Biden’s plan to cut U.S. oil production becomes clearer

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Category : News Offshore

By Jennifer A. Dlouhy on 1/23/2021

WASHINGTON (Bloomberg) –Hours after taking office, President Joe Biden made good on a campaign promise to cancel the Keystone XL oil pipeline. Later that day his Interior Department mandated that only top agency leaders could approve new drilling permits over the next two months.

Next week, according to people familiar with the plans, Biden will go even further: suspending the sale of oil and gas leases on federal land, where the U.S. gets 10% of its supplies.

The actions sent oil producers’ stocks tumbling and raised blood pressure across the industry.

“In the first couple of days of the new administration, they are taking actions that will harm the economy and cost Americans their jobs,” said Frank Macchiarola, a senior vice president of policy for the American Petroleum Institute. “We’re concerned, and everyone in the country should be concerned.”

The Interior Department’s order, signed late Wednesday, changes procedures for 60 days while the agency’s new leadership gets into place. It requires top brass to sign off on oil leases and permits as well as decisions about hiring, mining operations and environmental reviews.

The industry took it as a bad omen. Officials are worried that technical permitting decisions are being placed in the hands of political appointees, rather than expert regulators in the field. And they’re concerned permits — or simply changes to them — will be delayed for existing drilling operations.

Moreover, many interpreted it as a prelude to broader actions, including the administration’s plan to next week impose a moratorium on all oil, gas and coal leasing across some 700 million acres (2.8 million hectares) of federal land.

This “announcement is intended as a temporary ban on leasing and permitting but is also a precursor to a longer-term ban,” said Kathleen Sgamma, head of the Western Energy Alliance, which has threatened to go to court to battle any such blockade.

While Biden’s campaign promises – and his initial moves to fulfill them – are a threat to some U.S. oil producers, the actions could be a boon for crude prices by restraining supply.

The administration’s early moves mark a dramatic shift from the course under former President Donald Trump, who sought to accelerate drilling permits and open up more places to oil exploration.

And the change in direction is already apparent in early staffing decisions. Under Trump, the top offshore drilling regulator at Interior was Scott Angelle, a longtime oil industry ally and former Louisiana official who pushed for rapid permitting of Gulf of Mexico oil projects after the 2010 Deepwater Horizon disaster.

By contrast, one of Biden’s first hires at the Bureau of Ocean Energy Management that oversees offshore oil leasing and wind farms is Marissa Knodel, a former activist with Friends of the Earth. Knodel was one of about 150 people whose rowdy protest of a bureau auction of oil drilling rights in March 2016 prompted the agency to shift subsequent oil and gas lease sales online.

On the campaign trail, Biden called for phasing out fossil fuels and promised to halt new oil and gas permitting on federal land. Worried oil producers stockpiled leases and drilling permits last year in anticipation of more restrictions under Biden.

But the suddenness of this week’s moves still took many in the industry by surprise, prompting frantic phone calls as lobbyists and lawyers sought to plan their next moves. They are strategizing their options, including litigation, and looking at any political levers they can pull to forestall a broader leasing ban.

Senator Dan Sullivan, a Republican from Alaska, said permitting changes threaten operations in his state during the current winter season, when companies such as ConocoPhillips rely on ice roads and ice pads to support drilling and other activity in the National Petroleum Reserve-Alaska.

“If you put a 60-day moratorium on drilling in the NPR-A, guess what? You lose the whole season,” Sullivan said Friday on the Senate floor.

Environmentalists are delighted. They say throttling fossil fuel development on federal land is necessary to pare the greenhouse gas emissions driving climate change. The oil, gas and coal extracted from federal lands and waters is responsible for about 24% of U.S. carbon dioxide emissions, according to a U.S. Geological Survey report.

“Pausing new fossil fuel decisions brings us closer to healthier communities, a healthier climate and healthier wild places,” said Dan Ritzman, director of Sierra Club’s Lands, Waters and Wildlife campaign. “Public lands can and must be part of the climate solution.”

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Biden prepares to end new oil and coal leases on federal land

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Category : Drilling News

By Jennifer A. Dlouhy and Ari Natter on 1/21/2021

Biden chats with union workers during a campaign stop in 2020.

Biden chats with union workers during a campaign stop in 2020.

WASHINGTON (Bloomberg) –President Joe Biden is poised to suspend the sale of oil and gas leases on federal land, which accounts for about a tenth of U.S. supplies, according to four people familiar with the matter.

