobs, drilling jobs, engineering jobs -- as well as "induced" and "indirect" jobs, which are those not created by the industry itself but by the money the industry spreads around to local suppliers, hotels and restaurants, for example.

The study suggested that the industry generated around $3.1 billion in economic activity -- $1.2 billion in income and $1.9 billion in "added value."

Also of note was that locals who benefit from the gas play do not spend their lease and royalty checks immediately, meaning the money is not a direct, immediate benefit to the local economy. By surveying landowners in Bradford and Tioga counties, the study's authors estimate that leaseholders save or invest about 55 percent of leasing proceeds and about 66 percent of royalty payments in the year they are received, instead of spending the money.

The study's attempt to get a more accurate read on who -- and which areas -- benefit from drilling activity was hampered, Mr. Kelsey said, by the absence of any state or county database for who owns mineral rights (and thus owns the royalty rights to gas and shale deposits).

While it was relatively easier to find out who owns the land being leased -- about 51 percent of drilling plots are owned by people in that county -- it's far less clear who owns the rights to the gas below the surface and where those people live. The researchers, in calculating the economic benefits of the shale play, assumed an identical local ownership share (51 percent) for the mineral rights as well as the surface rights.

"We know that's not accurate," Mr. Kelsey said. "But there isn't anybody who has that data."

In many cases, mineral rights were separated from surface rights decades ago. It's more likely, he said, that the mineral rights owner lives out of state than the actual landowners, which means that it's also more likely gas royalty payments are going out of state.

But suspecting that and finding data to prove it are two different things, he said.

The state and county assessment offices need to do a better job of tracking that information if they want to have a more accurate picture of where mineral rights royalties are going, he said.

The study also surveyed 2,000 randomly selected businesses in Bradford and Washington counties to "identify the impacts they are experiencing from Marcellus Shale development." The responses "indicated positive economic impacts are occurring broadly across the economy in the communities where drilling is very actively occurring."

About 23 percent of Washington County business respondents said that natural gas drilling had helped to improve sales, while only 2 percent of respondents said that the drilling had hurt sales.

The full paper is available at http://extension.psu.edu/naturalgas/publications.

The study was paid for by funding from state Department of Community and Economic Development and money from Penn State and the Pennsylvania College of Technology.

(c)2011 the Pittsburgh Post-Gazette. Distributed by MCT Information Services.


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Wood Group Awarded Commissioning Services for Chevron's Big Foot Facility

- Wood Group Awarded Commissioning Services for Chevron's Big Foot Facility

Thursday, July 07, 2011
Wood Group

Wood Group has been granted a multi-million dollar, three-year contract by Chevron U.S.A. Inc. to commission the Big Foot extended tension leg platform (E-TLP) in the deepwater Gulf of Mexico. Work will be performed by DSI, Wood Group PSN's commissioning services business.

DSI's scope of work covers the full commissioning process, from development of procedures, through inspection and testing of every operational component at the South Texas fabrication yards and offshore, to the final hand-over of systems to Chevron.

Big Foot is the eighth TLP/ETLP DSI has commissioned worldwide and is the fifth facility commissioned for Chevron, including the Jack & St. Malo semi-submersible platform in the deepwater Gulf of Mexico, which DSI is currently commissioning.

"Commissioning is critical to the safe start-up of a production facility, proving the integrity and reliability of all safety and operating systems," stated Trey Lambert, president of DSI. "Chevron can rely on DSI to provide safe, consistent and quality commissioning services across its projects."

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GE O&G Wins Gig at Chevron's Big Foot Field

- GE O&G Wins Gig at Chevron's Big Foot Field

Wednesday, July 06, 2011
GE O&G

GE O&G' Drilling & Production business has received a contract of approximately $45 million to supply and service the industry's largest tension leg platform (TLP) marine riser Tensioner Systems to Chevron for deployment in its Big Foot oil and gas field in the deepwater Gulf of Mexico.

