Reservoir Engineering – June 7, 2015

Today we talk about five things in the news for the week of May 18 , 2015:

  1. EPA Gives Two Thumbs Up to Fracking
  2. Senate Looks Upstream, House Looks Midstream
  3. EIA Says Clean Power Plan Real Bad for Coal, Mixed on Gas
  4. Republican Presidential Candidates Downplay Energy
  5. Gas Companies Getting Into Climate Action

Our interview is with Islin Munisteri, a reservoir engineer.

Click below to listen or find us on iTunes or Stitcher.

1.  EPA Gives Two Thumbs Up to Fracking

On June 4, the U.S. Environmental Protection Agency issued a rather favorable report on the risks of hydraulic fracturing to drinking water.  The report does not look at all fracking impacts, rather it focuses on five drinking-water-related issues:

  • Water acquisition: the withdrawal of ground or surface water needed for hydraulic fracturing fluids;
  • Chemical mixing: the mixing of water, chemicals, and proppant on the well pad to create the hydraulic fracturing fluid;
  • Well injection: the injection of hydraulic fracturing fluids into the well to fracture the geologic formation;
  • Flowback and produced water: the return of injected fluid and water produced from the formation (collectively referred to as produced water in this report) to the surface, and subsequent transport for reuse, treatment, or disposal; and
  • Wastewater treatment and waste disposal: the reuse, treatment and release, or disposal of wastewater generated at the well pad, including produced water.

The assessment relied on an evaluation of existing literature and data.  In other words, no new studies were produced.  The study noted that almost half of all fracking was done it Texas, with Colorado, Pennsylvania, and North Dakota following far behind.  Regardless of oil prices, the EPA predicts U.S. production will continue to grow in coming decades.  The EPA found that 9.4 million people live within one mile of a hydraulically fractured well.

The EPA said there are mechanisms by which fracking can impact drinking water.  Specifically, this includes water withdraws in low water areas, spills of fracking fluids and produced water, fracking directly into underground drinking resources, mitigation below ground of liquid and gases, and inadequate treatment of wastewater.    The EPA said its findings were limited by a number of factors, particularly limited pre-and post-fracturing data on water quality.

The EPA did, however, make the widely-repeated statement that it “did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.”  A few other interesting notes popped up.  The report found that the average well uses 1.5 million gallons of water and only about 5% of the injected water is reused.  The EPA said it did not find any cases of fracking causing a well or stream to run dry, though it could have happened.

The EPA struggled to come up with an answer for the risk of spills while mixing fracturing fluids.  It said in Colorado and Pennsylvania spills happened at everywhere from one to 12 spills per every hundred wells.  Others states to do not have similar data.  The EPA also has limited data on what chemicals were spilled, but no reported spill has reached ground water.

The EPA found that most modeling and microseismic studies show that fractures created during hydraulic fracturing in most areas unlikely to extend upward from the shale formations into drinking water aquifers.  There is more risk in some areas where fracking occurs at more shallow depths.  These risks are reduced “by a factor of approximately one thousand when surface casing extends below the bottom of the drinking water resource.”

Water that flows back or is produced from a well is a bit of a challenge, and the EPA says leaks from pits of water stored on the surface “can and do occur.”  The water varies in quality, and the EPA seems to have thrown up its hands and said risks must be evaluated on a “site-specific” basis depending on what chemicals are present.  98% of the time, the water is disposed by underground injection.  The Marcellus Shale region tends to use other methods, primarily recycling, because injection wells are limited in the area.  The EPA report was somewhat critical of the 2% of water disposed through public water treatment systems, for example, but did not take a position on the underground injection wells.