The moratorium, which would also freeze coal leasing, is set to be unveiled along with a raft of other climate policies next week, according to the people, who asked for anonymity to discuss plans not yet public. The moratorium is separate from a 60-day leasing and permitting pause ordered Wednesday, two people said.

The move would block the sale of new mining and drilling rights across some 700 million acres of federal land. It could also block offshore oil and gas leasing, though details are still being developed, some of the people said.

Spokesmen for the White House and Interior Department, which overseas leasing on federal land, declined to comment.

Pausing new leases would let the administration assesses their environmental impact and decide whether — and how — to restart selling them. The review could result in an end to leasing or to new limits on selling tracts and higher price tags to buy them.

The moratorium would put the U.S. oil and gas industry squarely in the federal government’s crosshairs. Biden has called for phasing out fossil fuels over time in favor of cleaner power sources — an overhaul of the U.S. energy mix that would have profound implications for the economy, touching everything from pipelines to power lines.

The Biden administration is also developing plans to fulfill the president’s promise to target 40% of clean energy investments to disadvantaged communities, seize climate change as a force for creating jobs and stand up a government-wide task force dedicated to the issue. Final details are still being developed.

The steps will build on a blizzard of moves Biden took his first day in the White House, as he canceled the Keystone XL oil pipeline, rejoined the Paris climate accord and directed regulators to review dozens of environmental rules imposed under former President Donald Trump.

People familiar with the planned actions say they reflect the Biden administration’s desire to rapidly implement strong climate policies — not merely clear out Trump-era rules. Biden promised to end new oil and gas permitting on federal land during his presidential campaign.

Oil industry leaders and politicians from the Western U.S. have warned the move could harm some local economies where drilling and mining flourishes — while crippling U.S. energy production to the detriment of American consumers. The Western Energy Alliance, which battled Obama-era rules targeting oil drilling, has vowed to immediately go to court to challenge any leasing ban.

“Blocking American companies from accessing our country’s natural resources is bad for American jobs, bad for state budgets and bad for national security. It also raises serious legal concerns,” said Anne Bradbury, chief executive of the American Exploration and Production Council.

Federal lands and waters together accounted for 22% of total U.S. oil production and 12% of U.S. natural gas production in 2019, according to the Energy Information Administration. Onshore federal lands provide about 8% of the nation’s oil and 9% of its natural gas, according to the Bureau of Land Management. Data for 2020 are not yet available.

That makes that land a prime source of greenhouse gas emissions tied to burning those fossil fuels. The oil, gas and coal extracted on federal lands and waters are responsible for about 24% of U.S. carbon dioxide emissions, according to a U.S. Geological Survey report.

Environmentalists have urged the Biden administration to enlist federal lands in the fight against climate change by transforming the territory into a sponge for carbon dioxide and uninterrupted habitat for vulnerable species. Conservationists — including Biden’s nominee to lead the Interior Department, Representative Deb Haaland — have embraced a plan to protect at least 30% of U.S. land and ocean by 2030.

A moratorium can “give time for an actual review, letting the review and the science and the law dictate what the long-term form of leasing looks like,” said Collin O’Mara, president of the National Wildlife Federation.

White House Press Secretary Jen Psaki said Wednesday the administration still has a commitment to ending new oil and gas leasing on federal lands, without elaborating on the president’s plans. “We do, and the leases will be reviewed by our team,” Psaki said.

Biden already moved to block oil leasing and related activity in the Arctic National Wildlife Refuge — where Congress in 2017 ordered the government to auction drilling rights twice by the end of 2024. In an executive order signed Wednesday, Biden directed the Interior Department to review his predecessor’s decision making around Arctic oil development, including possibly redoing the Trump administration environmental analysis that provided the underpinning for its Jan. 6 sale of nine leases.

The new, broader approach covering all federal lands is modeled after a strategy employed former President Barack Obama in 2016, when he ordered a moratorium on new sales of mining rights and used the timeout to examine whether the federal coal leasing program should be modernized. The program was swiftly restarted under Trump before that assessment concluded.

Environmental and natural resources lawyers say the approach may be more legally durable if buttressed by such a programmatic environmental review. Both federal law and Bureau of Land Management plans governing land under the agency’s control mandate regular lease sales.