A TLP is a vertically moored floating structure suited for use in a wide range of water depths. GE is making key design modifications to develop 'push-up' style marine riser Tensioner equipment to enable the Chevron Big Foot oil and gas field TLP to deal with the challenging wave and current movement conditions of deepwater applications. To date, TLPs have been successfully deployed in water depths approaching 5,000 feet. The GE-Chevron Big Foot unit will be the first to operate in depths of 5,200 feet.

Manuel Terranova, senior vice president—global regions and sales, Drilling & Production, GE Oil & Gas said, "For this deepwater application, we are utilizing innovative technology to deliver customized 'push-up' style TLP Tensioners that offer Chevron an efficient and reliable solution for their challenging deepwater requirements. We are pleased to be supporting this important Chevron project which will contribute to the stability of future U.S. energy supply."

The Big Foot TLP will be Chevron's sixth operated facility in the deepwater Gulf of Mexico and will be located approximately 225 miles south of New Orleans. The TLP will include an on-board drilling rig and will have a production capacity of 75,000 barrels of oil and 25 million cubic feet of natural gas per day. Installation of the TLP is scheduled to begin in November 2012 and first oil is expected in 2014.

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Breitling Spuds Big Tex No. 1

- Breitling Spuds Big Tex No. 1

Thursday, June 30, 2011
Breitling Oil & Gas

Breitling Oil and Gas Corporation has spud the Breitling-Big Tex #1 on June 26, 2011 in Gaines County, Texas. The Breitling-Big Tex #1 is the first of three Big Tex prospect wells to be drilled.

The Breitling-Big Tex #1 is a 9,000-foot vertical well within the established Tex-Pac Field and is targeting Lower Clearfork Dolomite beneath 8,500 feet. Secondary objectives include the San Andres, Yates, Glorieta and Abo formations.

Breitling's 3-Well Breitling-Big Tex Prospect was developed after a 75-square-mile 3D seismic shoot was reprocessed and interpreted in 2010. The quality of the new data set after it was re-imaged using Breitling's proprietary Geo3D technology identified features that were not noticeable when the shoot first occurred. In essence the resultant seismic lines were much more detailed and refined, therefore capturing subsurface images not previously acknowledged.

Breitling Oil and Gas expects to recover reserves of 350,000-500,000 BO per well.

Management anticipates the first well will reach total depth in about 29 days. Well completion and testing should begin during the last week of July. Breitling Oil and Gas and its drilling partner Sandridge Energy plan to drill all three wells back-to-back using the same drilling rig.

Breitling Oil and Gas CEO Chris Faulkner stated, "We are excited to be working with Sandridge Energy on the Big Tex wells." Faulkner added, "We have great well control within the Tex-Pac field and great 3D seismic over the prospect."

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Little Lizard Could Cause Big Disruptions for Texas Drillers

- Little Lizard Could Cause Big Disruptions for Texas Drillers

Monday, June 20, 2011
Fort Worth Star-Telegram, Texas
by Anna M. Tinsley

Deep in the West Texas sand dunes is something that some say could threaten the state's oil and gas production: A tiny lizard.

But it's not just any lizard: It's a dunes sagebrush lizard, also known as the sand dune lizard.

This little brown reptile is a concern for state officials, who hope that federal officials don't designate it an endangered species. That, they say, could disrupt oil and gas exploration in the heart of Texas' oil country, leading to higher gas prices and shrinking dollars for schools.

"It's reptile dysfunction," said Texas Land Commissioner Jerry Patterson, who oversees the permanent school and university funds, which get money from royalties and leases on some of the potentially affected land. "It has the potential to bring oil exploration and production to a halt."

The U.S. Fish and Wildlife Service, which has had the issue before it for about a decade, is considering protections because oil and gas exploration and ranching are shrinking the lizard's habitat. A decision could come by year's end.

