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Huge Boost In U.S. Oil Output Set To Transform Global Market

NatGas&Worldby

U.S. oil production is rising sharply and increased output from shale will be a “game changer” in global energy markets in the coming years, according to a new report out Tuesday by the International Energy Agency.

“U.S. shale oil will help meet most of the world’s new oil needs in the next five years, even if demand rises from a pick-up in the global economy,” the Paris-based agency said in its five-year outlook, called the Medium-Term Oil Market Report.

“North American supply is an even bigger deal than we thought. A real game changer in every way,” said Maria van der Hoeven, the IEA’s executive director.

She said that North American production has set off a “supply shock that is sending ripples throughout the world” and urged the United States to dismantle the Export Administration Act of 1979, which bans the sale of U.S. crude abroad, except to Canada and Mexico.

“This issue is on the table. I think it has to be addressed because if there are no export licenses for crude, then the industry will find different ways, as they are looking for now already with processed, half-processed products, things like that,” van der Hoeven said.

The IEA report forecasts:

“North American supply to grow by 3.9 million barrels per day from 2012 to 2018, or nearly two-thirds of total forecast non-OPEC supply growth of 6 [million barrels per day]. World liquid production capacity is expected to grow by 8.4 [million barrels per day] – significantly faster than demand – which is projected to expand by 6.9 [million barrels per day]. Global refining capacity will post even steeper growth, surging by 9.5 [million barrels per day], led by China and the Middle East.”

As NPR’s Tom Gjelten reports:

“Petroleum engineers have always known about the untapped underground oil in the United States, but it was unreachable, trapped in tight shale rock. Then the engineers figured out how to crack the rock. Hydraulic fracturingfracking — got that ‘tight oil’ finally flowing in places like North Dakota.”

Canada, one of the world’s largest petroleum exporters, has also gotten oil from tar sands.

Those combined factors have resulted in a “steeper than expected” rise in North American production.

On the demand side, Gjelten reports, it’s no longer the big industrialized countries such as the United States that are also the biggest oil users. The IEA predicts countries such as China and India will need more oil than the industrialized counties at “some point” in the future.

“But it’s happening. And it’s happening fast. It’s faster than expected,” van der Hoeven says.

One big reason for rising supply is that energy consumers are expected to look more toward natural gas to fill their needs. Antoine Halff, head of the IEA’s Oil Industry Division, says trucks and trains, for example, will turn away from oil.

“In fact, we’re now expecting that we’re going to see some transition of transport demand from oil to natural gas before the end of the forecast period,” Halff says.

Meanwhile, The Daily Ticker, quoting Gasbuddy.com, says the average U.S. gas price is now $3.58 a gallon, down from nearly $3.75 a year ago.

“Analysts speculate that this is the result of a rise in crude oil production and a decrease in consumer demand. ‘We have seen rising crude oil inventories playing a role in lower gasoline prices,’ Patrick DeHaan, senior petroleum analyst at Gasbuddy.com, tells The Daily Ticker. ‘Last year there were a few major refinery incidents. Really we’ve had a lack of unexpected refining problems and that’s kept pressure at the gas pump down.’”

 
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Dearing Compressor and Pump Growing With Shale Development

IMG_0169-300x225by: Shawn – Director, Corporate and Community Affairs Energy InDepth

Dearing Compressor and Pump is seeing a rejuvenation in their business since shale development has begun in the Utica and Marcellus.  The company makes compressor packages for the oil and gas industry, which help transport natural gas and liquids through pipelines to utilities and processing plants across America.  Within the past four years, business has taken on a whole new life thanks to shale development.

With a flurry of projects happening in our region, Dearing is keeping busy filling orders for their customers.  In 2004, Dearing Compressors and Pumps employed around 45 people.  Today, they are employing around 180  and are still looking for more qualified workers to help weld, fabricate, and assemble their compressor packages.  The company, which has been has been servicing industrial and energy customers at its Youngstown location, is a family business that has based their reputation on service, reliability, integrity, and innovation fueled by customer confidence since 1945.

