Exxon Mobil’s profit sapped by natural gas – MarketWatch

Exxon Mobil’s profit sapped by natural gas – MarketWatch.

July 28, 2011, 12:36 p.m. EDT

Exxon Mobil’s profit sapped by natural gas

Reliance on lower-priced natural gas hurts quarterly results

By Steve Gelsi, MarketWatch

NEW YORK (MarketWatch) — Before its purchase of so-called unconventional gas producer XTO Energy in 2010, Exxon Mobil Corp.’s oil-equivalent production grew at an anemic single-digit percentage rate.

In the first full quarter after it closed on the XTO deal in June 2010, Exxon Mobil XOM -1.57%  registered a 20% increase in production.

While the Irving, Texas-based oil major granted Wall Street’s wish for greater fossil-fuel output, most of the increase came from natural gas tapped via the XTO business and its liquid natural-gas facilities in Qatar.

Natural gas industry strikes back at New York Times article | NewsOK.com

Natural gas industry strikes back at New York Times article | NewsOK.com.

Natural gas industry strikes back at New York Times article

Aubrey McClendon, chief executive officer of Oklahoma City-based Chesapeake Energy Corp., sent an email to employees in which he called the Times article “inaccurate and misleading.”

BY RANDY ELLIS AND JAY F. MARKS    Comment on this article 32

Published: June 28, 2011


Weekend New York Times articles that questioned whether the productivity and economic potential of shale gas has been overhyped by industry officials created a furor Monday among oil and gas executives as well as academic officials who study the industry.

photo - In this April 23, 2010 photo, a Chesapeake Energy natural gas well site is seen near Burlington, Pa., in Bradford County.  (AP Photo/Ralph Wilson)

In this April 23, 2010 photo, a Chesapeake Energy natural gas well site is seen near Burlington, Pa., in Bradford County. (AP Photo/Ralph Wilson)


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At a glance

Oklahoma congressmen comment

Two members of Oklahoma’s congressional delegation commented Monday on Sunday’s shale gas story in The New York Times.

Sen. Jim Inhofe, R-Tulsa:

“Here in Oklahoma, natural gas development has led to a tremendous economic boost and the creation of good paying jobs. That is a fact. Everyone knows that The New York Times has an anti-fossil fuel perspective. Even the reporter admits that the article is based on information provided by those who are apparently working to shut down drilling. Don’t be surprised if a vastly different picture emerges from a more balanced and responsible news outlet.”

Rep. John Sullivan, R-Tulsa:

“It’s a biased story that completely ignores the vast reserves of natural gas that has been uncovered across the U.S — we are in the midst of a shale gas revolution that has the potential to be a game changer for American energy security. We have over a 125-year supply of natural gas and each field they find is larger than the last. Reports indicate that our nation has more natural gas than Saudi Arabia does oil. It’s crazy to continue relying on OPEC oil when we have a cheaper, cleaner more abundant supply of American made natural gas sitting right under our feet.”

CHRIS CASTEEL, Washington Bureau

“Are you telling me some reporter at The New York Times knows more about the natural gas business than 25 companies and their engineers? I don’t think so,” said Texas billionaire T. Boone Pickens, who has amassed much of his fortune through his ability to analyze and predict developments and price movements in the oil and gas industry.

Aubrey McClendon, chief executive officer of Oklahoma City-based Chesapeake Energy Corp., sent an email to employees in which he called the Times article “inaccurate and misleading.”

“The Times story was obviously motivated by an anti-natural gas agenda. It is telling that the reporter chose not to interview a single reliable source and instead selectively quoted emails from unnamed sources or well-known industry critics dating back to as early as 2007 to invent a series of inaccurate and misleading allegations,” McClendon said.

“I wanted you to know that this reporter’s claim of impending scarcity of natural gas supply contradicts the facts and the scientific extrapolation of those facts by the most sophisticated reservoir engineers and geoscientists in the world,” McClendon said.

“It is also ludicrous to allege that shale gas wells are underperforming as we sit awash in natural gas, with natural gas prices less than half of what they averaged in 2008,” he said. I also note that Chesapeake and other shale gas producers are routinely beating our production forecasts. How can shale wells be underperforming if shale gas companies are beating their production forecasts and as U.S. natural gas production has recently surged to record highs?”

