The United States of Oil & Gas

united states oil and gas drilling

Since 2010, the United States has been in an oil-and-gas boom. In 2015, domestic production was at near-record levels, and we now produce more petroleum products than any other country in the world. President Trump said he plans to double down on the oil and gas industry, lifting regulations and drilling on federal land. Here is the state of the petroleum extraction industry that the new administration will inherit.


United States Oil and Gas Drilling

There are more than 900,000 active oil and gas wells in the United States, and more than 130,000 have been drilled since 2010, according to Drillinginfo, a company that provides data and analysis to the drilling industry. We’re familiar with oil-rich regions of Texas, but technological advances and new pipeline infrastructure have brought the ability to extract these resources to new parts of the country, injecting billions of dollars into local economies and spurring a modern-day gold rush.

Drilling for black gold in the Permian Basin Many oil basins, the deep geologic formations that hold resources, have started to decline in production. But some, like the ever-reliable Gulf of Mexico and the Permian Basin in western Texas and eastern New Mexico, show no signs of slowing down.

The Permian has produced oil since the 1920s. Companies hit production peak in the 1970s, when they drilled vertically into reservoirs and the natural pressure immediately caused the oil to flow. Over the next 30 years, production declined throughout the United States. Recently, companies have doubled down on the Permian, using a combination of sophisticated hydraulic fracturing and new horizontal drilling techniques to unlock massive untapped oil and gas resources sitting in layers of shale rock. This is commonly known as fracking.

In places like Andrews, Tex., within the Permian geologic formation — already in the middle of oil country — thousands of new wells were drilled in the last 10 years. The population in Andrews County has increased by more than 30 percent since 2005. Similar booms have occurred in other areas as well.

United States Oil and Gas Drilling

A boom in natural gas in the Marcellus region Natural gas production in the United States was traditionally a byproduct of oil production. Sometimes it was put into pipelines, but often it was simply flared, or burned off. Most exploration companies searched for a porous and permeable rock called a “trap” that held oil and gas. That changed in 2002. In the Barnett shale, near Dallas, Mitchell Energy introduced a new method: drill horizontally into shale formations and shoot gas and liquid solutions into the rocks at high pressure, creating fractures that would unlock oil and gas that would flow into the drilling pipe.

Fracking is what has driven the boom in the gas-rich Marcellus shale region, which stretches southwest from Lake Erie to West Virginia and Kentucky. Fracking brought the ability to extract gas more efficiently, and subsequently, production picked up in 2010, ending years of minimal output. For companies, about half of the gas a well produces comes within the first few years, and they must continually drill new wells to maintain production. Since 2010, there have been thousands of new wells drilled and hundreds of miles of pipelines installed in the region.

The areas near the Allegheny National Forest in Forest County, Pa., experienced dramatic increases in the number of wells and an influx of economic activity from the drilling boom in the Marcellus shale.

The gas boom in Pennsylvania at the beginning of 2009 accounted for more than 23,000 new jobs and added $1.9 billion to the state economy. Most of the income from natural gas royalties and leases went to mineral rights owners, a small proportion of the population, which can contribute to rising income inequality in the region.

Are vast reserves waiting to be drilled on federal lands?

A hallmark of President Trump’s “ America First Energy Plan” is the idea that federal lands contain oil and gas resources that should be harnessed.

The federal government owns about 28 percent of all land nationwide, most of which is out west. Four agencies — the National Park Service, the Fish and Wildlife Service, the Bureau of Land Management in the Interior Department and the U.S. Forest Service — are responsible for 95 percent of federal lands.

United States Oil and Gas Drilling

The U.S. Geological Survey assesses the amount of resources within oil and gas formations. These vast reserves stretch from the Northern Plains to the Gulf Coast to the Appalachian Mountains. Some areas, like the Permian Basin in western Texas and the Marcellus shale in Pennsylvania, sit atop several stacked geologic formations rich in resources.

United States Oil and Gas Drilling

There isn’t much overlap in lands the government owns and the oil- and gas-rich geologic formations. The Bureau of Land Management, which holds about 247 million acres of land in the West, might be the most likely federal entity to allow more access for drilling. This is because the agency already leases some of it for oil and gas exploration.

The oil and gas industry has a history of finding ways to extract oil from the ground, said Mark Nibbelink, co-founder and director of university outreach at DrillingInfo. “Given that the USGS just attributed another 20 billion barrels to the Permian Basin, and up until 2002-03 — when exploration in the Barnett shale started — no one thought that shales could produce gas (much less oil),” he said, “I have no doubt that there’s a lot of oil remaining to be discovered and produced on public and private lands.” While drilling is allowed in some cases on federal lands, there is minimal oil and gas production, most of which comes from areas in New Mexico and Wyoming.

But in federal waters, such as the Gulf of Mexico, oil and gas production has long been robust. However, the rise of fracking has made drilling for natural gas cheaper on land than in the water. Since 2003, natural gas production in the gulf has declined more than 70 percent.

The offshore federal waters in the United States are divided into 26 planning areas.

Companies bid on leases that give them the rights to produce oil and gas. Currently, there are active leases in the Gulf of Mexico, off the southern California coast, and in the Beaufort and Chukchi seas, north of Alaska. In the next five years, new leases will be sold only in the gulf and in Cook Inlet in Alaska. As part of the Gulf of Mexico Energy Security Act of 2006, Congress restricted leasing in the majority of the eastern portion of the Gulf of Mexico until 2022.

In 2016, President Barack Obama restricted drilling in the Atlantic Canyon areas off the outer continental shelf that stretches from Norfolk, Va., to the Gulf of Maine, as well as most of the areas north of Alaska in the Arctic Ocean. Viewing the offshore waters from a lens of recoverable resources, the Gulf of Mexico and the Arctic hold the most potential for undiscovered oil and gas. Drilling off the coast of Alaska, however, has its own challenges — namely the short drilling season and frozen waters during the winter.

oil and gas production

Because of its proximity to the oil- and gas-rich fields of Texas as well as the plentiful offshore resources, much of the United States’ oil infrastructure exists along the western part of the gulf. Refineries, crude oil terminals and natural gas processing plants dot the coastline along Texas, Louisiana and Mississippi. Oil companies bid on offshore leases offered by the federal government and ship their products via pipelines to the mainland, where they are refined or processed.

oil and gas production

Visible from space The petroleum industry employs more than 2.5 million American workers and tangentially affects millions more.

The industry is so large, its footprint can be seen from space with the help of NASA’s VIIRS satellite imagery. By isolating the wavelengths of natural gas flares, NOAA scientists identified areas where drilling rigs were burning excess gas. Occasionally, gas might be flared during the production of oil and gas because the area lacks adequate infrastructure to capture the gas.

This paints a picture of the world ablaze with light from oil and gas fields in the United States.

Source: Washington Post


Compiled and Published by GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.

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