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Saturday, April 2, 2011

Technology for 60-Stage Fracturing -- Bakken, North Dakota, USA

On March 9, 2011, I wrote that Whiting was looking at technology that would allow 60-stage fracture stimulation.

Most likely this is the technology Whiting is looking at: QuickFRAC by Packers Plus. Just as much fun is looking where Packers Plus Energy Services has district offices. Note that they are located in Williston, North Dakota, as well as offices around the world.

Here's another nice link to QuickFRAK sent to me by a reader. See comment below. Thank you very much. 

So, You Think The "Permitorium" In the Gulf is Bad --

The ban on fracking natural gas wells is still in effect in New York State.

They banned it three years ago:
New York put a hold on horizontal drilling three years ago while it conducts an environmental study to find safe ways of using the techniques that are in use elsewhere.
It turns out the issue of where to put the waste water is a much bigger problem. Fracking is done with fresh water, and waste water cannot be used. 

No doubt at the end of the multi-year study in New York State (three years and counting), the authors will come to the same conclusion (that the waste water is the problem) and a new study will be commissioned. As the world turns.

Again, this tells me that "we" have not reached the tipping point in how much "we" are willing to spend on imported oil. 

I noted earlier that in President Obama's energy security speech this past week, he said that every $10 increase in a barrel of oil translates to an increase of 25 cents/gallon at the pump. The individual who wrote that line, and the individual who spoke that line, clearly feel that Americans and the American economy can handle another 25 cents/gallon. That's why folks in Washington and pundits on television don't seem anxious about the price of oil right now.

Seeking Alpha on Chesapeake -- Not a Bakken Story

I don't follow Chesapeake but this is an interesting "op-ed" regarding the company over at SeekingAlpha.com.

This is an article about the "holy grail" of the natural gas industry: to find a process to convert natural gas to liquid fuel, such as diesel.

At least that's what I think the article is saying.

If so, there is technology out there and it is working. I just don't know if the technology is scalable and / or profitable. But if I understand what the author over at SeekingAlpha is saying, I wonder why Syntroleum, Sasol, or Shell were not mentioned?

From a very recent NY Times article:
A South African firm, Sasol, announced Monday that it would spend just over 1 billion Canadian dollars to buy a half-interest in a Canadian shale gas field, so it can explore turning natural gas into diesel and other liquids. Sasol’s proprietary conversion technology was developed decades ago to help the apartheid government of South Africa survive an international oil embargo, and it is a refinement of the ones used by the Germans to make fuel for the Wehrmacht during World War II.
I find that incredible. South Africa used the technology decades ago to help survive an international oil embargo, and Americans are willing to pay $104 for oil and $4 for gasoline ........

..... the "lost decade."

ADDED TO ORIGINAL POSTING:

Here's a nice op-ed on South Africa, Sasol, and the international oil embargo. I find it interesting what Chesapeake CEO did not say. It suggests CHK is way behind the "8-ball" on this one. I find it amazing that he has not been called out on it. DKRW is doing this (natural gas to gasoline and diesel) in Medicine Bow, Wyoming, also. Who's CHK trying to kid?

BLM To Help Write Environmental Impact Statement

The Bureau of Land Management will help write the environmental impact statement for a 400-mile transmission line from Wyoming to Utah.

New coal-powered electrical-generating plants in Wyoming? Natural gas plants? Wind power?

BLM's assistance in writing the environmental impact statement is something new to me. I would have assumed those who are advocating and funding the project would write the impact statement, and the BLM would review it. But here we have the BLM actually helping to write it. One of the nice things about that is this: the BLM would know the correct catch-phrases and the politically correct issues to place in the document to help ensure the states and the federal goverment would approve it. I assume the first level of approval is the BLM before it goes up to EPA.

All I'm saying is this: I doubt the BLM helps the oil companies write their environmental impact statements but I could be wrong. If they do, I applaud the industry and the government for working so closely together on our national energy program. Whatever it may be.

At Least It's Not the EPA --

The Bureau of Land Management (BLM) will visit Arkansas, Colorado and North Dakota, to get a better picture of the fracking situation.
Officials say the forums are designed to invite public comment on fracking, in which water, sand and additives are blasted into rock to release natural gas. Industry and environmental experts will be on hand to answer questions.
I assume it was just an oversight that "oil" was not mentioned in that 30-second soundbite. I assume this was an edited press release issued by the BLM; if so, it speaks volumes.

Link here (regional links break often and break early).

Japanese Nuclear Reactor Now Leaking Radioactive Water Into the Ocean

Link here.

In southern California along the coast, people are reminded not to dump waste down drains which run directly into the ocean. Rain water drains have signs painted on the streets reminding folks not to dump waste into these drains because they drain directly into the ocean.

It is too bad the Japanese did not paint a sign that said: Do Not Dump Radioactive Water Into the Ocean.

I still can't get Steven Chu's worse nightmare off my mind. As you may recall, our energy secretary is a nuclear physicist and his worse nightmare is ... drum roll, please ... coal.

Anyway, not to worry about that radioactive waste going into the ocean over in Japan. The authorities say it will soon be diluted. I wonder if Greenpeace is over there monitoring the waste water?

North Dakota Wheat Setting New Records -- North Dakota, USA

Link here (regional links break early, break often).

Data points:
  • North Dakota's 2010 wheat crop: $2.35 billion; new record
  • Previous record: 2007, $2.34 billion
  • 2010 sales were up 30% from 2009
  • Of the $2.35 billion, $1.86 billion from spring wheat, also a record
  • Durum: $390 million
  • Winter wheat: $99 million
But this is the most surprising statistic:
According to the National Agricultural Statistics Service data the projected return from North Dakota wheat per acre is $280 dollars, up $60 dollars from 2009 and also a new record
That represents a 27 percent increase from the previous year.