Oil industry advocates argue that drilling blockades do nothing to stifle emissions — just shift that crude production elsewhere. “The world is still going to need natural gas and oil under any scenario for a long time,” said Dan Naatz, senior vice president with the Independent Petroleum Association of America. “A leasing ban is just going to ship that production to Saudi Arabia, to Russia, where there are far less stringent environmental controls.”

Biden is also set to lay out plans for ensuring that 40% of the benefits of clean energy spending and policies flow to environmental justice communities — areas that are on the front lines of climate change or have historically weathered the brunt of pollution. During the campaign, the president committed to target 40% of his clean energy investments — including spending on sustainable housing and mass transit — to disadvantaged communities.

Biden’s forthcoming directive also is set to establish an external advisory board focused on updating Clinton-era environmental justice policies aimed at addressing the disproportionate effects pollution imposes on poor people and communities of color.

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Oilfield service companies see drilling rebound everywhere but the U.S.

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Category : Drilling News

By David Wethe on 1/22/2021

HOUSTON (Bloomberg) –Spending by the global oil industry outside the U.S. is poised to rebound later this year, according to its largest hired hands, the latest sign of growing confidence in the outlook for crude prices.

Schlumberger, the largest oil services company, posted better-than-expected earnings Friday and forecast an increase in overseas spending by customers in the next quarter. Earlier in the week, Halliburton Co. said markets outside North America may see double-digit growth in the second half of 2021, while Baker Hughes Co. predicted a modest recovery in Latin America, the North Sea and the Middle East.

The energy sector remains wary following a calamitous 2020 that saw capital expenditures slashed as energy prices plunged. The three largest oil services companies — who help explorers map underground reservoirs and drill their wells — fired tens of thousands of workers and took multibillion-dollar writedowns. They’re either lessening their exposure to the shrinking U.S. shale patch and turning their attention overseas, where they see a quicker recovery.

That strategy is looking like it’s paying off. Adding wind to their sails is the recovery in crude prices in the first few weeks of 2021 following OPEC+ production curbs and optimism about the recovery in global demand from Covid-19.

Schlumberger CEO Olivier Le Peuch

Schlumberger CEO Olivier Le Peuch

“We believe this sets the stage for oil demand to recover to 2019 levels no later than 2023, or earlier,” Schlumberger Chief Executive Officer Olivier Le Peuch said in the statement. “Absent a setback in these macro assumptions, this will translate to meaningful activity increases both in North America and internationally.”

After selling some North American assets last year and cutting almost one-quarter of the company’s workforce, Houston- and Paris-based Schlumberger now expects international markets to generate up to 80% of its revenue. It posted its worst fourth quarter revenue sales in 15 years. Still, profit for the period, excluding one-time items, was 22 cents a share, exceeding the average of analysts’ estimates in a Bloomberg survey. The stock fell 0.1% in pre-market trading at 8:46 a.m. in New York.

The earnings beat is significant and the “outlook is constructive and consistent with what we have heard from HAL and BKR earlier this week,” Kurt Hallead, an analyst at RBC Capital Markets, wrote Friday in a note to investors.

Schlumberger has been asking investors for more patience. It warned three months ago that it could take until late 2021 to restore profits to 2019 levels. But the company ended up achieving that goal by the end of 2020, posting an adjusted margin of 20% for earnings before interest, taxes, depreciation and amortization, the same level as the fourth quarter of 2019.

“Overseas drilling activity held up better than in North America in 2020, yet it’s taking longer to recover from Covid-19-related impacts,” Scott Levine and Justin Rothhaupt, analysts at Bloomberg Intelligence, said in a report. “International upstream spending could decrease almost 20% this year, a bit weaker than anticipated at around the start of the pandemic.”

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Keystone XL shutdown may signal the end of major U.S. oil infrastructure

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Category : News Production

By Gerson Freitas Jr., Rachel Adams-Heard and Ellen Gilmer on 1/20/2021

click to enlarge

click to enlarge

(Bloomberg) –Joe Biden’s move to block the $9 billion Keystone XL project is the clearest sign yet that constructing a major new pipeline in the U.S. has become an impossible task.

The incoming president has pledged to reshape the U.S. energy sector and accelerate the transition from fossil fuels, and the cancellation of the proposed link to Canada’s oil sands will be one of his first big environmental actions.

Even before Biden’s inauguration, the oil and gas industry was on its back foot when it came to building major new infrastructure. Despite Donald Trump’s pro-fossil-fuel policies, energy companies such as Williams Cos. and Dominion Energy Inc. have been forced to scrap new projects in the face of stiff opposition.

