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In The Oil Patch – Omar Garcia (ep. 104)

If you want to keep current on what’s happening in oil and gas in Texas, the “Inside the Oil Patch” program airs every Sunday evening on AM 740 KTRH in Houston, and AM 550 KTSA in San Antonio. The show is sponsored by Shale Magazine, for which I am an associate editor. I do a ten minute segment on most of the shows. The hosts, Kym Bolado and Alvin Bailey, do a great job of putting together high quality guests and very informative shows.

Listen to the Episode Here

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That Uncomfortable Moment When The Pipeline Boogeyman Fails To Perform

A couple of weeks back I wrote about the shifting focus of anti-fossil fuel conflict groups in their efforts to impede the nation’s energy development in various parts of the country.  That focus, which since about 2008 had centered on the boogeyman “fracking”, has now shifted to a new, midstream boogeyman in the form of pipelines.

When conflict groups have identified a good boogeyman, they flaunt it at every opportunity, and it becomes a rationale for them and their supporting web-based media outlets for stopping whatever other activities they want to stop. Of course, what they really want to stop is all development of fossil fuels.  Thus, over the last decade, we have seen minor spills of returned fluids from hydraulic fracturing jobs blown up into a reason to halt all drilling in a given basin or state.  Now, we see the same dynamic at work, in which even the smallest event that can (at least seemingly) be attributed to a pipeline forms the rationale for halting all activity in an entire region.

That previous piece focused on an incident involving a natural gas pipeline leak in Alaska’s Cook Inlet, which is operated by Hilcorp, and the manner in which Hilcorp’s efforts to coordinate with regulators to address the issue were distorted by one of those web-based media groups, EcoWatch.  Repairs to that pipeline are underway, with no discernible impacts to surrounding wildlife or the environment, but it placed Hilcorp on these groups’ radar as a target for exploitation.

Read The Full Piece Here

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The Oil And Gas Situation: The Rigs Just Keep On Coming

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Some thoughts on the domestic oil and gas situation as we move into April…

The rigs just keep on coming…:  The industry activated more than 70 additional drilling rigs during the month of March, bringing the total new rigs activated during the first quarter of 2017 to more than 200.  My “bold” prediction as the year began was that it would take four months, not three, for the U.S. industry to bring that number of new rigs onto the market.  So, ok, I was too timid.

Interestingly, more than a dozen of these newly-active rigs have moved into the Haynesville Shale region, which is experiencing a somewhat surprising resurgence of activity, even in the seemingly interminable weak price market for natural gas.  The play’s abundance of pipeline takeaway capacity and proximity to major export facilities are two of the main reasons for this uptick in activity, as detailed by Forbes contributor Jude Clemente in his piece of March 25.

March’s increase in rigs drilling for oil was also less focused on the Permian Basin than in prior recent months, with other basins like the Eagle Ford, the SCOOP/STACK and the DJ Basin also seeing significant upticks in activity.  How much longer this rising rig count can last is anyone’s guess, but it was a major reason why…

 

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President Trump’s Latest Energy Executive Order Is Not Just About Coal

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An interesting facet of the news media’s coverage the past couple of days about President Trump’s Executive Order on Promoting Energy Independence and Economic Growth (hereinafter referred to as “Order”) is that the coverage focused mostly or entirely on the Order’s impacts on the U.S. coal industry and coal-related jobs.  Granted, the Order was cast as the President’s effort to essentially rescind major parts of former President Obama’s “Clean Power Plan”, which most recognize was an effort by his Administration to damage the nation’s coal industry.  But just as the “Clean Power Plan” had impacts and produced major regulatory efforts that reached far beyond the coal industry, President Trump’s newest executive order also impacts other segments of the nation’s energy sector.

Some major aspects of the Order contain significant implications for the oil and natural gas industry as well.

Here is a review of several of them:

  • Section 2 of the Order directs all relevant agencies to “review all existing regulations, orders, guidance documents, policies, and any other similar agency actions (collectively, agency actions) that potentially burden the development or use of domestically produced energy resources, with particular attention to oil, natural gas, coal, and nuclear energy resources.”   This is a very broad-ranging mandate that, when combined with other aspects of the Order, is likely to create a vast array of proposed regulatory rescissions and reforms.
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Conflict Groups Find A New Boogeyman – Pipelines

As their decade-long effort to demonize hydraulic fracturing – or “fracking” as they like to call it – lost its previous steam over the last couple of years, anti-fossil fuel conflict groups who raise money by stoking public fears related to the oil and gas industry have gradually shifted their main focus over to the pipeline segment of the business.  Encouraged by the temporary victory given them by the Obama Administration related to the Keystone XL pipeline project, these conflict groups have become engaged in protests related to numerous midstream projects in the Northeast, in North Dakota (the Dakota Access Pipeline) and in West Texas (the Trans-Pecos Pipeline).

While their high-profile “wins” to date have been either temporary or, as with the Dakota Access Pipeline, illusory, the conflict industry obviously sees this coordinated attack on the midstream segment as a money-makernevertheless.  Thus, they have chosen to engage in a constantly-increasing number of pipeline-related construction projects and incidents.

Read the Full Piece Here

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Lessons Learned Through Two Oil Busts

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“How does this bust differ from the bust in the ’80s?”

I get asked that question quite often, partly because I’m growing old and it shows on my face, and partly because I’ve been in the oil and gas industry since 1979, and people assume — rightly or wrongly — that I know some stuff because of that. I did live through that bust in the ’80s, and it wasn’t fun. I got laid off from a job in 1985 and was out of work for a few months — the only time I’ve been unemployed since I was 16 years old — and that caused me and my wife great financial hardship.

So I do remember those days all too well. To understand why that bust happened, you first have to go back to the oil shocks of the 1970s, when the Saudis and other OPEC nations implemented oil embargoes, first in 1973 and then again in 1979.

Two memories from that period of time stick with me to this day. The first is of filling my mother’s 1972 Pontiac Grand Ville up with gasoline on the day in 1974 when the price of gas at the local Circle K in Beeville, Texas, reached the then unheard of sum of 50 cents per gallon. That was the first time I had ever had to come up with 10 bucks (the aircraft carrier-size Grand Ville had a 26-gallon tank) to fill up a car with gas. I knew I was going to have to start working overtime or get another job if I was going to keep putting gas in that car. The second memory is of sitting at a long-disappeared Texaco station at the corner of Richmond Avenue and Buffalo Speedway in Houston during the summer of 1979, having to wait in a very long line of cars on an odd-numbered day to pay over $1 per gallon for my allotment of gas to fill up my Chevy Caprice. Another 26-gallon tank that was even more costly to fill.

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Culture of Innovation: Doug Suttles with Encana

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The history of the oil and natural gas industry in North America is in many ways intertwined with the history of the railroad, which in the mid-19th century became the main means of transcontinental transportation for Americans and Canadians.

As these great railroad systems were constructed across the continent, the companies building them gained ownership of great swaths of land, and, as importantly, obtained ownership of the minerals beneath the land. In the United States, as oil and natural gas began to be discovered across the Midwest and Rocky Mountain states, a good deal of it lay beneath land owned by rail companies like Burlington Northern, Union Pacific and Santa Fe.

These companies all eventually created subsidiaries to manage their oil and gas royalty holdings, and those subsidiaries eventually evolved into some of the country’s largest independent producers: Burlington Resources, Union Pacific Resources and Santa Fe Energy. Those companies are all gone today, having been merged with or acquired by ConocoPhillips, Anadarko Petroleum and Devon Energy, respectively, but their place in history is firmly established.

 

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