The lizard

The blunt-nosed lizard at the heart of the issue has bright yellow eyes but is barely as long as a person's hand. The lizard is important prey for a number of other species, including some birds and mammals.

It can be found in the West Texas counties of Andrews, Crane, Gaines, Ward and Winkler -- part of the Permian Basin, known to petroleum officials as the most "prolific oil-producing region in onshore America" -- as well as in southeast New Mexico.

There it lives, in the shade of shinnery oak trees, which look like bushes and are found mainly in the sand dunes. The lizard lives only in dunes that have medium-size sand grains.

Environmentalists say the spiny lizard is in danger of extinction because its habitat has been disturbed or removed by oil and gas development. Shinnery oaks, for instance, have been destroyed by drillers, who clear space and move equipment. They have also been killed by ranchers, who say the plant can be poisonous to cattle.

The lizard has been a candidate for endangered status since 2001, when the Center for Biological Diversity asked the federal government to list it. But this proposal was moved forward at least in part because of a federal lawsuit by the environmental advocacy group WildEarth Guardians.

"I think the current federal proposal is based on a number of years of examining the status of the lizard," said Ken Kramer, director of the Lone Star Chapter of the Sierra Club. "It's not a last-minute sort of proposal."

State opposition

Patterson, who has compared the sand dune lizard to Godzilla for its ability to potentially freeze gas and oil work, said this fight is about more than just a reptile.

It's about what he said is a new strategy to gain endangered status for many animals and essentially block industries from doing their work.

"You overwhelm Fish and Wildlife with requests ... and rather than do science on several hundred species, they just settle the lawsuit," he said.Patterson, who has held a sand dune lizard and said it actually is "a cute little bugger," is calling on federal officials to reject the proposed designation.

"The science is not complete, it's out of date, and there's no decent information that has been sufficient to warrant the designation," he said. "If the designation comes, and it isn't based on sound science, we will file a lawsuit."

Texas Agriculture Commissioner Todd Staples, University of Texas System officials and Texas Association of Business President Bill Hammond also oppose the designation.

UT System officials manage more than 2.1 million acres for the benefit of the system, including acreage that could be a habitat for the lizard. They sent a letter to federal officials saying that listing the lizard as endangered is "at best premature" because that decision would be based on "faulty science, inadequate data and seriously erroneous assumptions."

Patterson said that a herpetologist from Texas A&M University has been hired and that studies of the lizard have been commissioned.

The Texas Endangered Species Task Force, primarily made up of property and business owners who could be affected, is developing conservation plans, said R.J. DeSilva, a spokesman for the Texas comptroller's office.

"The goal is to have a plan by November," he said. "There's a need to balance the development of the industry, and economic development in the industry, and take actions to mitigate and preserve the habitat."

Political move?

This year, the Obama administration said a decade's worth of petitions to add wildlife to the endangered species act would be addressed over the next six years.

About 1,400 plant and animal species are designated endangered. Officials work to protect their habitats and review what can be done. Several Texas Republicans in Congress, including Reps. Michael Conaway of Midland, Randy Neugebauer of Lubbock and Francisco Canseco of San Antonio, have asked colleagues to keep the lizard from being designated as endangered. Sen. John Cornyn filed an amendment to prevent federal officials from offering protections to the lizard.

"If the Obama administration has its way, this scaly political pawn will land on the Endangered Species List, without sufficient supporting research to back up the move, and effectively bring new and existing oil and gas production in parts of Texas and New Mexico to a screeching halt," he said in a statement.

Federal officials say they used the best science available and are working with companies to minimize problems or interruptions. Some petroleum companies have signed on to voluntary conservation agreements, agreeing to pay for habitat restoration and use techniques to lessen the impact on the lizards.

Kramer, of the Sierra Club, said he believes that state and industry officials are exaggerating the crisis.

"Practically every time there is a proposal, we get these people saying ... 'The sky is falling. This is going to be the end of civilization as we know it,'" Kramer said. "There is almost always an overreaction based upon their lack of understanding in which the species can be protected."