“I can’t imagine going to my board and saying, ‘we want to build a new greenfield pipeline’,” Williams Chief Executive Officer Alan Armstrong said in an interview. “I do not think there will be any funding of any big cross-country greenfield pipelines, and I say that because of the amount of money that’s been wasted.”

The industry’s retreat is a victory for the environmental movement. Groups that once campaigned under the slogan Keep It In The Ground have increasingly turned their attention to the pipes. Building them in much of the U.S. is a far trickier business than drilling oil and gas wells. That’s due to the numerous federal and state permits that, for the most part, can be more easily litigated. The Trump administration sought to streamline federal permitting, but many projects were dealt a mortal blow in the courts.

“No one is going to announce a new pipeline while Joe Biden is the president,” said Katie Bays, managing director at FiscalNote Markets, which tracks policy issues for investors.

Pipelines are likely to face a more burdensome approval process under the new administration, according to industry watchers including analysts at Morgan Stanley. Armstrong, whose company operates the Transco gas pipeline that runs from the Gulf of Mexico up the East Coast, says costs associated with litigation, together with the risk of delays, mean the construction of interstate projects in the U.S. can no longer be justified.

He speaks from recent experience. Williams abandoned its Constitution natural gas pipeline in 2020 following years of legal battles with New York over a water permit. Its Northeast Supply Enhancement plan, which would have added pipeline segments in New York, Pennsylvania and New Jersey to an existing Williams system, was also effectively killed off last year amid opposition from New York Governor Andrew Cuomo.

In fact, 2020 proved to be an awful year for anyone trying to build a major pipeline. In July, Dominion and its partner Duke Energy Corp. scrapped plans for their $8 billion Atlantic Coast natural gas project along the U.S. East Coast after legal battles, permitting hiccups and ballooning costs. Less than 24 hours later, a U.S. court court ordered the shutdown of the Dakota Access crude oil pipeline — though the order was later sidelined.

In Minnesota, on-the-ground protests from environmental and indigenous activists continue to dog Enbridge Inc.’s proposal to replace its Line 3 crude pipeline, which shuttles crude from Alberta to Wisconsin.

Meanwhile, the $6 billion, 303-mile (488-kilometer) Mountain Valley natural gas project — which along with Line 3 are the last remaining mega pipeline projects still in development in the U.S. — is running into regulatory hurdles after years of cost overruns and delays. Shares of Equitrans Midstream Corp., which is constructing the pipeline between West Virginia and southern Virginia, plunged 9.9% Tuesday after a meeting of federal regulators in Washington failed to advance the project.

Mountain Valley “might be the last one for a good long while,” said Christi Tezak, managing director at ClearView Energy Partners.

TC Energy Corp., which was set to build Keystone, on Wednesday lamented Biden’s decision and said it will cost thousands of jobs. The Canadian company could challenge the move, but “suing your way to successful completion of a project is never a good situation to be in,” Southern Methodist University energy law professor James Coleman said.

While the energy industry digests the Keystone news, it faces other harsh truths. Covid-19 decimated demand and prospects for a recovery to pre-pandemic levels remain uncertain. Though Keystone itself is important for Canadian oil producers, it has lost much of its former appeal to refiners on the U.S. Gulf Coast following years of rising shale supplies.

And while oil stumbled, the renewable energy sector has been on a roll. Investors have fled the fossil fuel sector in droves and flocked to companies in solar, wind and other alternative technologies. That trend may determine the kind of big infrastructure projects that get built in years to come.

“Looking farther out, it’s hard to imagine that we’ll never go through a build cycle again,” FiscalNote’s Bays said of the pipeline business. “But it’s more likely that the next build cycle isn’t gas or oil, but is hydrogen or carbon dioxide.”

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Biden’s Keystone XL cancellation risks straining Canadian ties

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Category : News Production

By Jennifer A. Dlouhy and Ari Natter on 1/20/2021

WASHINGTON (Bloomberg) –Joe Biden will cancel the Keystone XL oil pipeline hours after becoming president on Wednesday, killing once again a cross-border project that had won a four-year reprieve under his Republican predecessor, Donald Trump.

In one of his first major environmental actions, Biden will revoke TC Energy Corp.’s pipeline permit via an executive order because it doesn’t “serve the U.S. national interest,” according to fact sheet from his transition team.

