Friday, November 12, 2010

Frackers move from gas to oil, raising U.S. output

Advances in the old technology of hydraulic fracturing, which have opened up vast reserves of natural gas, have also turned around "the decades-long decline of domestic oil production, which increased slightly in 2009 for the first time in more than 20 years," Daniel Gilbert reports for The Wall Street Journal. (Yes, that's the same Daniel Gilbert who won the Bristol Herald Courier this year's Pulitzer Prize for Public Service with his revelation of the mismanagement of natural-gas resources in southwest Virginia. He now works out of the Wall Journal's bureau in Houston.)

When "fracking" created a glut of gas and reduced prices about 20 percent, "Energy companies began eyeing the more attractive price of oil, which, at $84.88 a barrel after Friday's price drop, is still up more than 11 percent in the past year. Now they are deploying the same drilling technology to shale formations containing oil," Gilbert writes. "The number of oil-seeking rigs has nearly tripled since June 2009, and now makes up 42 percent of all rigs in use, a prevalence not seen since 1997, according to data compiled by oilfield-services company Baker Hughes Inc."

The biggest increase in the rig count has come in Texas, not just a big state but a big oil state. It was followed by North Dakota, Oklahoma and Colorado. The trend is likely to spread, because IHS Cambridge Energy Research Associates has "identified 20 significant shale prospects across North America," Gilbert notes. "Industry executives and analysts say the growth is likely to continue, at least as long as oil prices remain over $70 a barrel."

How should rural news media cover oil and gas booms? Treat skeptically reports of huge production until you can get confirmation from buyers or regulators. Check the courthouse for leases and see what up-front and royalty payments companies are making. Check with citizens and regulators about possible environmental problems. Gilbert writes from Karnes City, Tex., "Here in south Texas, there has been little opposition, and the unexpected rise in economic activity has been welcomed." (Read more)

No comments: