Oil, gas industry leaders talk technology, future in the Eagle Ford Shale

CORPUS CHRISTI - Texas Railroad Commissioner David Porter said the Eagle Ford Shale could provide “the single most economic development in our state’s history,” last week.

Porter made the comments Thursday at a luncheon hosted by the Texas Alliance of Drilling Producers, which focused on increasing communication between industry groups and highlighting issues affecting one of the hottest oil and gas plays in the world.

Porter’s Texas Railroad Commission is the state agency that regulates the oil and gas industry, and his lunchtime address followed a series of presentations in the morning that covered the future of energy, water issues, air permitting, and technological advances in the field.

The day-long event was meant to build networks of communication, but also highlighted the impact of the Eagle Ford Shale, and the technology that continues to drive one of the world’s most high-tech industries.

“Texas continues to set the tone for the nation on oil and gas policy,” Porter said. “I am pleased to stand up here and say something everyone in this room already knows… that things are looking good here in South Texas.”

A “Task” For the Future

Porter told the group at last week’s “Challenges in the Eagle Ford” conference where we are today: At a point where oil and gas drilling in the Eagle Ford Shale is providing 13,000 full-time jobs and more than $500 million in salaries.

He projected that the jobs number will grow to approximately 70,000 full-time positions by 2020, and said that his office is working to put together a group to be known as the “Eagle Ford Task Force,” to ensure that regulations keep up with the growing oil and gas boom.

Communication, Porter said, will be key to ensuring that the Eagle Ford boom does not repeat mistakes made during the Barnett Shale boom of the 1980s and 1990s.

The Eagle Ford Shale Task Force will be comprised of 16-20 members representing industry, local community leaders, elected officials, water representatives, landowners/property rights representatives, local businesses, and environmental groups. The group’s charge will be to (1) open the lines of communication between all parties, (2) establish best practices for developing the Eagle Ford Shale, and (3) promote economic benefits locally and statewide.

“I’m confident we are going to have the right people keeping us ahead of the pressing issues,” Porter said. “One of the biggest problems we ran into in the Barnett Shale is that no one was listening to each other. If we all keep working together, we’re not going to have that problem down here.”

“The First Three Years”

As Porter finished off his keynote address with more positive predictions for the oil and gas industry’s impact on the Texas Economy, Richard Stoneburner, president and COO of PetroHawk, took to the podium to tell the story of how it all began.

It had been long known that the Eagle Ford Shale held incredible promise for oil and gas discovery, but it was the evolution of horizontal drilling techniques that led to major activity in the summer of 2008.

PetroHawk spudded its first well in July of 2008, and in just three years, the Eagle Ford Shale has grown into the eighth-largest oil and gas field in the world.

“It was really a remarkable series of events in a compressed time frame to produce a world-class field,” Stoneburner said. “We just happened to find the first commercial discovery.”

Stoneburner said that PetroHawk targeted the Eagle Ford based on its significance as regional source rock. In the first quarter of 2008, PetroHawk mapped the shale formation across the Gulf Coast and identified it as “anomalously thick, porous and highly resistive.”

After the word was out, a land rush began in late 2009 and production has grown to 750 million bcf (billion cubic feet) per day in approximately three years. Stoneburner said the composition of the Eagle Ford Shale is what has allowed it to grow so rapidly.

“Every single inch of that rock is gas-bearing, permeable and producing,” Stoneburner said. “This is not your average shale… I have not seen another shale anywhere like it. This, in my opinion, is the premiere area in the country.”

“The Single-most High Tech Industry in Texas”

Morning presentations at the “Challenges in Eagle Ford” conference varied in topics, but the common theme of technology permeated each speech.

“The oil and has industry is probably the single-most high tech industry in the United States,” oil and gas attorney John Hays said.

“The shale play itself is based on technology,” COMM Engineering USA president Bill Schnieder said.

Schneider and COMM Engineering vice president Brian Boyer teamed up on a presentation about air permitting compliance – and ways to turn compliance into profits.

Processing facilities produce volatile organic compounds (VOCs), and the Texas Commission on Environmental Quality (TCEQ) issues permits based on the amount of VOCs a processing facility produces.

Those facilities can obtain a “permit by rule” if they produce less than 25 tons of VOCs per year, which requires less regulation than the “standard permit requirements” needed for producers of higher levels of VOCs.