The move brings Keystone’s fate full circle, repeating a decision made in 2015 by President Barack Obama to keep the pipeline from crossing the border. Trump reversed that in 2017 on his fourth full day in office over the objections of environmental groups.

TC Energy said it was “disappointed” and would suspend work on the project, leading to the layoff of thousands of workers. The decision overturns “an unprecedented, comprehensive regulatory process that lasted more than a decade and repeatedly concluded the pipeline would transport much-needed energy in an environmentally responsible way,” said the Calgary-based company.

TC Energy shares pared losses after initially trading at $56, down 1%, on the news.

Alberta Premier Jason Kenney

Alberta Premier Jason Kenney

Alberta Premier Jason Kenney on Tuesday urged Canadian Prime Minister Justin Trudeau to take steps to save the permit, saying its revocation “would damage the Canada-U.S. bilateral relationship.”

Keystone XL was one of only a handful of energy and mining projects Biden took an explicit stand against while on the campaign trail. Environmentalists emboldened by his move on Keystone are already pressuring him to revoke a critical authorization allowing continued operation of Energy Transfer LP’s Dakota Access oil pipeline and take action against Enbridge Inc.’s plan to replace and expand its aging Line 3 pipeline from Alberta to Superior, Wisconsin.

“It’s exciting news,” said Dallas Goldtooth, an organizer with the Indigenous Environmental Network. “Now what are you going to do about Line 3 and the Dakota Access pipeline? We are happy, but we want to see what comes next.”

Environmentalists are counting on the latest rejection — coming more than a dozen years since the pipeline was first proposed — to stick. They argue the project would provide an outlet for heavy Canadian oil sands crude extracted in Alberta through particularly energy-intensive processes that ratchet up its carbon footprint.

“Putting a stop to the dirty and dangerous Keystone XL tar sands pipeline immediately and once and for all would be an important first step and testament to the leadership of the diverse grassroots movement that has long pushed to stop it and other harmful pipelines,” said Tiernan Sittenfeld, a senior vice president with the environmental group League of Conservation Voters.

Biden promised the action on the campaign trail, yet his formal step still provoked outrage from oil industry leaders, some Canadian interests and labor unions that support the project.

“The Biden administration has chosen to listen to the voices of fringe activists instead of union members and the American consumer on Day 1,” said the United Association of Union Plumbers and Pipefitters in an emailed statement based on news reports before the action.

Construction of Keystone XL already began last year, jump started with a $1.1 billion investment by the province of Alberta. Whole segments of the line, including one that crosses to U.S.-Canadian border, have already been built.

TC Energy has worked to make the project more palatable to a Democratic administration, inking labor agreements with four major pipeline unions last August, agreeing to sell an equity stake in the line to indigenous communities along the route and promising to power it entirely with renewable energy.

The Suncor Energy Inc. Millennium mine is seen in this aerial photograph taken above the Athabasca oil sands near Fort McMurray, Alberta, Canada, on Monday, Sept. 10, 2018. While the upfront spending on a mine tends to be costlier than developing more common oil-sands wells, their decades-long lifespans can make them lucrative in the future for companies willing to wait.

Still, Keystone XL has been a lightning rod for controversy and a litmus test for environmentalism almost since it was first proposed in 2005. The 1,179 mile (1,897 kilometer) segment is designed to move oil from Alberta through Montana, South Dakota and Nebraska, then connect with an existing network feeding crude to the Gulf Coast. The line would carry as much as 830,000 barrels of oil a day.

Opponents argue it will stimulate oil sands development, contributing to climate change.

Years ago, proponents of the controversial crude pipeline argued that more of Canada’s cheaper, heavy crude would help fuel producers on the U.S. Gulf Coast wean off supplies from countries like Venezuela or the conflict-prone Middle East.

But refiners in Texas and Louisiana have become increasingly flexible, using more of the abundant light oil from shale fields. Plus, Canadian crude’s price advantage has narrowed, and imports from the country have roughly doubled in a decade to a steady flow of more than 3.5 million barrels a day, without Keystone XL.

“It’s not an issue for refiners,” said Robert Campbell, head of oil products research at Energy Aspects Ltd. “They can switch into domestic light. The hurt would be on oil sands producers.”