The full study is about 1,000 pages long, and is open for public comment until August 28, 2015.  The executive summary is much more manageable.  Needless to say, both sides found want they wanted in the report:

2.  Senate Looks Upstream, House Looks Midstream

On May 19, 2015, the Senate Energy and Natural Resources Committee held a hearing to look at the supply portion of an energy bill that is in the works with four titles: efficiency, infrastructure, supply, and accountability.  The hearing looked at all types of energy, and had a lot of focus on geothermal and hydro electricity generation.  The coastal Senators on the panel, Sen. Lisa Murkowski (R-AK) and Sen. Bill Cassidy (R-LA) shared their support of revenue sharing for offshore drilling.  Sen. Tim Scott (R-SC) also supports offshore drilling and revenue sharing, but he did not make remarks at this hearing.

On May 20, 2015, the House Natural Resources Committee held a hearing on H.R. 2295, the “National Energy Security Corridors Act.” The bill is sponsored by Rep. Tom MacArthur (R-NJ) and Rep. Cedric Richmond (D-LA), and they explain that it establishes National Energy Security Corridors on federal lands and streamlines the rights-of-way approval process for natural gas pipelines across federal lands. Rep. MacArthur expressed a particular concern with the lack of pipeline infrastructure in the Northeast. A witness from the U.S. Bureau of Land Management expressed skepticism about the bill, while several others argued it was necessary.

On June 2, 2015, the House Energy and Commerce Subcommittee on Energy and Power held a hearing entitled “Quadrennial Energy Review and Related Discussion Drafts.”  The Committee is also putting together a comprehensive bill, as Chairman Fred Upton (R-MI) explained:

3.  EIA Says Clean Power Plan Real Bad for Coal, Mixed on Gas

When the U.S. Energy Information Administration puts out its projections for the future of U.S. energy markets, the agency generally follows current law.  That means, for example, that renewable energy credits set to expire after a few years are generally not counted even if everyone knows they will be extended eventually.  More importantly right now, President Obama’s Clean Power Plan for reducing carbon emissions from powerplants is currently just a proposal and therefore did not factor at all in the EIA’s most recent projection.

The EIA has now released a specific case that treats the Clean Power Plan as if ti was a final rule.  The results are not terribly surprising.  Th good news is that the plan is projected to work, cutting electric power emissions back to 1980 levels.

In the short run, this will help natural gas.  Market share for natural gas will be expected to shoot up from 24% in 2010 to 32% in 2020.  EIA says that without the Clean Power Plan natural gas would increase more modestly, up to 26% of generation by 2020.  In the longer run, however, the Clean Power Plan will hurt natural gas as its market share will give way to renewables.  In 2010, renewables were at 10% (mostly hydro), but the Clean Power Plan is projected to boost that to 27% by 2040.

With natural gas and renewables winning, somebody has to loose.  Nuclear, despite being near carbon free, is expected to dwindle.  Coal is getting clobbered.

4.  Republican Presidential Candidates Downplay Energy

Over the last few weeks the rapidly-growing stable of Republican Presidential candidates have traveled around to a number of gatherings to give there stump speeches.  It can be mind-numbing to hear the same speech more than once, but it gives an interesting sense for what they think is important.  Interestingly, Gov. Rick Perry, the former Governor of Texas, is the only one who has energy as a regular part of his stump speech.

The “war on coal” from last election cycle has largely disappeared, even though it is possibly a stronger argument today.  The focus has shifted to speaking positively about oil and natural gas exports.  Candidates are putting a strong emphasis on geopolitics as well.  At one of the meetings, in May in Oklahoma City, almost all the candidates jumped on board with crude exports.  The is still pretty controversial in Congress, but is one place where the candidates can draw a distinction with President Obama.

U.S. Republicans have had to watch from the sidelines as the Obama White House has taken political credit for America’s unexpected energy boom and tumbling gas prices. Now it has left their presidential candidates scrambling for a way to reclaim leadership on an issue the party once seemed to own.

Their apparent answer: calling time on a 40-year-old federal ban on crude oil exports and using the newfound energy bounty to strategic advantage.

Gov. Scott Walker from Wisconsin made his mention of energy very brief.

New Jersey Governor Chris Christie briefly mentioned coal in his speech.