G. Randy Keller, director of the Oklahoma Geological Survey which investigates the state’s land, water, mineral and energy resources, was particularly incensed by Times quotes from unnamed industry insiders and analysts that compared shale plays to Ponzi schemes and said some were questioning whether companies were “intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves.”

“I just don’t think any of these companies deserved to be treated like that,” Keller said. “It sure had an awful lot of hatchet job to it and was a little short on what I would consider facts.

“There are promoters in every business and I know somebody somewhere has overstated something, but to suggest this is a big problem is crazy,” he said.

Keller said he talks with lots of industry officials in the course of his work and hasn’t heard anybody talk about inflating reserves.

Keller said the only negative talk he has heard is that natural gas prices have been so low lately that some companies are right on the edge of making money in the short term.

Keller said he’s not overly concerned about that because commodity prices like natural gas and oil rise and fall over time and natural gas prices currently are extremely cheap when compared to oil that can produce the same amount of energy.

“I’m not a financier, but I own stock in several of those companies, and I’m not looking to sell it,” he said.

Harold Hamm, chief executive officer of Enid-based Continental Resources, said he had not read the article in depth, but defended the industry’s shale gas projections.

“I believe these reserves are real,” he said.

Hamm said he chose to focus his company on oil exploration because he believed the abundance of natural gas reserves would result in an oversaturated market. And he said that is what has happened with the shale gas boom.

“As a geologist, I believe natural gas is ubiquitous,” he said. “It’s everywhere.”

ExxonMobil, the largest natural gas producer in the United States, blasted The New York Times’ journalistic standards in a blog entry Monday.

“The Times questions the value of our country’s vast shale gas resources with little more than anonymous sourcing, two-year-old emails and analysis unsupported by fact,” the blog said. “Ironically, author Ian Urbina did not call ExxonMobil, the largest natural gas producer in the United States, for comment. You would think an investigative journalist for one of the world’s great newspapers would have been curious to know why the world’s largest publicly traded energy company has invested billions of dollars in a so-called ‘Ponzi scheme.’ Of course we’re doing no such thing, no matter how hard the article works to imply otherwise.”

Melanie Kenderdine, executive director of the Massachusetts Institute of Technology Energy Initiative, said her group currently projects that roughly 500 trillion cubic feet of shale gas are recoverable at costs of less than $7 per thousand cubic feet.

Costs vary greatly from one geological formation to another and even within the same geological formation, she said.

“Even with uncertainty, there is a substantial amount of shale gas in the U.S. at relatively affordable costs,” she said.

In an article that appeared in Sunday’s New York Times, the writer noted that the federal government’s Energy Information Administration has steadily increased its projections of domestic natural gas supplies. However, he quoted unnamed officials within the agency as questioning whether there was an “irrational exuberance” around shale gas that may have left the shale industry set up for failure.”

Asked about the article Monday, federal Energy Information Administration officials forwarded a response they had made to a New York Times inquiry that said agency officials considered discussions between staff members concerning estimates of recoverable shale gas to be part of a “healthy analytical process.”

“While resource estimates will continue to be updated as new information becomes available, experience suggests that EIA has been more likely to understate rather than overstate the contribution of unconventional oil and natural gas resources in recent Annual Energy Outlook Reference cases,” the response said.


June 25: Wall Street Journal “Facts about Fracking”

June 25: New York Times article “Insiders Sound an Alarm Amid Natural Gas Rush”

June 26: Chesapeake’ Aubrey McClendon responds on Facebook “An email to Chesapeake employees”

June 26: GreenBiz.com “Why we need to calm the natural gas frenzy”

June 26: The Associated Press “Gushers highlight gas potential of Pa.’s Marcellus Shale”

June 26: Blog: Not Hot Air “New York Times no Wiki Leaks of shale”

June 27: John Hanger. Facts of the Day blog “Barnett hale Production Now Record High: Facts not fit to print in NYT”

June 27: Huffington Post “Lawmakers urge Obama to pursue more Natural Gas exploration”

June 27: New York Times “SEC Shift Leads to Worries of Overestimation of Reserves”

June 27: Forbes “Green Tech Blog: Analysis”

June 27: Fuel Fix “Barnett Shale Still Has Lots of Life”

June 27: Council on Foreign Relations “Is Shale Gas a Ponzi Scheme?”

