Eagle Ford Flaring Impact on South Texas - Video

August 22, 2014 Kirk Eggleston

Since the Eagle Ford oil boom began in 2009, the prolific development of the liquids-rich shale formation has put Texas in an enviable position on the world-stage as a top oil producer. As with any boom, there have been positives and negatives associated with development. This week, the San Antonio Express News published an investigative report highlighting one of the negatives - the flaring of natural gas. As companies have aggressively developed the Eagle Ford Shale to benefit from the current high price of oil, natural gas, a lower priced commodity, has been flared in the process. A lack of natural gas pipeline infrastructure in some areas has also contributed to flaring. Federal rules implemented in 2011 that require greenhouse gas permits for things like compressor stations and processing plants have likely tied up pipeline projects that would've otherwise been implemented. Still, pipeline companies, which generally conduct an open season prior to beginning construction on a project, have had trouble getting enough commitments for natural gas pipelines in other oily plays like the Bakken Shale in North Dakota, which is the second most significant U.S. domestic shale play to the Eagle Ford. The Bakken Shale currently flares nearly 30% of its natural gas.

According to the paper, oil producers flared and vented 32.7 billion cubic feet (Bcf) of casinghead gas from 2009 to 2012. That's nearly 8% of all casinghead gas produced in the region, and 10 times higher than the flaring rate in the rest of Texas. During the same time frame, La Salle County, a top producer in the play, flared or vented about a fifth of its production — more than 10 million cubic feet (MMcf). At oil wells in Atascosa and Frio Counties, energy firms flared a quarter of the 17 Bcf of casinghead gas they produced. Companies operating in Wilson County produced nearly 1.4 Bcf of gas from oil wells, but flared or vented more than a third of it.

The question is could flaring be affecting health and quality of life. For some South Texas residents, there's no question - Yes! The paper revealed that an estimated 15,000 tons of volatile organic compounds and other contaminants were released into the air in 2012 from flaring.

Pioneer Addresses Eagle Ford Exports in Q2 2014 Report

August 21, 2014 Kirk Eggleston

Recently, the U.S. Commerce Department (U.S. DoC) granted Pioneer Natural Resources Co. and Enterprise Product Partners LP permission to export minimally processed Eagle Ford condensate. According to Pioneer officials, the U.S. DoC confirmed that condensate processed at Pioneer’s Eagle Ford Shale central gathering plants in South Texas is a petroleum product that can be exported without a license.

The news in June 2014 that Pioneer was granted permission to export condensate made headlines and sparked a debate about the oil export ban, which has been in place for nearly forty years. Earlier this week, Eagle Ford Operator BHP Billiton confirmed it had applied for an export permit with the U.S. DoC.

It shouldn't come as a huge surprise, but Pioneer is looking to Asian markets to sell its processed Eagle Ford condensate. According to the Energy Information Administration (EIA), Asia surpassed North America as the largest petroleum-consuming region in 2008, with demand increasing 146% (15 million b/d) from 1980 to 2010.

“We are pleased that the U.S. Department of Commerce has recently confirmed that Pioneer may begin exporting processed condensate from the Eagle Ford Shale. Our first cargo was shipped in late July and monthly shipments are expected through the end of this year at prices higher than domestic condensate sales. International interest for our processed Eagle Ford Shale condensate is growing, particularly from Asian petrochemical companies.”

— Pioneer CEO, Scott Sheffield

Pioneer Eagle Ford Q2 2014 Production and Operations Update

During the second quarter, Pioneer had record average Eagle Ford production of 47,000 boe/d. Thirty-one wells were placed on production during the quarter.

For 2014, the company expects to place approximately 125 liquids-rich wells on production in the Eagle Ford Shale (63 wells in the first half of 2014 and 62 wells in the second half). Company officials say most of these wells will be drilled utilizing three-well and four-well pads. The 2014 program reflects longer lateral lengths and larger fracture stimulations compared to 2013. Full-year production is forecasted to range from 46,000 boe/d to 49,000 boe/d, an increase of 22% to 30%, compared to 2013.

Murphy Hits Record Eagle Ford Production in Q2 2014

August 20, 2014 Kirk Eggleston

Murphy Oil Corp.'s second-quarter Eagle Ford production hit a new company record of 52,184 boe/d, with a 90% liquids cut. That's up about 6% from the previous quarter and 33% year-over-year. Murphy expects to surpass 60,000 boe/d in 2015. At current rates, the company should realize its anticipated production target in the first or second quarter of next year.

Portfolio-wide, the company averaged total production of 210,191 boe/d, which is about 3% less than anticipated for the quarter. The shortfall was attributed to Murphy's operational delays relating to its offshore business in Malaysia.

In the Eagle Ford Shale, 53 new wells were brought on line during the quarter. That's up from 44 wells in the first quarter of 2014.

The company is currently operating eight drilling rigs and four completions across the play. Murphy expects to bring on a total of 200 wells (including non-operated locations) in 2014.

Murphy's Upper Eagle Ford Tests Could Boost Drilling Inventory

According to company officials, further testing for upside potential in the Upper Eagle Ford Shale zone is expected, which could yield 600 additional well locations, beyond the 1,500 locations remaining to be drilled in the Lower Eagle Ford Shale. Murphy officials also indicate downspacing efforts across the Eagle Ford continue to deliver positive results. At the company's current pace, officials expect 10 + years of drilling.

Furthermore, Murphy is in the process of conducting negotiations for two separate pipeline arrangements in its Karnes and Tilden areas of the play to transport up to 28,000 b/d oil net to market. The company hopes to reduce trucking operations and improve overall reliability.

Eagle Ford's BHP Billiton Seeks to Export Condensate

August 19, 2014 Kirk Eggleston

Houston-based BHP Billiton may soon get the green light to export condensate from the Eagle Ford Shale.

According to the Houston Chronicle, BHP President Rod Skaufel confirmed the company has applied for an export permit with the U.S. Commerce Department (US DoC).

In June 2014, Pioneer Natural Resources Co. and Enterprise Product Partners LP were granted permission by the US DoC in a private ruling to export minimally processed Eagle Ford condensate. In late July 2014, the first exports began.

The US DoC's ruling in June 2014 was the first sign the United State's oil export ban, which has been in place for nearly 40-years, could be subject to change. Following the Arab oil embargo of the early 70s, in 1975, President Gerald Ford signed into law the Energy Policy and Conservation Act, which in effect bans most U.S. oil exports (refined products are not included in the ban). The minimally processed condensate currently being exported by Pioneer and Enterprise is considered a refined product by the US DoC.

With the U.S. slated to become the top oil producing country in the world by 2015, according to the International Energy Agency (IEA), the necessity of the ban is puzzling to some, but still viable to others. In recent months, there's been a push from industry leaders for the federal government to relax and even lift the ban, including Continental Resources CEO Harold Hamm. Continental Resources is the second largest producer in the Bakken Shale in North Dakota, which also produces light oil and condensate.

BHP Billiton Eagle Ford Position in Condensate Window

Due to its position in the play, among other factors, the company is in an attractive position for exporting condensate should it get the go-ahead from the US DoC.

“Our position in the Eagle Ford is right in the heart of the condensate window, and the economics of the wells average a 70% rate of return,” said Skaufel, in an interview for Unconventional Oil & Gas Report.

BHP plans to spend $3-billion of its $3.9 billion budget for onshore U.S. in the Eagle Ford in 2014. The company entered the Eagle Ford Shale in 2011, with the acquisition of Petrohawk for ~$12-billion.

Eagle Ford Shale Rig Count Decreases by Five to 261

August 18, 2014 Kirk Eggleston

The Eagle Ford Shale rig count decreased by five to 261 rigs running across our coverage area by the end of last week.

In recent news, The U.S. Energy Information Administration (EIA) predicts the Eagle Ford Shale will produce 1.51-million b/d crude oil in September 2014. That’s an increase of ~31,000b/d over August’s expected production (1.48-million b/d), according to the EIA’s monthly Drilling Productivity Report released this week.

The U.S. rig count increased by five to 1,913 rigs running by the end of last week. A total of 321 rigs were targeting natural gas (five more than the previous week) and 1,589 were targeting oil in the U.S. (one more than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.). 901 or ~48% of rigs active in the U.S. were running in Texas.

Baker Hughes rig count is quoted here. Baker Hughes also releases its own Eagle Ford Rig Count that covers the 14 core counties (199 rigs). The rig count published on EagleFordShale.com includes a 30 county area impacted by Eagle Ford development. A full list of the counties included can be found in the table near the bottom of this article.

Eagle Ford Oil & Gas Rigs

The natural gas rig count increased by one to ten rigs running by the end of last week. Average rig counts for natural gas production in 2012 were around 80 and then dropped to around 40 in 2013. Natural gas prices decreased slightly from the previous week to $3.77/mmbtu on Friday afternoon.

The oil rig count decreased by six to 251 rigs running by the end of last week. WTI oil prices stayed relatively flat from the previous week, trading at $97.09/bbl on Friday afternoon. Eagle Ford light crude traded at $92.00/bbl on August 14th.

A total of 247 rigs are drilling horizontal wells, four rigs are drilling directional wells, and ten rigs are drilling vertical wells. Karnes, La Salle, De Witt, and Webb each have at minimum 25 rigs running. Karnes County has the highest rig count this week at 34. See the full list below in the Eagle Ford Shale Drilling by County below

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Eagle Ford Shale Drilling by County

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 rigs referred to in this article are for ALL drilling reported by Baker Hughes and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count.