Drought in Russian and the Black Sea region, and floods and too much rain in Australia and Canada contributed to the 2010 record.

Interestingly enough, the same are that produces the most wheat, the western third of the state, is also where all the oil activity is. Williams County, the heart of the Bakken, is one of the leading wheat producing counties in North Dakota.

As We Move Closer to Discussion of Windfall Profits Tax ...

... I don't know what the compensation package is for the CEO of XOM, but I'm sure someone will tell me.

But I do know the following, if the media reports are accurate:
All stories were published the same day, April 2, 2011 -- a day after April Fool's Day

Wow, Wow, Wow -- This Is Incredible -- ... Must Be Freezing Over -- Wind Turbine Project Canceled -- North Dakota, USA

Updates

January 26, 2014: I spoke too soon. Xcel has four wind farms in North Dakota on the drawing board.  

Original Post

Xcel announced it is canceling a 150 megawatt wind turbine project in southeastern North Dakota due to environmental costs of implementing the project.

Remember: Xcel was just granted a 12 percent hike in electric rates (more on that at the bottom, with link).

Data points:
  • Xcel, Minneapolis-based utility, cancels plans to build 150-megawatt wind farm in southeastern North Dakota
  • Decision based on: “the adverse impact this project could have on endangered or threatened species protected by federal law, and uncertainty in the cost and timing in mitigating this impact,” 
  • US Fish and Wildlife Service simply expressed a "concern" that certain birds were at risk, Xcel said
  • $400 million project
  • Was to go into operation this year (2011)
  • Partnered with EnXco, the US project development unit of Paris-based EDF Energies Nouvelles SA
My comments: the Xcel "cover story" may be 100 percent accurate. But I doubt it. Times are a-changing. Congress is not going to pass and "cap and trade" legislation and if they do, Xcel probably already meets/exceeds what they need; if not, they can pursue this project again. Xcel had already done the cost basis analysis and knew the wind farm would not be profitable when federal subsidies end; getting rate increases through the PUC would have damaged company's reputation in front of their customers. My hunch is Xcel was looking for an excuse to cancel the project and when they got the "boiler-plate" e-mail from the US Fish and Wildlife Service, they broke out the champagne. Folks, wind power is very, very expensive, and when subsidies end, it's going to get even more expensive. It's possible Xcel will just move this project down the road (where there are no "certain birds") but I would be surprised.

This decision was based on an "e-mail." It had not even resulted in any discussions between the parties (if the full story is being told); no discussion with public utility commission. We don't even know who in the US Fish and Wildlife Service signed off on the e-mail.  (We may not have heard the end of this story. A copy of the e-mail would be quite enlightening.)

Remember, North Dakota consumers had just received a 12 percent rate increase three months ago. That was a temporary increase while Xcel and ND PUC debated the higher rate Xcel needed. This whole story is quite incredible.

What Birds Most Likely At Risk?

With regard to what birds would be at risk, the most likely were the birds in the western flock of whooping cranes. I cannot find a map accurate enough to show their route over North Dakota (about midway between Texas and northwestern Canada) but their route is close enough to cause concern. Unlike other "birds of concern," these are perhaps the most well-known and identifiable by the general public. A loss of even of these rare and protected birds by a wind turbine would be a public relations disaster.  Interestingly enough, the migration is watched so closely, the wind turbines could easily be shut down for the one month that that birds would be flying through North Dakota. But if a company is really worried about migratory birds flying through North Dakota, it almost rules out the entire state for wind turbines because their actual paths would be so variable.  North Dakota is rated #1 in potential wind energy capacity.

Hearing Dockets for April, 2011, Are Posted -- Summary Provided -- Bakken, North Dakota, USA

I have completed the summary of the April, 2011, cases coming before the NDIC.

I think the cases will leave many of you with your lower jaw hanging down.
  • Based on graphics on corporate presentations, CLR's estimates of recoverable oil in the Bakken, and a realization that fracking doesn't extend more than 500 feet from the borehole, I thought we would see as many as four wells in a section. I underestimated
  • I do not recall so many cases in which operators wanted to flare gas, in general to allow unrestricted production of oil;  I assume many of these operators need the cash flow to keep operating
  • There are a couple new operators that I had not seen before
  • Corinthian Exploration, which just acquired the Ritchie Spearfish wells in Bottineau County as a request for 240 Spearfish wells in Bottineau County
  • CLR, Slawson, others are now putting in infill wells, as noted above, with as many as 7 wells/1280-acre unit; in some cases, the density may be almost double (such as 6 wells in 640-acre units)
  • Burlington Resources will be putting in an additional 12 wells in 1280-acre spacing units where there is already a long lateral: thus, BR will be putting in as many as 13 long laterals in one 1280-acre units; BR has identified two such units for 13 wells each
Back of the envelope calculations: it is assumed that even the mediocre Bakken wells will produce 400,000 bbls EUR. Let's say that drops to 250,000 bbls EUR. With 13 wells in 1280-acres, that's 3.25 million bbls. At $75/bbl --> $244 million.   13 wells at $8 million a piece --> $104 million. So, it sounds like a lot of money ($244 million) but if the wells affect each other's EUR, they may only double their investment over 30 years. However, they will carry these wells on their books with EURs of 400,000 barrels; at $75 --> $390 million over 30 years. However, I doubt price of oil will remain at $75 over 30 years; inflation should increase price paid for a barrel of oil. In addition, there are depletion allowances, amortization. tax issues, etc.

Even the fields that produce mediocre wells, they are being fully developed.

I was not impressed with Oil for America's Zastoupil well, but it must be good enough to keep producing; the operator has asked for temporary spacing (case 14541).
    This is the summary of April, 2011, hearing docket.