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Libya seeks funds from foreign oil firms to repair infrastructure

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Category : News Production

By Salma El Wardany on 1/21/2021

Key Libyan oil and gas infrastructure

Key Libyan oil and gas infrastructure

(Bloomberg) –Libya is seeking funding from foreign oil companies to fix its ailing infrastructure after years of war and neglect, the nation’s top energy official said.

The state-owned National Oil Corp. was forced to shut down a leaking pipeline on Saturday, which cut the OPEC member’s crude production by around 200,000 barrels a day.

“This gives you an indication that the infrastructure in Libya is really in bad shape,” Mustafa Sanalla, the NOC’s chairman, said during a conference hosted by the Atlantic Council. “We are now discussing with our partners how to finance and how they can help us. If the government can’t give the NOC the right budget, maybe we can take the budget from our partners.”

Total SE, Eni SpA and Repsol SA are among the firms with stakes in the country. Many of them have withdrawn foreign staff in recent years.

The NOC closed a pipeline that carries crude to the eastern oil port of Es Sider, the country’s largest. Overall Libyan output has fallen to around 1 million barrels daily, the lowest in two months, as a result.

The pipeline, almost 60 years old, may be back online in 10 days, Sanalla said.

Libya increased production from almost nothing in September to about 1.3 million barrels a day this month after a truce between warring factions enabled the NOC to reopen many fields and ports.

However, almost a decade of political strife and volatile production have starved the government and NOC of funds. The company is struggling to fix oil fields, storage tanks, pumping stations, pipelines and ports. Some have been damaged by the conflict, while others are corroding because of neglect.

Sanalla is optimistic Libya can sustain the recovery in production, despite the setback with the Es Sider pipeline. But it depends on the NOC getting more money and there being no more blockades of ports, he said.

Libya has suffered from regular shutdowns of its oil facilities by armed groups, some of them involved in the war.

The Petroleum Facilities Guards, a paramilitary unit originally formed to protect energy infrastructure, this month threatened to halt loading at oil terminals if its members didn’t receive delayed salaries.

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Fracturing and the environment

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Category : Drilling News

Special Focus

One of the industry’s premier experts says hydraulic fracturing actually reduces the environmental impact of oil and gas production by increasing the productivity of each well.

Dr. Ali Daneshy, Daneshy Consultants Int’l.

Schematic of a popular horizontal well fracturing completion system.

Schematic of a popular horizontal well fracturing completion system.

Over the last few years, there has been a lot of public debate about the environmental impact of hydraulic fracturing, as well as advocacy by some of our civic and political leaders for banning the process as a way of improving environmental quality. This article makes an in-depth analysis of the subject and the advisability of such action.

The environmental impact of oil and gas is usually discussed under a single umbrella. But careful and learned examination of the subject teaches us that the proper way to analyze the topic is to break it into its two main separate and independent parts—its production, and its use/consumption. The activities falling under the production heading include drilling, completions (including fracturing), and lifting the produced fluid to the surface. The use/consumption portion covers its many industrial applications.

USE/CONSUMPTION

Oil and gas are the primary fuels for power generation, transportation, heating, petrochemicals, and many other uses for our essential individual and social activities. Consumption of oil and gas has a vastly bigger impact on the environment than its production. Historical oil and gas consumption statistics show continuously increasing demand, reaching over 95 MMbopd in 2019. 

The overall emphasis of governments, and general consensus of the public, is to reduce the need for oil and gas by replacing it with other less environmentally harmful alternatives such as solar, wind, geothermal, and nuclear energy, as well as use of electric cars, etc. The effect of these replacements is to reduce the percentage contribution of oil and gas in the overall energy picture. But since the general global need for energy is increasing continuously, the actual need for production of oil and gas is projected to increase in absolute terms, even though, and while, its relative contribution will be decreasing subsequent to the above replacements. Thus, production of more oil and gas will continue to be an important source for satisfying the energy needs of the future.

PRODUCTION

Let us now shift our focus to the environmental aspects of oil and gas production, and the effects of its various phases, such as drilling, completions (including fracturing), and production operations. Meeting our present and future oil and gas needs requires drilling and completing a certain number of wells. The actual number of required wells depends on their individual productivity; the higher the productivity of each well, the fewer the required number of wells. Thus, any operation that increases the productivity of wells will reduce the need for drilling more wells, and consequently reduce the environmental impact of production operations.