June 27: Energy In Depth “NYT’s ‘Dewey-Defeats-Truman’ Moment on Shale?”

June 27: CNBC “Deborah Rodgers: Shale Companies’ Balance Sheets Raise ‘Red Flags'”

June 27: Exxon Mobil Perspectives “Don’t facts matter anymore?'”



Behind Veneer, Doubt on Future of Natural Gas – NYTimes.com

Behind Veneer, Doubt on Future of Natural Gas – NYTimes.com.

New York Times
Drilling Down

Behind Veneer, Doubt on Future of Natural Gas

Kathy Chruscielski

A drilling operation in Texas. In documents, Energy Information Administration officials voice skepticism.

Published: June 26, 2011

Drilling Down

Widespread Skepticism

Articles in this series will examine the risks of natural gas drilling and efforts to regulate this rapidly growing industry.

Complete Series »


  • “The potential for natural gas is enormous,” President Obama said in a speech this year, having cited it as an issue on which Democrats and Republicans can agree.

The Department of Energy boasts in news releases about helping jump-start the boom in drilling by financing some research that made it possible to tap the gas trapped in shale formations deep underground.

In its annual forecasting reports, the United States Energy Information Administration, a division of the Energy Department, has steadily increased its estimates of domestic supplies of natural gas, and investors and the oil and gas industry have repeated them widely to make their case about a prosperous future.

But not everyone in the Energy Information Administration agrees. In scores of internal e-mails and documents, officials within the Energy Information Administration, or E.I.A., voice skepticism about the shale gas industry.

One official says the shale industry may be “set up for failure.” “It is quite likely that many of these companies will go bankrupt,” a senior adviser to the Energy Information Administration administrator predicts. Several officials echo concerns raised during previous bubbles, in housing and in technology stocks, for example, that ended in a bust.

Energy Information Administration employees also explain in e-mails and documents, copies of which were obtained by The New York Times, that industry estimates might overstate the amount of gas that companies can affordably get out of the ground.

They discuss the uncertainties about how long the wells will be productive as well as the high prices some companies paid during the land rush to lease mineral rights. They also raise concerns about the unpredictability of shale gas drilling.

One senior Energy Information Administration official describes an “irrational exuberance” around shale gas. An internal Energy Information Administration document says companies have exaggerated “the appearance of shale gas well profitability,” are highlighting the performance of only their best wells and may be using overly optimistic models for projecting the wells’ productivity over the next several decades.

While there are environmental and economic benefits to natural gas compared with other fossil fuels, its widespread popularity as an energy source is relatively new. As a result, it has not received the same level of scrutiny, according to some environmentalists and energy economists.

The Energy Information Administration e-mails indicate that some of these difficult questions are being raised.

“Am I just totally crazy, or does it seem like everyone and their mothers are endorsing shale gas without getting a really good understanding of the economics at the business level?” an energy analyst at the Energy Information Administration wrote in an April 27 e-mail to a colleague.

Another e-mail expresses similar doubts. “I agree with your concerns regarding the euphoria for shale gas and oil,” wrote a senior official in the forecasting division of the Energy Information Administration in an April 13 e-mail to a colleague at the administration.

“We might be in a ‘gold rush’ wherein a few folks have developed ‘monster’ wells,” he wrote, “so everyone assumes that all the wells will be ‘monsters.’ ”

The Energy Information Administration’s annual reports are widely followed by investors, companies and policy makers because they are considered scientifically rigorous and independent from industry. They also inform legislators’ initiatives. Congress, for example, has been considering major subsidies to promote vehicles fueled by natural gas and cutting taxes for the industry.

In any organization as big as the Energy Information Administration, with its 370 or so employees, there inevitably will be differences of opinion, particularly in private e-mails shared among colleagues. A spokesman for the agency said that it stands by its reports, and that it has been clear about the uncertainties of shale gas production.

“One guiding principle that we employ is, ‘look at the data,’ ” said Michael Schaal, director of the Office of Petroleum, Natural Gas and Biofuels Analysis within the Energy Information Administration. “It is clear the data shows that shale gas has become a significant source of domestic natural gas supply.”