Former Pennsylvania Gov. Rick Santorum weaved the importance of blue collar work into his environment.

5.  Gas Companies Getting Into Climate Action

Thinking back to the 2012 election, all the energy industries seemed to hang together.  That bond between coal and oil and gas is starting to fray a little bit.  Last week, the Wall Street Journal reported that many of the world’s largest oil and gas companies are coming out against coal.

Executives from Royal Dutch Shell PLC, BP PLC, Total SA and others told industry officials at a conference that their increased production of gas could help reduce carbon emissions and lessen the world’s reliance on coal for heating homes and creating electricity. Coal, they said, is a pollutant that sets back environmental efforts.

The message was delivered at the World Gas Conference in Paris six months before United Nations climate-change talks that could result in an agreement to curb carbon emissions and limit global warning.

So far, the American companies are not jumping on board, as Bloomberg Business reported:

“We don’t intend to participate in that coalition,” Chevron Chairman and Chief Executive Officer John Watson told investors at the company’s annual shareholders’ meeting on Wednesday. “We think we can make our statements, and our statements speak for themselves.”

Exxon Chairman and CEO Rex Tillerson was more blunt in remarks to reporters after his company’s annual meeting in Dallas on Wednesday. …“No thank you, that would not be us,” Tillerson said. “We’re not going to be disingenuous about it. We’re not going to fake it. We’re going to express a view that we have been very thoughtful about. We’re going to express solutions and policy ideas that we think have merit.”

This will be an interesting issue to watch going forward as both industries fight over market share with the climate debate in the background.

Interview with Reservoir Engineer Islin Munisteri (Begins at 28:48)

Islin is a reservoir engineer who is also a big supporter of women in energy and STEM education in general.  She grew up in Colorado and studied petroleum engineering at the Colorado School of Mines.  She had considered becoming an english major, but she was drawn to the promise of stronger earning potential that the School of Mines had to offer.  Islin is a big supporter of the school.  She said the “softest” major is economics, and even that requires large amounts of upper-level math.  She choose petroleum engineering largely because oil is ubiquitous, found in everything from band aids to roads.  Petroleum engineering, she said, is one of the strongest majors at the School of Mines and it has grown a lot in recent years (131 undergraduates completed the program in 2014).

Islin got an early start on her career by working as an administrative assistant at the Colorado Department of Heath.  Her parents really pushed her to get a career-relevant first job, and her mom helped set her up.  During school, Islin had a number of internships that helped pave her career path after graduation.  After her sophomore year she landed an internship with Anadarko Petroleum working on coal bed methane wells in Wyoming.  She learned a lot of the basics of the industry there, fusing pipes, working with logging tools, writing well completion programs, and designating areas for perforation.

After college, Islin moved to Houston to work for BP.  In that setting, reservoir engineers are generally working in an office assigned to a team that includes geologists and geophysicists that work on a particular oil or gas field.  The team considers all the relevant data they have on a field to make recommendations on future production.  It often requires looking at samples as small as a thumb and using that to predict the characteristics of many square miles of the field.  Permeability is the main issue to consider, as that decides your ability to extract the oil and gas.  The goal is always to find a way to make a sufficient rate of return on the field.

The shale boom was not particularly surprising to Islin.  In her role, she is looking at subsurface formations and what is happening onshore is not that much different than the Gulf of Mexico.  And it was clear that older fields had plenty of oil and gas left.  It was predictable that higher prices would drive producers into finding a way to make those leftover assets economic, particularly in tight formations.

Islin is a board member of Pink Petro, a social network for women in the energy industry.  She finds that great way to build a community of support in the industry.  She encourages students to take the time to learn about different career paths and then choose their own.  Try different things, and set up a coffee date with someone that has a job you are interested in.  Early on, for example, Islin learned she would not enjoy a lab environment and she was able to focus her career in another direction.  Islin also recommends that students in STEM do not forget the arts, as she finds much of her technical work still a bit of an art.