Oil and natural gas exploration companies aren't the only ones licking their chops at emerging shale formations in Texas and other states that may hold vast untapped supplies of natural gas.
Major oil field services firms, including Schlumberger, Halliburton and Baker Hughes, also see big opportunity and are jockeying to get their share of the work.
To those firms, the complex shale formations could bring a windfall of new contracts that call on specialized technologies, which have become indispensable in these frontier areas.
Perhaps nowhere is that truer than in the Haynesville Shale play, a major discovery in northwestern Louisiana and East Texas. Not only is it estimated to be the nation's largest natural gas field and the fourth-largest in the world, it may be among the most difficult of its kind to unlock, creating high demand for sophisticated service work.
New optimism
Such predictions have given leading oil field services firms new reason to be bullish about the U.S. after a drop in natural gas prices and an oversupply of land drilling rigs brought a dismal year in 2007.
Gas futures last year sank below $5.50 per million British thermal units after hitting a record near $15 in late 2005 when hurricanes Katrina and Rita disrupted Gulf of Mexico production.
Natural gas closed Friday on the New York Mercantile Exchange at $7.943 per million British thermal units, though it traded at more than $13 earlier this summer.
The services companies are cautious about exaggerating the potential of the new shale plays, like Haynesville, given the shortage of data about them and technical challenges of operating there.
"It's kind of touted as the next gold rush, yet there are some people who are very concerned — will it come to pass?" said Joe DeGeare, manager of the eastern U.S. area at Baker Hughes' oil tools division.
Incentive to explore
Going after shale gas is nothing new. Oil and gas companies began drilling wells in areas like the Barnett Shale near Fort Worth more than two decades ago.
But technological advances and higher natural gas prices this year have given producers greater incentive to explore in shales and other unconventional rock formations once thought too difficult to reach.
Unlike conventional wells, which extract gas from porous rock formations, shale is hard and nonporous.
It also can contain oil. But oil's larger molecules make it more difficult to extract from the dense rock than natural gas.
Oil shale technology is still developing and has advanced recently as energy companies try to take advantage of high crude prices. Shale gas production is better established.
It now accounts for about 10 percent of U.S. natural gas production, but that could double over the next three years as wells in the emerging shale plays start coming online, Deutsche Bank said in a report last month.
"For all the seeming hype, we actually believe this heavy focus on gas shales is very well-placed," the investment bank said.
A fever pitch
That hype has reached a fever pitch this year as EOG Resources, Chesapeake Energy, Petrohawk and other oil and gas producers have revealed large acreage positions and capital spending plans in shale plays in Louisiana, Texas, Pennsylvania, Arkansas and elsewhere.
New investment in the Haynesville Shale, for example, is expected to more than double the number of drilling rigs operating there today to 100 or more by 2009.
Alone, such predictions would be enough to spark the interest of oil field services companies, which are paid by oil companies to manage all or part of a well-drilling project. But contracts there are expected to be especially lucrative given the challenging conditions.
At the Haynesville Shale, average well depths are 12,500 feet, with bottom hole temperatures of 350 degrees and pressures that exceed 10,000 pounds per square inch, according to a study by Halliburton.
As such, wells drilled there will demand twice the hydraulic horsepower, higher treating pressures and more advanced fluid chemistry than those used in established shale plays like Barnett in North Texas or Woodford in Oklahoma, the company said.
"In terms of activity, this is big on anybody's radar screen, whether it's the service industry or the producers," said Marc Edwards, vice president of Halliburton's production enhancement product service line in Houston.
Elevated spending
Halliburton, the world's second-largest oil field services company, with dual headquarters in Houston and Dubai, said recently it will boost its 2008 capital spending budget by $200 million, in part to capture more business in emerging U.S. shale plays.
Schlumberger, the largest services company, also may need to boost capital spending this year in response to the bigger-than-expected rebound in land drilling in the U.S., Chief Executive Andrew Gould said during a conference call last month to discuss the company's second-quarter earnings. But it has not made that decision yet, he said.
Houston's Baker Hughes has not said it will increase 2008 spending, but DeGeare said the third-largest oil field services company will be aggressive in chasing business in Haynesville and other emerging shale plays.
Striking while the iron is hot may be important, according to a fall 2007 report by Houston investment bank Simmons & Company International. The firm found that emerging resource plays are more sensitive to volatility in natural gas prices, given their high development costs, than more established plays.
No comments:
Post a Comment