But the doubts and concerns expressed in the e-mails and correspondence obtained by The Times are noteworthy because they are shared by many employees, some of them in senior roles. The documents and e-mails, which were provided to The Times by industry consultants, federal energy officials and Congressional researchers, show skepticism about shale gas economics, sometimes even from senior agency officials.

The e-mails were provided by several people to The Times under the condition that the names of those sending and receiving them would not be used.

Some of the e-mails suggest frustrations among the staff members in their attempt to push for a more accurate discussion of shale gas. One federal analyst, describing an Energy Information Administration publication on shale gas, complained that the administration shared the industry’s optimism. “It seems that science is pointing in one direction and industry PR is pointing in another,” wrote the analyst about shale gas drilling in an e-mail. “We still have to present the middle, even if the middle neglects to point out the strengths of scientific evidence over PR.”

The Energy Information Administration, with its mission of providing “independent and impartial energy information to promote sound policymaking” and “efficient markets,” was created in response to the energy crisis of the 1970s because lawmakers believed that sound data could help the country avoid similar crises in the future.

As a protection from industry or political pressure, the Energy Information Administration’s reports, by law, are supposed to be independent and do not require approval by any other arm of government.

Its administrator, Richard G. Newell, who announced this month his plans to resign to take a job at Duke University, has hailed the prospects for shale gas, calling it a “game changer” in the United States energy mix. “The energy outlook for natural gas has changed dramatically over the past several years,” Mr. Newell told the Natural Gas Roundtable, a nonprofit group tied to the American Gas Association. “The most significant story is the transformative role played by shale gas.”

A number of factors have also helped create more interest in shale gas. The nuclear disaster in Japan in March has focused attention on the promise of natural gas as a safer energy source.

And last year, as energy market analysts warned about tougher federal regulations on oil and coal, particularly after the BP oil spill and the Massey coal mining accident, they also pointed to natural gas as a more attractive investment.

But a look at the Energy Information Administration’s methods raises questions about its independence from energy companies, since the industry lends a helping hand to the government to compile those bullish reports.

The Energy Information Administration, for example, relies on research from outside consultants with ties to the industry. And some of those consultants pull the data they supply to the government from energy company news releases, according to Energy Information Administration e-mails. Projections about future supplies of natural gas are based not just on science but also some guesswork and modeling.

Two of the primary contractors, Intek and Advanced Resources International, provided shale gas estimates and data for the Energy Information Administration’s major annual forecasting reports on domestic and foreign oil and gas resources. Both of them have major clients in the oil and gas industry, according to corporate tax records from the contractors. The president of Advanced Resources, Vello A. Kuuskraa, is also a stockholder and board member of Southwestern Energy, an energy company heavily involved in drilling for gas in the Fayetteville shale formation in Arkansas.

The contractors said they did not see any conflict of interest. “Firstly, the report is an extremely transparent assessment,” said Tyler Van Leeuwen, an analyst at Advanced Resources, adding that many experts agreed with its conclusions and that by identifying promising areas, the report heightened competition for Southwestern.

Intek verified that it produced data for Energy Information Administration reports but declined to comment on questions about whether, given its ties to industry, it had a conflict of interest.

Some government watchdog groups, however, faulted the Energy Information Administration for not maintaining more independence from industry.

“E.I.A.’s heavy reliance on industry for their analysis fundamentally undermines the agency’s mission to provide independent expertise,” said Danielle Brian, the executive director of the Project on Government Oversight, a group that investigates federal agencies and Congress.

“The Chemical Safety Board and the National Transportation Safety Board both show that government agencies can conduct complex, niche analysis without being captured or heavily relying upon industry expertise,” Ms. Brian added, referring to two independent federal agencies that conduct investigations of accidents.

These sorts of concerns have also led to complaints within the administration itself.

In an April 27 e-mail, a senior petroleum geologist who works for the Energy Information Administration wrote that upper management relied too heavily on outside contractors and used “incomplete/selective and all too often unreal data,” much of which comes from industry news releases

“E.I.A., irrespective of what or how many ‘specialty’ contractors are hired, is NOT TECHNICALLY COMPETENT to estimate the undiscovered resources of anything made by Mother Nature, period,” he wrote.