At the present time, the dominant method for enhancing well productivity is hydraulic fracturing. As a matter of fact, the vast majority of all wells take advantage of some form of fracturing for starting or enhancing their production. Thus, the more effective the fracturing operations are for increasing well productivity, the less the need for drilling more wells to meet our production objectives. In fact, this is the reason for the huge financial and intellectual effort of the industry to improve effectiveness of fracturing operations by reducing their size and intensity to get the required production enhancement. Any improvement in fracturing effectiveness will also reduce the overall environmental imprint of production operations.

Thus, as long as the world needs access to oil and gas for its energy supply, use of fracturing and improving its production effectiveness is going to be essential for improving environmental quality. The consequence of banning fracturing is to ban our ability to get better production from oil and gas wells. The net effect is removal of many of our marginal reservoirs which will become uneconomic to produce from, thus scarcer sources of oil and gas and higher prices, and a need for more drilling, which also will result in more environmental impact and higher prices. In summary, the environmental consequences of banning fracturing are very different than what is recognized by a casual or emotional review of the subject.

This author’s exposure and involvement in hydraulic fracturing started more than 50 years ago, while a graduate student at the University of Minnesota, with the job of preparing samples and helping with fracturing experiments for a classmate who was researching the subject for his PhD thesis. That very modest beginning was continued and expanded to include laboratory research on various technical aspects of the subject, developing simulators for engineering design of the different applications of the process, and extensive review of the results of these applications for better understanding of what happens in the mysterious underground when we fracture wells in oil-and-gas-bearing formations.

Increasing use of horizontal wells for production from ultra-low-permeability reservoirs (such as the U.S. unconventional shales) has added a new dimension to the widespread use and technical complexity of hydraulic fracturing. A common practice for production from these reservoirs includes drilling long horizontal wells (often close to, and sometimes in excess of, 2-mi-long horizontal sections), mechanically dividing the horizontal segment into multiple isolated sections, and simultaneously creating multiple fractures within each isolated section during each fluid injection stage. 

The ability to perform these complex operations has been made possible by the development and integration of many advanced mechanical components into a coherent and functional system. Without these advancements, the contribution of U.S. unconventional reservoirs to our energy needs would have been close to negligible! 

NEW TECHNOLOGIES 

Over the years, many of us in the fracturing community have been witnesses to, and participants in, the industry’s growing interest in the various technical and operational aspects of the subject, and infusion of many advanced technologies for this purpose. These have included mapping the location of the hydraulic fractures within the formation by detecting micro-seismic signals caused by a growing fracture, and deployment and detection of electromagnetic particles injected inside the fracture. Other advanced technologies deployed in the process include use of fiber optic lines inside the wellbores for detection of changes in ground deformation and temperature caused by fracturing; use of various types of chemicals for tracing fracturing fluid movement within the fractured formation; and measurement and analysis of small pressure changes detected in adjacent wellbores caused by an approaching hydraulic fracture.

Use of each of these technologies, and analysis of their results, has been supported by a group of highly capable scientists and specialists in this subject. The results of these investigations have been published in many technical papers. In fact, there are more technical papers on hydraulic fracturing than any other subject within the oil and gas industry. Multiple dedicated technical conferences discuss the continuous evolution of the subject and improvements in our understanding of the technology while improving its effectiveness. It is fair to say that the industry is very much aware of the positive impact of hydraulic fracturing on the productivity of reservoirs and supporting ways of enhancing its effectiveness.

The level of increase in well productivity depends on reservoir properties, and especially on its permeability; the lower the permeability, the higher the level of production increase resulting from proper fracturing. Drilling and completion operations cause substantial reduction in the formation permeability of the near-wellbore region, and consequently in well productivity. Nearly all wells drilled today require some level of fracturing before they are ready for production.

Furthermore, without fracturing, some of the low-permeability reservoirs would not contribute to world energy needs at all. Most notable among these are the U.S. unconventional shale formations which are a major contributor to energy needs in this country. 

CHANGES IN PRACTICES

To demonstrate the environmental benefits of present industry practices for production of unconventional reservoirs, let us review the effects and contributions of changes in prevailing practices over the last two decades. Horizontal wells have mostly replaced vertical wells for production of these reservoirs. This has substantially reduced the required number of wells. A 10,000-ft horizontal section, at a depth of 10,000 ft, has a total well length of less than 20,000 ft, and is drilled during one continuous operation. It replaces the need for drilling eight to 10 vertical wells—each 10,000 ft deep—which would have a combined length of 80,000 to 100,000 ft and are drilled over a much longer period of time, with separate surface set-ups for each well.