COMM Engineering encouraged all producers to shoot for the “permit by rule,” and has developed technologies to increase profits through recapturing vented gasses. The company’s Vapor Recovery Towers and Vapor Balancing for truck loading are both vapor recovery solutions that capture vapors that would escape into the atmosphere and recapture them for processing.

In the Eagle Ford Shale, this vent gas measures out as high as 3,000 BTUs. The national average is approximately 1,000 BTUs.

“This is the richest gas in your facility, and it’s escaping,” Schneider said. “It is truly profitable with today’s technologies to recover this product.”

Schneider presented figures that showed Vapor Recovery Towers costing an initial $120,000 investment, and showing a return of more than $700,000 per year in product recovery. He also said the Vapor Balancing for truck loading, which routes vapors back to storage, can have a significant impact on air permitting requirements.

“In a lot of cases, simply doing that can keep you under 25 tons per year,” Schneider said.

Reuben Cantu of Champion Technologies addressed chemical issues in the Eagle Ford Shale, including build-up of paraffin (wax) in pipes and the geographic characterization of oil in the area.

He said there are essentially two types of oil being drilled out of the shale, a black crude being found in the lower parts of the formation, and all the rest. Cantu described northeastern parts of the formation producing a darker oil with less severe build-ups of wax.

“Hot watering” is his company’s preferred method of mitigating the problem, and he also mentioned build-up of bacteria in pipes as another issue Champion Technologies works to solve. Increasing knowledge of the product will be an ongoing issue as production in the Eagle Ford continues.

“We are trying to gain an understanding chemically of the types of crudes we’re dealing with,” Cantu said.

Energy – Past, Present, and Future

Oil and gas attorney John Hays opened Thursday’s “Challenges in the Eagle Ford” conference by putting today’s energy needs in a historical perspective. He said early humans produced energy with their bodies, and described the evolution of outside energy sources from draft animals to wind energy to the steam engine, which he described as the “first move towards modern economy.”

In 2009, the supply source of domestic energy was composed of 35 percent petroleum, 23 percent natural gas, 20 percent coal, 7.7 percent renewable energy, and 8.3 percent nuclear, according to the 2009 Annual Energy Review.

Projections for 2035 show the percentages for oil and liquids, natural gas and coal growing, according to Hays.

“They consistently show energy in all sectors increasing in supply,” Hays said. “That’s why those that say we need to subsidize renewables don’t really know what they’re talking about.”

Hays was critical of solar and wind energy, saying that wind energy technology has not evolved to a point where it can operate efficiently without being augmented by other sources, and that solar projects have not proven cost effective.

He cited the example of ancient ships that utilized sails, but also human-powered oars as early examples of lack of efficiency.

“People speak about wind energy as glamorous, exciting, clean, like it’s something we didn’t have before,” Hays said. “Even back then they knew they would have to have some back-up system to augment wind energy.”

The future of energy will depend highly on water, an issue that both Railroad Commissioner David Porter and John Burke of Burke & Associates, LLC, advised producers to watch carefully.

The average well requires approximately 119,050 barrels of water per year, according to Burke, an amount that could provide water for 92 people for a year.

He said that those numbers, however striking, pale in comparison to other uses.

“You need to get the story out that even though you’re using this water, compared to agricultural and municipal uses, it’s not as much as it appears to be.”

Burke recommended working with local cities and municipalities to purchase effluent, like one oil company already has done with the City of Gonzales, and to utilize brackish water for as many projects as possible.

“The more you can use brackish water to frack with, the less you’re going to hear from people,” he said.

Moving Forward

Texas Alliance of Energy Producers Chairman Tom Taylor spoke briefly at many times during the course of the day-long presentation, and continued to make the point that communication is key as the oil and gas boom in South Texas continues.

Forty percent of oil and gas in use today has been discovered in the last five years, according to Taylor, and the Eagle Ford Shale boom that is estimated to last anywhere from 15 to 40 years should continue to play a big role.

“We wanted Texas to set an example for all the other states… we’ve been doing fracking for 40 years and the technology keeps improving,” Taylor said.

Porter hopes that the economics will keep improving as well.

“We have an incredible opportunity at hand to better the Texas economy,” Porter said. “We must ensure that Texas remains in control and regulating… and establish Texas as a national economic powerhouse. Let’s keep it that way.”