Energy officials have also quietly criticized in internal e-mails the department’s shale gas primer, a source of information for the public, saying it may be “on the rosy side.”

The primer is written by the Ground Water Protection Council, a research group that, according to tax records, is partly financed by industry.

The Ground Water Protection Council declined to respond to questions.

Tiffany Edwards, a spokeswoman for the Department of Energy, said that the shale gas primer was never intended as a comprehensive review and that further study was continuing.

Asked about the views expressed in the internal e-mails, Mr. Schaal says his administration has been very explicit in acknowledging the uncertainties surrounding shale gas development.

He said news reports and company presentations were included among a range of information sources used in Energy Information Administration studies. Though the administration depends on contractors with specialized expertise, he added, it conforms with all relevant federal rules.

And while production from shale gas has not slowed down and may not any time soon, he said, a lively debate continues within the administration about shale gas prospects.


Robbie Brown contributed reporting from Atlanta. Kitty Bennett contributed research.

Insiders Sound an Alarm Amid a Natural Gas Rush – NYTimes.com

Insiders Sound an Alarm Amid a Natural Gas Rush – NYTimes.com.

U.S.   | June 26, 2011

Drilling Down:  Insiders Sound an Alarm Amid a Natural Gas Rush


As investment floods into shale wells, concerns about their productivity are spurring talk of a bubble.

Copyright 2011  The New York Times Company | Privacy Policy

Hinchey on shale gas drilling – YNN, Your News Now

Hinchey on shale gas drilling – YNN, Your News Now.

The Fractured Ethics of Fracking

The William G. McGowan Charitable Fund.


Thursday, May 26, 2011

The Fractured Ethics of Fracking
            Shareholders of two large gas producers — ExxonMobil, and Chevron  – voted yesterday not to require company officials to disclose more information about the growing practice known as fracking. Short for ‘hydraulic fracturing,’ the idea behind fracking is that companies drill down and then push under great pressure liquids sideways into oil and gas-rich shale rock. Millions of gallons of water, mixed with brine or chemicals, is injected into the shale and the resulting pressure fractures the rock layers which releases natural gas or oil. A proppant, usually sand, is injected into the fractures to keep the fissures open and the oil or gas flowing.
            The practice is controversial because the chemicals, mixed with water, may find their way into aquifers which supply drinking water. Oil companies say that fracking is safe and poses no threat to drinking water. Although fracking has been used since the late 1940s, it has attracted attention lately because of its growing use in teasing out natural gas from virgin areas.
            Right now, few groups are calling for an outright ban on fracking. What some shareholders – at least those who put the question before yesterday’s meetings –  and others want is for companies to issue full disclosure about individual fracking operations and the chemicals used during the process. Some companies counter that they already abide by environmental laws and regulations and that further disclosure is not necessary.
            Exxon and Chevron had urged shareholders to vote against disclosure. Even so, 30 percent of ExxonMobil shareholders and 41 percent of Chevron shareholders voted for increased disclosure.  ExxonMobil spokeswoman Karen Matusic, quoted in Platts,  before yesterday’s vote said that while the company supports the disclosure of chemical composition of hydraulic fracturing fluid, management has urged shareholders to vote against the activists’ resolution. “We believe state-level oversight of oil and gas operations, including hydraulic fracturing, is the most effective approach for protecting human health and the environment, since it best accounts for local geology and other local factors,” she said.
            The voting was non-binding, no matter what the outcome, but I can see no reason why oil producers should not release everything they know about their fracking operations to shareholders, who, ultimately, own the company. Indeed, if fracking turns out to be a dangerous practice, shareholders will bear the financial loss  as did BP shareholders after the company spilled millions of gallons of oil into the Gulf of Mexico. Beyond their financial interest, shareholders deserve to know if the companies they support through their share ownership are good environmental stewards. I’m dismayed that shareholders voted down full disclosure. On the other hand, shareholders rarely vote against their company’s recommendations because most of them just fill in the box that says: “I agree with management.”  (Who has time to read proxy statements?)
I can appreciate the paperwork burden involved in releasing additional data especially when opposing lawyers will be poring over every word trying to find the basis for lawsuits. One law firm, Ashcraft and Gerel, already has a webpage devoted to fracking litigation. There’s also concern among drillers that releasing information about the specific chemicals used at certain wells would be giving away proprietary data to competitors. (Many drillers have registered their wells and chemicals at a websitehosted by the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission. However, it does not include all chemicals because of these proprietary concerns. Also, it only includes 80 percent of U.S.  shale gas production.)
Some people I’ve spoken to in the oil and gas exploration industry say, off the record, that very little is actually proprietary and that competitors know pretty well what others are doing as far as trying new chemical mixes. Others vehemently hide, on business grounds, the recipes for their chemical concoctions even from government agencies investigating the deaths of animals who drank these potions and keeled over
In the end, these are simply distractions. If fracking is safe, as the oil companies claim, then why hide any details from shareholders and the public? People’s lives and health are at stake and that supersedes trade secrets.
Don’t forget; you can become a follower of this blog by using your existing Google, Twitter or Yahoo! logon.
Larry Kahaner has been a business journalist for more than 20 years, a former Business Week Washington correspondent, and the author of many books about business ethics including: Values Prosperity and the Talmud: Business Lessons from the Ancient Rabbis; Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top; and Say It and Live It; The 50 Corporate Mission Statements that  Hit  the Mark, (co-author).

