The International Liquid Terminals Association’s 2014 conference began with a discussion delivered by James Fallon, director of Downstream Energy Consulting at IHS Global Inc., focusing on shale oil developments and the movement of liquid products.
In addition to examining capital investments in transportation and storage infrastructure, Fallon revisited the primary shale formations in North America, as well as shale plays considered to be in the developmental stage, and how new production techniques in these regions have led to shifts in crude and natural gas logistics in the U.S.
Fallon identified the U.S.’ three major tidal plays as the “Big Three”: the Bakken in North Dakota; the Eagle Ford, located about 100 miles south of San Antonio; and the West Texas Permian Basin.
“If you look at what the next big plays are, a couple are emerging, and each has its own characteristics and profile,” Fallon said. “One is called SCOOP, an oil industry acronym for South Central Oklahoma Oil Province.
“There’s a lot of activity there. From a storage terminal and infrastructure prospective, being 50 miles away from Cushing means you don’t need a lot of holding infrastructure. You just need to connect yourself to Cushing.”
Referring to California’s Monterey Formation, Fallon cited a report recently released by the Energy Information Administration that had downgraded its reserves by 96 percent.
“My view has always been there’s going to be additional challenges for developing shale oil or unconventional resources in California,” Fallon said. “Part of it is permitting.
“California will always be, sort of, running with its shoes tied together. There is a resource there, but the real challenge with Monterey is they really haven’t cracked the code yet. It hasn’t been proven to be cost effective.”
Fallon also cited the Tuscaloosa Marine, which stretches “in a sort of wide swath” throughout Louisiana and Mississippi.
“You’re starting to see encouraging results there,” Fallon said. “Operators in that region have been drilling and experimenting for about the past three or four years.”
Fallon indicated their efforts are bearing fruit.
“That’s a region that does hold some interest from a terminal operator’s (perspective) because it’s a region that hasn’t had a lot of oil and gas infrastructure,” he said.
Fallon then referred to what he termed “a fair amount of shale oil plays” in Canada with tight oil experiencing “a renaissance, or revival of sorts,” as a result of the Viking Formation.
“The thing about Canada is its resources are located in Alberta and British Columbia,” Fallon explained. “They’re pretty isolated, so there would be a fairly high infrastructure needed to bring those resources to market.”
Notably emerging in the past year “and there hasn’t been a ‘Wall Street Journal’ article about it yet so a lot of people don’t know,” Fallon quipped, is a revamp, of sorts, of old wells that enhance oil recovery.
“What people have started to do is take existing old wells and use the techniques pioneered for unconventional shale oil, and started to recomplete existing wells with those technologies,” Fallon said. “We’re seeing a lot of success.”
The process reactivates conventional oil wells that might decline by 4 or 5 percent per year, reversing their production growth to decline rates of 1 or 2 percent.
“The difference between a 1- or 2-percent decline rate and a 4- or 5-percent decline rate is huge,” Fallon said. “You’re seeing the conventional resource base in the U.S. be used more efficiently by using unconventional technologies.”
For more information, visit www.ilta.org.
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