It is obvious that the shorter horizontal well will have a much smaller environmental impact than the several vertical wells that it replaces. With a similar analogy, one also can appreciate the environmental benefits of creating multiple fractures during a single operation in a horizontal well, compared to multiple set-ups for fracturing multiple vertical wells. The main components of this advancement, drilling horizontal wells, dividing them into multiple segments, and continuous fracturing of these segments, are essential parts of the entire operational package that need to be practiced together to get their beneficial results.

Another important point for consideration is the quality of the oil being produced—the lighter the oil, the less its environmental impact during its use. For example, the fluid produced from U.S. unconventional reservoirs is a light crude. Its use produces less environmentally harmful by-products than heavier crudes. Fracturing these reservoirs is essential for producing from them. Banning fracturing will practically stop production from these reservoirs within a few years, which then forces its replacement by heavier imported crudes that will have higher environmental impacts during their use.

Some of the negative public reaction to fracturing is likely to be related to the increasing intensity of these operations during the last decade. These changes have, in fact, reduced the environmental impact of fracturing during completion operations. Some of the horizontal wells drilled for production from unconventional reservoirs are fractured a few hundred times during a continuous operation. The concentrated execution of these operations reduces their environmental impact per unit of produced fluid.

Another change has been drilling multiple horizontal wells from a single pad, which has substantially reduced the footprint of drilling activities. Fracturing these wells is then undertaken during a single continuous period, as it progresses and moves alternately between adjacent wells, starting from their toes and moving toward their heels. While the entirety of these operations may take two to three weeks of continuous fracturing and assembly of large surface pumping and storage facilities, the net overall effect is, in fact, a reduction in the environmental impact of the operations per barrel of produced fluid.

CASE HISTORY

Figure 1 provides a typical case history of the efficiencies that have resulted from use of horizontal well drilling and fracturing. The horizontal well in this case was nearly 2 mi long. It was subdivided into 53 segments and fractured during a single continuous operation that took 17 days. For comparison, separate preparation and fracturing of each of the 53 segments would have taken more than one full day.

Fig. 1. Example case history of multiple fractures created in a horizontal well during a continuous operation.

Fig. 1. Example case history of multiple fractures created in a horizontal well during a continuous operation.

The graph also shows the data collected in an adjacent offset well, using a new technology known as Frac-Driven Interaction (FDI) for better evaluation of the created hydraulic fractures. This easy-to-use technology gives very valuable information about the size and orientation of fractures created in this reservoir. In this specific example, it shows that the previous fractures in the offset well had extended very close to the location of the new well and farther than initially anticipated. The data open the option of using less fluid in future fractures in this reservoir and in shorter time, all of which reduce every aspect of the environmental footprint of the fracturing operations for the production of the required volume of oil.

FINAL THOUGHTS 

In conclusion, improving the quality of our environment is a logical goal, worthy of support from every one of us. Replacing oil and gas consumption with more environmentally friendly alternatives is a step in the right direction. Government and political leaders are best positioned to address the relevant issues and recommend/legislate steps for its implementation. The effectiveness of these steps depends on the wisdom and depth of knowledge behind them. A prudent way to address the relevant issues is to seek participation and input from knowledgeable experts in the various aspects of each decision and avoid taking action based on the popular mood of the time.

As long as oil and gas contribute to our overall energy needs (even though playing a smaller part), their more effective production should be part of the overall environmental strategy. Hydraulic fracturing operations improve productivity of our reservoirs, reduce the need for drilling many more wells, and reduce the overall environmental impact of production operations while meeting present and future oil and gas needs. Banning use of fracturing by the industry will be unwise and will actually run contrary to the objective of improving environmental quality. Its main result will be eliminating the production of oil and gas from our land-based reservoirs and replenishing our needs with imported products. If this is the goal, then banning frac’ing is the answer!

Dr. Ali Daneshy for over 50 years, has been a very active participant in the development of hydraulic fracturing technology and its application for enhancing productivity of oil and gas wells. He has authored more than 75 technical papers related to the subject. In acknowledgment of his many contributions to hydraulic fracturing, Dr. Daneshy has been recognized as an SPE Honorary member (SPE’s highest honor), and received Distinguished Service, Distinguished Member, and Distinguished Lecturer Awards. His work experience spans U.S and international industry and academic assignments.

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