Copyright (c) 2011, Fort Worth Star-Telegram, Texas

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Quicksilver Resources Counting On A Big Year

- Quicksilver Resources Counting On A Big Year

Tuesday, May 24, 2011
Fort Worth Star-Telegram, Texas
by Jack Z. Smith

Quicksilver Resources CEO Glenn Darden expects 2011 to be "a breakout year" as the company advances into the development phase of its Horn River Basin project in Canada, moves into oil exploration and continues amping up natural gas production from North Texas' Barnett Shale.

"It looks like it's going to be a fabulous year," Darden said at last week's annual shareholders meeting of the Fort Worth-based natural gas producer, which has a healthy $500 million capital budget for 2011. "We're moving more toward oil, but we're still a gas company, and we'll always be a gas company," Darden told shareholders at the downtown Fort Worth Club.

Quicksilver will soon start to show "how valuable Horn River is," as it completes more natural gas wells in cold, remote northeast British Columbia and benefits from new pipeline links allowing it to transport more gas to market more cheaply, Darden said. The company is also testing for oil there.

With 130,000 net acres leased at Horn River, Quicksilver has drilled eight natural gas wells there and completed four, which cumulatively are producing 30 million cubic feet a day. It expects to complete the other four wells this coming winter, when drilling equipment can be transported on ice roads. In warm weather equipment bogs down in the swamplike terrain called muskeg.

Horn River potential

Quicksilver estimates that each Horn River well will have an exceptional "estimated ultimate recovery," or lifetime output, ranging from 8.8 billion to 19.4 billion cubic feet of gas. Those numbers far exceed the 1 billion to 5 billion cubic feet estimated for most Barnett Shale gas wells, although operating costs are considerably lower in the Barnett.

Quicksilver's latest annual report said Horn River "appears to be the largest gas find in the company's history and has the potential to quadruple our current total company reserves." The company estimates that it could recover 10 trillion cubic feet of natural gas from Horn River, or nearly double what it expects from the Barnett.

As of Dec. 31, Quicksilver's proved reserves were equivalent to 2.9 trillion cubic feet of natural gas, with 2.6 trillion from the Barnett. The reserves are 99 percent natural gas and natural gas liquids such as propane and butane.

Getting more 'oily'

Crude oil accounts for a tiny 1 percent of Quicksilver's reserves, but that could rise. U.S. energy producers are increasingly focusing on oil and natural gas liquids, which command higher prices than natural gas. Quicksilver is pushing this year to become more "oily."

The company expects to complete a horizontal well in the Exshaw formation at Horn River this summer, with oil the target instead of natural gas. Quicksilver has "gotten great oil shows" there, Darden said, from both the Exshaw and from natural gas in the Muskwa and Klua formations below it.

Darden said Quicksilver's biggest thrust into oil this year will be in the emerging Niobrara play in the Green River Basin, where the company has 200,000 net acres leased in northwest Colorado. The company expects to drill up to six exploratory wells there this year.

"We're in oily country, and we're very excited about it," Darden said. "The Niobrara has about 1,500 feet of thickness, so it's a very big target."

Quicksilver is also launching some oil prospecting in the Bakken formation in northern Montana, where it has 175,000 net acres.

The company is also "targeting multiple formations" in the Delaware Basin in West Texas that could yield oil, said Rick Buterbaugh, Quicksilver's vice president for investor relations and corporate planning. These targets include the Bone Springs formation that is attracting increasing attention.

The company has 54,000 net acres leased in Culberson, Reeves, Jeff Davis and Presidio counties and expects to acquire more.

Quicksilver can move quickly in West Texas by re-entering "noncommercial natural gas wells" the company drilled in the West Texas portion of the Barnett Shale, Buterbaugh said. The clay content in the Barnett zone made the results from fracking "less than desired," Buterbaugh said.

