Enhanced Oil Recovery Technologies and Higher Energy Prices Enable Economical Production from U.S. S Point Roberts WA - April 1, 2011� www.Investorideas.com, an investor research portal specialized in sector research including energy stocks, publishes new CFA commentary from Patrick J. Murphy
BigNews.Biz - Apr 01,2011 - Point Roberts WA - April 1, 2011� www.Investorideas.com, an investor research portal specialized in sector research including energy stocks, publishes new CFA commentary from Patrick J. Murphy on US Shale Plays, featuring junior oil and gas stock, American Petro-Hunter, Inc. (OTC.BB: AAPH).
Patrick J. Murphy is the owner of Murphy Analytics LLC, a provider of sponsored research coverage on smallcap stocks.
"With horizontal drilling, today's oil and gas industry has an extraordinary capability: the power to navigate three dimensionally through the earth, contacting and economically producing resources while minimizing surface disruption."
This commentary from a DOE report, "Environmental Benefits of Advanced Oil and Gas Exploration and Production Technology”, captures the enormous opportunity made possible by the technological advances pushed forward by Halliburton (NYSE: HAL) and others driven to find an economical approach to tapping into what the U.S. Geological Survey estimates is 2.5 to 3 trillion barrels of proven resources of shale oil throughout the world. Importantly for domestic producers, studies estimate that the U.S. has as much as 73% of the world's recoverable shale oil in contrast to only 5% of the world's recoverable crude oil.
Historically, vertically drilled wells were the most economical method for tapping into the formations that have produced abundant quantities of the world's oil and gas. However, as producers began to comprehend the magnitude of the opportunity in the Barnett Shale, the Woodford Shale and elsewhere, it became clear that exploiting unconventional resources would require unconventional technology.
As explained by the Energy Information Administration of the DOE, because oil and gas reserves are much wider than they are deep, which is particularly true of U.S. shale reserves, horizontal drilling achieves the technical objective of intersecting a reserve in a manner that maximizes contact with the reserve. Developing this expertise took time, however, and this technical evolution is highlighted in a Halliburton white paper that points out the lag between the identification and commercialization of the Barnett Shale opportunity:
"Lacking an efficient means of production, U.S. shale gas reserves were largely ignored so long as market conditions made reserves more costly to produce than conventional sources. In fact, one of the first recognized major shale gas plays, the Barnett Shale of Texas, was under investigation as early as 1981, but not until 1995 was the hydraulic fracturing technology available that successfully brought in the gas at commercial rates. Then, five of the initial six wells each began producing more than two million cubic feet of gas per day and, soon after, introduction of horizontal drilling began to extend the basin where today two percent of all the gas consumed daily in the U.S. is produced.”
The delay in utilizing horizontal drilling and hydraulic fracturing was not solely the result of the lack of technical knowledge, but also a function of the higher relative cost of these technologies, which did not prove to be economical when oil and gas prices were low. Although the cost of drilling a horizontal well can be as much