An excellent article about the Barnett Shale from the Wall St. Journal about the difficulties of drilling in urban and suburban areas. You can find it all* in the extended entry. Here’s a good excerpt:

Urban drilling has never been undertaken on such a giant scale. Oil and gas wells still dot neighborhoods in Oklahoma City and Los Angeles but those fields were discovered in the 1920s and developed when local opposition was minimal. Drillers also left many oil-free neighborhoods untouched. By contrast, Fort Worth’s gassy rocks lie under the entire city and stretch underneath 16 counties. Any open field in the area is a potential well site.
[Beyond the Shale]

There are now 90 natural-gas drilling rigs poking holes in and around Fort Worth, more than one can find in either Africa or Europe. The Barnett Shale, all by itself, is having a significant impact on the U.S. energy sector. It’s arresting steep declines in domestic gas production and tempering near-record prices for a fuel critical for generating electricity and home heating.

At first, energy companies concentrated on a small section of the Barnett Shale about 30 miles north of downtown. But the pace of drilling accelerated after word got out about good wells on the other side of the city. That has created some new challenges.

It took 18 months of negotiations to hammer out plans to drill wells on the site of a proposed 8,900-home community named Sendera Ranch. The property’s developer, Centurion American Development Group, originally wanted to build baseball diamonds on the four-acre well sites.

* The Wall St. Journal’s website is subscription-only, but I’m reproducing the whole thing here as an example of what you’ll get. I won’t do this again. Best $50 you’ll ever spend.

Read the rest of this entry »

An historic day : OFTP2′s first blog-link! Eric Siegmund of Midland talking about the Valero acquisition of Premcor. I was interested in this statement:

Specific to Valero, whose return to shareholders over the past five years has been tops in the S&P 500…can it continue in its strategy of focusing on heavy/sour crude* for its refining feedstock, thereby enjoying the higher margins that come from buying that lower-priced oil? Some of Exxon’s [think he means Valero's] competitors (notably, ExxonMobil) don’t think it’s a viable long-term strategy, as supplies of lower-quality crude will decrease over time.

Anyone out there know if heavy-sour is really being depleted? The ExxonMobile contention is the first I’ve heard of it. I’d expect heavy-sour stocks to go up (and definitely up as a percentage), not down, just because those fields might not have been previously profitable but would be today, in light of gasoline prices.

Anyone care to enlighten?

PS Sorry I'm not very funny...OFT, step in here and get some funny going.

If you’re gasfield trash, you might be interested to know a little something about the economics at play that are driving the Barnett Shale hubbub:

Oil prices are through the roof. OPEC is sitting pretty. Could things get any worse for energy buyers? You bet. There are troubling signs that natural gas producers are moving toward forming their own version of OPEC. While not an immediate threat, such a move could eventually drive up prices for an indispensable element of the U.S. long-term energy supply: In January, the Energy Dept. predicted that gas imports from outside North America will increase more than 700% and account for a quarter of U.S. consumption by 2025.

Of course, that report is from MSNBC, which specializes in writing big, scary stories that only rarely stand up. You read this and you wonder why there’s not a rig every 20 acres, but we know why not. Still and all, rising energy demand means Good Times for owners, operators, investors, and lessors. So, tell your friends and families to get their money into this play now.

This chart shows that The Big Five are falling behind in production. Even though it only shows oil, the same thing is happening to them with NG. This WSJ article explains why we see so many “small” operators around the Barnett Shale. Opportunity, baby…

I love capitalism.

Wall St. Journal: ChevronTexaco’s Digital Oil Field Aims to Aid Reserves, Productivity

The digital oil field of the future has taken shape in ChevronTexaco Corp.’s new headquarters in Houston since early January — and it looks like the set of a Cold War melodrama.

In a screen-filled war room, technicians monitor real-time data flowing via fiber-optic cable and satellite links from sensors behind the drill bit below a Gulf of Mexico platform. By looking at the acoustic, temperature and pressure information, engineers can almost hear and feel the pulse of the drill, and receive e-mail alerts of any emergency on their BlackBerries if they are out of the office.

And then there’s this part about control:

The digital oil field also has to overcome venerable workplace conventions.

In ChevronTexaco’s “collaboration” room, drilling engineers and geoscientists — the petroleum human-resources equivalent of water and oil — stand side by side, wearing 3D-vision goggles as they interpret a tri-dimensional model of the reservoir.

According to Mr. Lacy, the new arrangement helps drilling engineers increase their knowledge of the reservoir and geologists get involved in the drilling process.

But problems may arise between the command center and the field as offshore workers lose some control.

The field force would be increasingly transformed from data gatherers into troubleshooters dependent on remote decision-makers, said Mr. Severns.

At ChevronTexaco’s pilot project, offshore workers are still in charge, though. They rely on Houston for advice, but onshore experts must request their permission before tampering with their platform.

Offshore workers “are not on their own, but the decision must be made on site,” said Mr. Lacy. “What we do is provide them with the best of the services of the company.”

Good article about the oil field of the future right now. If you don’t have a WSJ subscription, why not? I’ll email it to you if you want it.