Energy Management Resources Reports on the Volatility of Natural Gas Prices

Energy Management Resources Reports on the Volatility of Natural Gas Prices.

Energy Management Resources Reports on the Volatility of Natural Gas Prices

Shale continues to take center stage, albeit with mixed opinions, which is adding volatility to the direction of natural gas prices.

Quote startThe new drilling technologies that have proved so successful for natural gas may now provide an impact on the world oil supplyQuote end

(PRWEB) May 03, 2011

EMR – Based on last months New York Mercantile Exchange (NYMEX), Natural Gas prices are holding between $4.20 to $4.30 per MMBtu. Many factors come into play with when pricing commodities on NYMEX; however, all eyes continue to focus on the game changer – Shale Gas. Energy Management Resources is seeing a lot of clients re-analyze their hedging strategies as a result.

Shale continues to take center stage, albeit with mixed opinions, as compared to previous robust projections. These mixed opinions are adding some volatility to the direction of natural gas prices. Yet, it looks like North American producers are scaling back due to economics.

Here are the some facts regarding the economics of shale gas:

  •     There are 2,300 drilled but yet to be completed wells in the Haynesville, Marcellus, Eagle Ford and Barnett plays alone. As a result, producers have an inventory position whose cost structure will continue to put price caps on future price increases.
  •     There are potential environmental hazards that can be associated with the process of drilling for shale gas. Consequently, larger investments may be needed to deal with any new regulatory oversight and unanticipated regulations.
  •     Storage and pipeline capacity limits are being tested, as U.S. dry natural gas production is expected to grow by about 5.4 Bcf/d through 2015 from the 2010 average.

What some know about this game-changer is that the new drilling technologies that have proved so successful for natural gas may now provide an impact on the world oil supply. Oil brings much higher returns than gas, so many investors have already begun to pressure Boards of Directors about their investments. While debt rollovers, new equity offerings, and asset lease sales have financed the shale gas boom, disappointing cash flows are leading some investors to jump off the bandwagon. A thousand cubic feet (Mcf) of U.S. natural gas once sold for a tenth of the price of a barrel of oil, but now that spread has widened tremendously – One (1) Mcf of gas now sells for a twentieth, or less, of the price of a barrel of oil. Major shale producers see today’s gas prices making the economics of shale gas, as well as conventional gas, increasingly unprofitable. Weak cash flows have spurred investor concerns that these companies may no longer be able to meet wellhead break-even costs at those prices.

  •     Chesapeake Energy Corporation announced they had decided to sell all of its Fayetteville Shale assets and its equity investments in Frac Tech Holdings, LLC and Chaparral Energy, Inc.
  •     Chesapeake also announced ramped up investments at the Niobrara oil/shale formation, primarily an oil play, situated in northeastern Colorado and parts of Wyoming, Nebraska, and Kansas.
  •     Voyager Oil & Gas has made similar investment decisions. It will reduce production in its Bakken shale formation and refocus on its Niobrara fields.
  •     In response to deteriorating, if not negative profit margins, other shale gas producers are suddenly redeploying their rigs to drill for more lucrative oil. That includes the likes of Petrohawk Energy Corporation, EOG Resources, Forest Oil Corporation, and Quicksilver Resources.