With strong reliance on innovation, Dearing saw the opportunity shale development would bring and began building and supplying compressor packages to customers in Pennsylvania.  The average compressor station puts out anywhere from 1,500 to 5,000 horsepower costing $1 million plus.  During our tour, there were 7 compressor stations being built in the bays of their 50,000 square feet facility with each one ranging from $1.2 million to $3.4 million.

IMG_0172-300x225As their compressor station began to increase in size, Dearing found their 36,000 square foot facility wasn’t nearly large enough to handle all of their new business.  As a result, in 2010 they started building a 50,000 square foot manufacturing and assembling area next to the existing 36,000 foot space to accommodate the growing business.  Today, only two years later, they are looking to expand to over 125,000 foot workspace while remaining at the same location.

Each compressor package is built from scratch at the Youngstown facility, minus the engine and compressor, which are bought from companies like CAT and Ariel Corporation.  From the skids where the station sits, to all of the fittings, pulse bottles and scrubbers, each component is fabricated on site.

The operation is amazing as compressor stations are built in multiple bays, each one made to the customer’s unique specifications.  Their customers range from utilities, natural gas processing plants like the M3 project, to pipelines responsible for getting our natural gas to heat our homes.

As Dearing Compressor and Pump continues to grow, they will continue to need qualified employees to help them supply the oil and natural gas developers not only in our region, but across the United States.  Luckily for Ohio, we have a manufacturer like Dearing employing Ohioans and supplying companies developing resources in our state.  It is success stories like these that show the true potential for Ohio as oil and gas development continues to increase.

 
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Gulfport steps up drilling plans in Utica Shale

gulfportBy Shane Hoover

Delays in the construction of pipelines and processing plants have put Gulfport Energy’s Utica Shale drilling four months behind schedule, but the company plans to accelerate exploration this year.

Most of Gulfport’s wells are in Harrison County, followed by Belmont and Guernsey counties, according to the latest numbers from the Ohio Department of Natural Resources.

The Oklahoma City-based company released its first quarter results Wednesday, posting a $44.6 million net income, up from $26.9 million during the same quarter last year.

Officials said the company produced 575,543 barrels of oil equivalent in the first quarter, with 72,134 BOE from the Utica Shale.

Gulfport has 128,000 acres under lease in the Utica Shale region of Ohio. State statistics show Gulfport has 50 wells in various stages of development, second to Chesapeake Energy’s 401 wells.

This year, Gulfport will spend about $500 million on exploration in Utica Shale, six times what the company has budgeted for any other region. Gulport plans to drill up to 60 Utica wells as it increases to seven horizontal rigs, from the current three rigs.

Although production has been challenged by a delay in connecting wells to pipelines, results indicate “now is the time to accelerate our drilling,” CEO James Palm said.

The company reported that its first 14 Utica wells averaged an initial rate of 3,055 BOE per day, with a mix of 36 percent natural gas, 28 percent natural gas liquids and 36 percent heavier condensate.

“Gulfport’s position in the heart of the Utica wet gas window could yield performance results on par with the most attractive shale plays,” according to the company’s investor presentation.

The company said it has nine wells flowing into the sales pipeline, with plans to add four more wells by mid-June. Denver-based MarkWest Energy PartnersMarkWest Energy Partners is developing pipelines and processing facilities for Gulfport.

Near Cadiz in Harrison County, MarkWest and Texas-based Energy & Minerals Group are building a facility to gather and process liquid natural gas. The facility already has agreements with four drilling companies to process their product.

 
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Lawrence County power plant takes another step forward

thCA20Q66ABy Timothy Puko

A $750 million power plant project in Lawrence County  has taken a big step toward reality with the approval of its state air permit by  the Department of Environmental Protection.

Industry officials cheered the decision disclosed by  the DEP over the weekend as possibly the biggest hurdle New Jersey-based LS  Power had to clear to build the Hickory Run Energy Station.

