Eagle Ford Shale Rig Count - June 24, 2011

Drilling Rig

The Eagle Ford Shale rig count activity was down 4 rigs to 216 from 220 the prior week . The gas rig count remained flat at 108 rigs, while the oil rig count dropped from 111 to 107.  One rig is drilling an injection well.  Horizontal rigs account for 197 of the 216 rigs drilling in the South Texas region. Drilling activity will likely continue to climb over the coming months as operators commit more rigs to the area. Stay tuned each week for an update on the South Texas rig count.  Better yet, Subscribe by RSS.

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas.  The South Texas rig count referred to in this article is for ALL drilling reported by SmithBits and not solely wells targeting the Eagle Ford Shale.

All land rig count and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count and/or Smith Service Co's (Schlumberger) Smith Rig Count

Shale Oil Production to Lower U.S. Imports

The Eagle Ford Shale, Bakken Shale, and Niobrara Shale are all estimated to reduce U.S. oil imports by as much as 500,000 barrels a day over the next five years, according to an industry study.  Shale Oil production could rise to 900,000 barrels a day in the same time frame and could be as much as 1.3 million barrels a day by 2020. Oil pipeline expansions from Cushing, Oklahoma, down to Houston and the Gulf Coast are needed to help improve prices for WTI crude in comparison to other benchmark crude prices.  TransCanada Corp.'s planned Keystone XL will increase oil deliveries to refineries in Cushing and the Gulf Coast by 700,000 barrels a day starting in 2013. The Double E pipeline from Enterprise Products Partners and Energy Transfer Partners and the Longhorn pipeline reversal by Magellan Midstream Partners might add 650,000 barrels a day of capacity into Houston from West Texas and Oklahoma.

Refineries are also looking to benefit. Valero Energy Corp, Flint Hills Resources, and Frontier Oil Corp. area all looking for ways to increase the amount of U.S. crude they refine.  Growing U.S. oil production has created an exciting environment for every U.S. refinery.

Read the full article at Bloomberg.com

Eagle Ford Shale Rail Expansion at Port of Corpus Christi

The Port of Corpus Christi is expanding to handle up to 100,000 rail cars per year.  This will help the import of raw materials into the booming region that is stressed by the call on businesses from drilling and production in the Eagle Ford Shale.  

"Rail has always been part of the Port of Corpus Christi — a great asset, but not a central focus.Today, engines pull an estimated 30,000 to 50,000 rail cars through the port each year. Facilities are designed to handle only 12,000 to 13,000 cars.

Delays haven't been a problem, Brogan said. However, if a port gets a reputation for rail traffic jams, business goes elsewhere.

Atop a sliver of land tucked between the Joe Fulton International Trade Corridor and the industrial canal's turning basin, the port's planned Viola rail yard will ensure things keep moving.

The $15 million expansion will give the port more rail storage capacity. The project also is a major step toward the port's goal of handling 100,000 rail cars a year, Brogan said.

Brogan said the project should be through the design and permitting stages by the end of summer, clearing the way for two-phased construction. The first phase will take 18 months."

Kinder Morgan and Copano Energy Enter Agreement with Williams Partners

Eagle Ford Gathering LLC joint venture has entered into a long term agreement with Williams Partners to process Eagle Ford Shale gas at Williams Partner's Markham processing plant:

Eagle Ford Gathering LLC, a 50/50 joint venture between Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and Copano Energy, L.L.C. (NASDAQ: CPNO), today announced a long-term agreement with Williams Partners L.P. (NYSE: WPZ) to process Eagle Ford Shale production at Williams Partners' Markham processing plant located in Matagorda County, Texas. Eagle Ford Gathering will construct a 7-mile, 20-inch lateral to connect its previously announced crossover pipeline project to the Markham plant and install approximately 3,400 horsepower of compression at a cost of approximately $27 million. The agreement will initially provide Eagle Ford Gathering with 100 million cubic feet per day of processing capacity at the Markham plant, with an option to increase its capacity to up to 200 million cubic feet per day.

Eagle Ford Shale Region Experiencing a Record Drought

South Texas is experiencing one of the worst three droughts on record.  Producers are coming up with creative ways to conserve resources and tap water resources that have gone unused for many years.

"We have not experienced any problems obtaining water," in the play, Richard Wheatley, a spokesman for El Paso Corp., said.

The Houston-based producer and pipeline company, which has drilled about 30 wells in the so-called central region of the Eagle Ford play, uses groundwater either from water wells the company itself has drilled or that it has purchased under contract with ranchers in the region.

El Paso uses no surface water from lakes or rivers in the region, Wheatley said.

Petrohawk, one of the operators that pioneered the development of the Eagle Ford, has reduced its water needs by two-thirds since it began drilling in the play about three years ago, spokeswoman Joan Dunlap said.

"We use much less water for Eagle Ford wells than is required for wells in other plays. We are down to using less than 5,000 barrels per frack stage, as opposed to 15,000 barrels per stage," she said.

She added that the company's operations actually result in increasing the access to water supplies for surface landowners in the region.

"Our Hawkville field sits atop a prolific 500-foot thick aquifer located between 4,000 and 5,000 feet underground," Dunlap said.

"The landowners, largely ranchers and farmers, have no means to access this water for their use. Nearly every lease calls for the drilling of a water well, at the company's expense, that is used for well completion operations and then turned over to the surface owner for future domestic use," she said.

"Since these water wells cost about $500,000 each, we don't know a landowner that isn't tickled pink with

Read the full article at Platts.com