With the new oil plays, Quicksilver has "some very high-potential prospects that can really change the look of this company," Darden said.

The company has had lackluster earnings the past two years, primarily because of weak gas prices and related write-downs. The company's stock (ticker: KWK) closed Friday at $14.44, up 14 cents. The stock is down about 2 percent this year.

Quicksilver, however, generally has been a low-cost operator and profited from the sale of its majority interest in Quicksilver Gas Services, which helped trim its debt to a manageable $1.7 billion, with major debt maturing in late 2015. It had 65 cents of debt per 1,000 cubic feet of reserves as of Dec. 31, down 44 percent from $1.17 two years earlier.

Barnett still mainstay

The company's bread-and-butter revenue source this year should continue to be the Barnett Shale, where Quicksilver hopes to boost production by 20 percent. Some of the company's biggest gas wells, with estimated lifetime production of 4 billion to 5.5 billion cubic feet, are in the Alliance and Lake Arlington areas, but smaller wells in the southern Barnett provide more natural gas liquids.

Although natural gas prices have barely topped $4 per 1,000 cubic feet, Darden said Quicksilver will benefit by hedging most of its 2011 gas production at just under $6.

In the company's annual report, Darden said Quicksilver doesn't believe today's abnormal price disparity between oil and natural gas will continue. And at the shareholders meeting he said company officials believe its stock is undervalued.

"We believe this presents a tremendous opportunity to invest in natural gas at the bottom of the cycle," he concludes in the annual report.

Copyright (c) 2011, Fort Worth Star-Telegram, Texas

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Baker Hughes Awarded Deepwater ESP Gig at Chevron's Big Foot Proj.

- Baker Hughes Awarded Deepwater ESP Gig at Chevron's Big Foot Proj.

Tuesday, May 24, 2011
Baker Hughes Inc.

Chevron has awarded Baker Hughes a contract to supply electrical submersible pumping (ESP) systems and production packers for seven producing wells, plus mud line packers for three injection wells for their Gulf of Mexico deepwater Big Foot Project. This award marks the first deployment of ESP systems inside the wellbore in the deepwater Gulf of Mexico. The ESP systems will be placed at a true vertical depth of approximately 16,000 feet.

Discovered in 2006, Big Foot is in 5,200 feet of water in the Walker Ridge area of the Gulf of Mexico. The Big Foot production facility will be an extended tension leg platform with an onboard drilling rig and production capacity of 75,000 barrels of oil and 25 million cubic feet of gas. Deployment of the ESP systems is scheduled to begin in 2014.

ESP systems were selected to boost the production stream and maximize asset recovery while extending production life and accelerating recovery. Improved ESP technology and manufacturing controls has extended ESP run times for critical well applications. The 1200 horsepower dual ESP systems will be the highest horsepower in-well systems ever deployed in an offshore environment. The ESP systems are deployed on dual by-pass systems, allowing for reservoir access and the ability to switch between ESPs without intervention.

"Longer-term, the experience and knowledge gained from Big Foot can potentially be applied to other developments in the deepwater market to extend field productivity," said Richard Williams, president of the Gulf of Mexico for Baker Hughes. "We are happy to be working with Chevron on this groundbreaking project to extend the application of ESP technology in the deepwater environment."

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Big Oil Ready to Deploy New Containment Device for Deepwater Spills

Big Oil Ready to Deploy New Containment Device for Deepwater Spills

Monday, April 18, 2011
Dow Jones Newswires
by Angel Gonzalez

The high-tech marvel that's enabling oil companies to return to the deep waters of the Gulf of Mexico sits in a sun-baked industrial lot in the outskirts of Houston, not far from a gas station, a taco truck, and a highway that could quickly take it to the scene of the next Gulf oil spill.

The new spill-containment device was developed by a consortium led by ExxonMobil to control future spills similar to the largest marine oil spill that leaked more than 4 million barrels in the Gulf in April last year.

"We like it here," Marty Massey, chief executive of the Marine Well Containment Co. (MWCC), said Friday, as the company unveiled to reporters the device, called a capping stack that is the heart of the containment system. "[The device was] built here; the people who built it can maintain it" and can be deployed to its destination "in a matter of days," Massey said. "We are ready to go."

The 30-foot tall, 100-ton stack--a tree-shaped mass of blue, yellow and white steel with protruding knobs and gauges--is meant to be lowered on top of a deepwater gusher, either killing the flow or funneling the oil to ships. It draws on the lessons of the system that BP struggled to develop during the three months it fought to control the damaged Deepwater Horizon well that unleashed a major environmental disaster.

The company said the containment system that the device is part of can capture up to 60,000 barrels a day from wells up to 8,000 feet below sea level.

Massey said that the consortium, created by Exxon, Chevron, Shell and ConocoPhillips, is also developing a similar system with a higher capacity capable of capturing up to 100,000 barrels a day from gushers as deep as 10,000 feet. This improved version, Massey said, will operate from several bases along the Gulf Coast and will be ready around mid-2012.

As the government suspended deepwater drilling following the Gulf disaster, the oil industry needed to quickly take steps and prove that it was capable of controlling any future

Statoil Wins Big at Skrugard

Statoil Wins Big at Skrugard

Friday, April 01, 2011

Statoil

Statoil, along with partners Eni Norway and Petoro, has made a significant oil discovery on the Skrugard prospect in the Barents Sea. The breakthrough discovery is one of the most important finds on the Norwegian continental shelf in the last decade.

      Transocean Polar Pioneer

Statoil and its partners are in the process of concluding drilling operations on the Skrugard prospect, which is located approximately 100 kilometers north of the Snohvit gas field in the Barents Sea.

The well was drilled with the Polar Pioneer rig, and has proven gas column of 33 meters and an oil column of 90 meters. The oil is anticipated to be easily producible.

The estimated volume of the discovery is between 150–250 million recoverable barrels of oil equivalent (boe), while Statoil sees opportunities for further upside in the license of up to 250 million barrels – for a potential total of 500 million boe.

"The Skrugard find is significant and a break-through for frontier exploration in the Barents Sea. This opens a new oil province that can provide additional resource growth," said Tim Dodson, executive vice president for Exploration in Statoil.

He emphasizes that it is too early to say something concrete about the total potential of the area, but ventures to characterize the Skrugard find as the most important exploration event on the Norwegian continental shelf in the last decade. The discovery is vital in order to maintain the technology and technical environments in the oil and gas industry in Norway in the future.

Statoil has plans for both the drilling of a new prospect in the same license next year, and a possible appraisal drilling at Skrugard.

The Skrugard prospect was Statoil's first priority in the 20th licensing round on the Norwegian continental shelf, which was awarded in April 2009. Over the course of the spring the Norwegian government will allocate acreage in the 21st licensing round. Acreage in areas nearby Skrugard is expected to be assigned during the round.

Drilling operations have been conducted in a safe, efficient and environmentally friendly manner. Several core samples have been taken in order to understand reservoir properties, and some data collection in the well still remains.

In total there have been over 80 wells drilled in the southern Barents Sea, and Statoil has been the operator for more than 60 of these. The Snøhvit gas field, which is operated by Statoil, is the only field center established so far in the Barents Sea, while Eni's Goliat field is under development.

"The Barents Sea is large, and we can not say that we have cracked the code for the entire area yet. But we have confirmed that our exploration model is correct. This is a break-through, and an important step in understanding how the geology – and thus the hydrocarbon systems in the Barents Sea – works," said Dodson.

"If the volume estimates are confirmed, then this discovery could provide a basis for an independent development. Given that it takes between five to 10 years from discovery to production, we are planning for the future now. Our ambition is to put this find into production as quickly as possible," he added.

Statoil is the operator of license 532 with a 50% share. The license partners are Eni (30%) and Petoro (20%).