“We viewed the air permit as kind of the keystone  permit for the project,” project manager Casey Carroll said. “When we feel like  the market conditions are right, then we will be able to go ahead and complete  the project.”

The company is still studying funding and applying  for “minor” construction, storm water and erosion and sediment permits with the  goal of starting construction in North Beaver by 2014, Carroll said.

While experts agreed that the permit is an important  step for the project, they were split on the larger ramifications. It is one of  nine projects trying to capitalize on a bounty of cheap shale gas in the region,  a crowded competition for space on the electric grid to replace a wave of  retiring coal-fired generators.

But if this plant, at a 900-megawatt capacity, can  get a permit, it might be a good sign for all of them, said Gregory Reed,  director of the Power & Energy Initiative at the University of Pittsburgh.  Eight of them, including a proposed Westmoreland County project, are between 650  and 1064 megawatts, reversing a recent trend of building small plants producing  25 to 50 megawatts, he said.

“It’s great to see us now starting to become a part of  the major infrastructure of energy development, rather than just a location for  resource potential,” Reed said. “I think there’s a lot of economic development  that will come with a generating station like this.”

Company officials have projected about 500 workers  during a two-year construction, followed by about 25 permanent employees to  operate the plant. The plant will be built on land vacant since the 1960s, a  former American Cyanamid Co. explosives manufacturing plant just east of state  Route 551.

A DEP spokesman said the plant needed the permit by  May to take part in regional utility auctions that started on Monday, though  Carroll said he couldn’t comment on financial details. If it’s in those  auctions, its performance there could be critical to its success, said Jake  Smeltz, president of the Electric Power Generation Association.

The auctions bid out future capacity years in  advance, which helps finance plant construction for the companies that use it.  And while natural gas prices are theoretically low enough for it to be a star,  other factors have limited it to winning only about a third of the future  capacity that’s been auctioned in past years, Smeltz said. Several plants that  have pursued long-term purchase contracts outside of that wholesale market are  still looking, he added.

“The markets right now are very difficult,” he said. “Natural gas should be thriving, yet the current conditions in the marketplace  are frustrating gas developers. I think those gas developers who have been  successful will have to have been ahead of the curve.“

 

 
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Shale made Penn State professor a star

051313_terryengelder_600by: Andrew Maykuth, Inquirer Staff Writer

Pennsylvania State University geoscientist Terry Engelder spent most of his  career toiling in obscurity, studying fracture behavior of rocks known as black  shales. Even among geologists, he says, it was kind of a boring topic, and he  was often slotted to present his papers on the last day of professional  conferences.

“Not only was it the last day, but it was in the afternoon of the last day,”  he said.

But then, Engelder and Gary G. Lash, a colleague from New York, discovered  natural gas in the Marcellus Shale. Rather, they calculated the huge amount of  natural gas contained in the shale and announced it to the world in early  2008.

And the world discovered Terry Engelder.

With the emergence of the Marcellus Shale as one of the world’s premier  natural-gas reserves, the 67-year-old Engelder has become widely identified as a  leading advocate of shale-gas development. Now, he travels the world to attend  conferences – and often is a keynote speaker.

As a public evangelist for hydraulic fracturing, the controversial process  used to crack shales to release natural gas, Engelder has become a target for  anti-drilling activists who regard the fossil-fuel rush as an environmental  disaster.

One critic of Penn State’s role in natural-gas development called Engelder  “the poster child for that corporatized institution we used to call a  university.” Engelder jokes that he is regarded as the “Dr. Strangelove of the  fracking debate.”

The criticism doesn’t bother him, Engelder says. But Anthony R. Ingraffea, a  Cornell University engineering professor and anti-drilling advocate who has  known him for more than 30 years and has debated him three times in public about  fracking, said Engelder has a thin skin.

“Terry’s a gregarious, open, friendly, high-energy person,” Ingraffea said.  “I guess it just comes as a shock to him when he doesn’t get the same reaction  from other people.”

Ralph Kisberg, a founding member of the Responsible Drilling Alliance in  Williamsport with whom Engelder has clashed, regards the Penn State professor  warily, saying, “There’s something a little off there.”