Low natural gas prices are the result of many factors and the technology behind shale gas is seen as the central game changer, as it may assume a similar role in oil exploration. Although the potential environmental impacts of producing shale gas are being questioned, shale gas producers are redeploying their drilling dollars to oil targets searching for higher returns. According to Baker Hughes last week, the number of natural gas rigs operating in the US fell for a fifth consecutive week to a ten-month low. By shifting from gas to oil, the technology has lifted hopes of the first significant rise of onshore U.S. oil production in decades. In five to eight years, the technology could add a million barrels of oil a day to U.S. supplies.

Analysts stress the importance of this switch in exploration activity. Moving from shale gas to oil won’t be without consequences for future gas supply, as the effect of more rigs drilling for oil will have an impact gas prices. The oil exploration industry has already moved to riskier finds, such as Alberta tar sands and deep-water drilling. There probably isn’t a whole lot of “easy oil” left to find. Thus, the oil industry thinks it can benefit from the shale gas technology developed by its siblings in the natural gas sector.

About Energy Management Resources:
Energy Management Resources (EMR) helps energy intensive industrial and commercial companies across North America optimize their energy requirements. The costs, risks and regulatory issues associated with high demand energy consumption are complex. We take the complexity out of the equation to reduce your operating expense and manage your company’s risk.


NATURAL GAS: Investors press for ‘more responsible’ gas drilling

An E&E Publishing Service
NATURAL GAS: Investors press for ‘more responsible’ gas drilling  (Friday, January 21, 2011)
Mike Soraghan, E&E reporter
A coalition of investors today is announcing a campaign to press publicly traded oil and gas companies to disclose how they plan to handle the risks of hydraulic fracturing.
Led by the nonprofit investor group Ceres, they are filing nine resolutions with petroleum companies that they hope will lead to “more responsible” fracturing processes. Among the companies are Exxon Mobil Corp., Chevron Corp. and Cabot Oil & Gas, which has been accused of contaminating wells in Dimock, Pa.
The investors believe that petroleum companies have been too vague about the pollution, safety and regulatory risks created by the process, which is essential to developing the country’s vast shale gas reserves.
“This grows out of the work we’ve done with our investors in climate change,” Andrew Logan, director of the Oil and Gas Program at Ceres, said in an interview. “The vision is that gas is a bridge to a low-carbon future. That’s been a position of these investors for a long time. As they’ve learned about the fracturing process, they’ve seen the need to engage with industry to make sure it’s being done sustainably.”
The oil and gas industry says fracturing is a safe process and that existing state regulations are sufficient to protect drill site neighbors and the public. It has vigorously fought proposals in Congress to have U.S. EPA regulate the process.
Companies have also resisted similar shareholder resolutions on fracturing in the past.
But Ceres officials say that resolutions filed in 2010 spurred at least one company to begin disclosing the measures it takes to ensure well integrity, describe its recycling practices, and discuss “green completions” that reduce greenhouse gas emissions.
Pressing for disclosure and ‘best practices’
An increase in gas supply, made possible by advancements in fracturing technology, has led to the idea that gas can serve as a bridge while cleaner sources of energy are developed. Burning gas emits about half as much carbon as burning coal.
But fracturing, and the drilling process itself, brings environmental risks. And the shale boom is bringing it to areas long unaccustomed to heavy petroleum development, such as Pennsylvania. Cabot is contesting the allegations in Dimock.
Fracturing involves injecting tankerloads of chemical-laced water into wells to crack apart rock formations and release oil and gas. The chemicals used can be as mundane as ice cream thickener and as toxic as benzene.
The shareholder proposals ask companies to disclose their policies and strategies for reducing environmental and financial risks from chemicals use, water impacts and a host of other issues. They also request that the companies adopt “best management practices,” such as reusing the waste water from fracturing, testing the cementing of wells and disclosure of the chemicals used in the process.