From the President- October 2012

Tipping Point

Change is all around us. Not only does fall arrive with the eventual hope of cooler weather, but also our oil and gas  industry is changing in ways we could not anticipate only a few years ago. In 2000, we used the “petroleum system” concept to discuss basin history and to guess where the end product, a commercial accumulation of hydrocarbons, might be. That involved determination of source rock, time of generation, migration pathway, timing of trap and seal, and other factors that lead to entrapment of hydrocarbons.

Now exploration ists have jumped the queue. They now exploit source rocks directly and intercept the hydrocarbons as they prepare to migrate, or are migrating. Today in unconventional,nhorizontal drilling and multiple fracs create artificially fractured reservoir. So much gas is now developed that its sales price has been depressed and is likely to stay moderate as yet more comes on stream with liquids-rich production. Drilling for dry gas has declined dramatically while overall gas production is still rising. After years of speculation, the shift to a gas-dominated energy mix may have arrived in the US. Natural gas, fundamentally methane, is today’s fuel of choice. We have reached a tipping point!

A system once seemed to be in equilibrium has suddenly changed. This situation is analogous to bumping a glass vase on the dining table. Light disturbance may cause the vase to rock but the weighted base prevents it from going over. Lack of care can cause a larger blow and over the vase goes in a spray of glass chips, water and flowers over the hostess’s fine linen!

So it is with energy. The connection between oil and gas price is broken. In part because of government mandates, coal is second now to cheap gas in new electrical generation in the Houston area (Houston Chronicle, Aug 9, 2012).

Compressed natural gas (CNG) outlets have been added to large truck stops across the USA and fleets of garbage trucks in Houston will be converted to CNG. School buses are also being converted. Federal government supports in the form of large grants to researchers to develop natural gas containers the size of present gasoline tanks is the advancement which will accelerate CNG use in cars.

A prior sudden change in fuel use occurred in the mid-1800s. The change from whale oil to kerosene for illumination was reviewed by James L. Coleman in a series of three articles in the HGS Bulletin of 1994. In 1846 the US whaling fleet was at its maximum size, but whale oil had become expensive. By 1854 Abraham Gesner had extracted a clean burning liquid from coal and bitumen that he named and copyrighted as Kerosine. In 1859, Benjamin Silliman, Jr. improved distillation of the Kerosene (modern spelling) from Pennsylvanian crude even as the Drake well produced oil. Use of whale oil in lamps was still practical till the invention of the pressure kerosene lamp with Thorium mantle. After 1888 American whaling was one half its former size and on its way to elimination in favor of kerosene as the preferred lighting fuel.

Wide use of cheap natural gas will be a curse to some, but an opportunity for us in the industry if we prepare ourselves. Here is what the HGS can do to prepare us all for the ongoing change:  provide information and education for its members. The dinner and lunch meetings are an opportunity to be exposed to leading technology, to meet and learn from each other. As many companies have done away with their research labs, academics are now more valuable than ever. We all can write papers and present ideas to contribute.

There are now 4000 HGS members, each one capable of searching for new ideas and useful talks. If you hear a good talk elsewhere consider that perhaps the author might come to Houston to present to HGS. Let us know. The more outside speakers we line up the better our meetings and the more courses we can present. Good sources include the GCAGS, SIPES, GCSSEPM, and AAPG courses, conventions, section and annual meetings. Our email addresses are on page 3 of the Bulletin. I encourage you to relate to us your good meeting experiences.

A word to employers: Cover the expense for employee attendance at evening and noon meetings! These employees are there processing valuable information, ideas, and and techniques developed by others for the benefit your company. If just one idea translated to an increased oil recovery from a shale in just one well by one extra barrel a day, in a year it would be worth an extra $29,000. That is roughly a 1000% return on investment!

We geoscientists need to learn and be ready for that lucky break. As large companies lose heart and sell off gas wells due to huge sunk costs, new and smaller companies can sweep them up.

Opportunity awaits those able to leverage new knowledge of rock physics, seismic attributes, microseismic recording, and re-perforation. Part of our HGS mission is education of members. Now is the time to study up. You owe it to yourself and to others.