Engelder is quirky. He sprinkles his speech with expressions like by  golly and gosh and whatnot.

He keeps spreadsheets listing all the people he has spoken with since the  Marcellus boom took off – scores of investors, lawyers, engineers and analysts,  and more than 450 journalists. He has made more than 300 public appearances. His  collection of business cards fills nine boxes on his desktop. They are, of  course, organized.

Before Engelder began teaching at Penn State in 1985 – a native of western  New York, he has degrees from Penn State, Yale, and Texas A&M Universities -  he started jotting down his activities in notebooks. He now famously passes  around the notebooks at public appearances for people to sign, so he has a  record of the lives he has touched. He is currently on Book #42.

Some regard the notebooks with bemusement. But the only time people refused  to sign was at a 2010 City Council hearing in Philadelphia on Marcellus  development.

“People said, ‘You brought all this calamity on Pennsylvania. We’re not going  to sign your book.’ That was nasty,” he said.

Engelder is keeping a record, he says, because he believes he is playing a  pivotal role in an American energy revolution, moving away from coal and oil to  cleaner-burning natural gas. He also says the nation will become more reliant on  renewable energy in the long run, but his convictions about shale gas are so  ardent many people don’t hear the green-energy argument.

“This is historic,” he said of shale gas, an assessment his intellectual  adversary Ingraffea calls “grandiose.”

Engelder argues that the benefits of natural-gas development outweigh the  risks. But he acknowledges there are risks and says some people will make  sacrifices for the greater good of producing a vital energy source. His comments  have prompted some anti-drilling activists to declare areas “no sacrifice  zones.”

To those who have called for moratoriums on fracking, he argues the industry  is rapidly improving its practices, just as the developers of aircraft and  automobiles did with successive generations.

“If you don’t do it at all, you don’t ever learn how to do it,” he said.

After Penn State trumpeted Engelder and Lash’s findings in 2008, the  professor was summoned to Harrisburg to meet with state policy makers. In 2011,  Foreign Policy magazine named Engelder, Lash and shale-gas pioneer George  Mitchell to its list of Top 100 Global Thinkers – ranked higher than many heads  of state, Engelder notes.

“I don’t think many people have experienced the transition from being an  unknown university professor to somebody in the public eye,” he said.

Lash, Engelder’s co-author and a structural geologist at the State University  of New York at Fredonia, says he was happy to let Engelder take on the public  advocacy role as the shale-gas debate became more polarized.

“I really enjoy just talking about the science,” Lash said.

“Terry’s very passionate that natural gas is about to change the nature of  energy for the next few decades,” he said. “He’s the guy you want out there  doing that.”

Sometimes, Engelder comes across as immodest. A radio interviewer called him  out for comparing his work to that of Louis Pasteur and Jonas Salk. In  discussing his willingness to talk to journalists, Engelder says Albert Einstein  was also media-friendly – it’s part of the mission of selling America on natural  gas.

“I wouldn’t be well known now if I wasn’t accepting of these things that come  along with it,” he said.

The notoriety has its benefits. Engelder and Lash are attracting more funding  for their research on Devonian shales, the rock in which oil and gas formed over  hundreds of millions of years from accumulated dead microscopic sea life.

Engelder also has acquired star status among students. Enrollment in his  advanced geology class for engineering students has ballooned from 20 to 120 in  five years, said Jon Schueth, his teaching assistant. Engelder drops lots of  names in the first lecture to let his students know his place in history.

“It makes us respect him on the first day, how he really is a great thinker,”  said Patrick Lambert, an engineering senior from Suquehanna County.

But Engelder is sensitive. His prestige is deeply invested in the success of  the Marcellus Shale. He spent much of a recent lecture debunking critics who say  the country is experiencing a shale-gas bubble — that “there’s not as much gas  as this crazy professor at Penn State says there is.”

If anything, he says, the enormous Marcellus production is showing that his  initial projections were too conservative.

 

 
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