Battlement Mesa in Garfield County, Colo., is witnessing rapid expansion of natural gas drilling, with one operator developing 200 gas wells on nine well pads. Some of these wells are as close as 500 feet from people's homes; state law permits wells to be as close as 150 feet.
Now, a new study out of the community of 5,000 finds that people living within half a mile of a natural gas well conducting hydraulic fracturing are at higher risk of developing health problems compared with people living farther away. The study was published in the journal Science of the Total Environment.
"Our data show that it is important to include air pollution in the national dialogue on natural gas development that has focused largely on water exposures to hydraulic fracturing," said Lisa McKenzie, author of the study and researcher at the Colorado School of Public Health, in a statement.
Many states set a minimum distance between a drilling site and a residence, but there is little research to back up this value. Some of these values are based on a study out of Alberta that looked at hydrogen sulfide release, and the value may not be relevant to natural gas drilling in the United States, said McKenzie in a phone interview.
But further research in Garfield County could be difficult given allegations last year by study co-author Roxana Witter that the county has terminated its support since May 2011 (Greenwire, Jan. 10).
The study looks at health risk due to air pollution from a well completion. The process includes hydraulic fracturing, which uses water and chemicals to fracture rock, and the flowback of these liquids back to the surface. Emissions also result from diesel engines and generators, tanks that hold produced water, drilling fluids and other materials.
Petroleum hydrocarbons emitted during the process such as benzene, ethylbenzene, toluene and xylene are known to be toxic. Acute exposure has been linked to eye irritation and headaches, asthma and some forms of cancer.
The researchers measured levels of certain gases in the Battlement Mesa region between January 2008 and November 2010 to study ongoing exposure and health risks. They plugged their values into EPA models to estimate the hazard to health.
They found that the noncancer health impact of natural gas development is greater for residents living within 500 meters of wells, especially when a well is being completed. Levels of trimethylbenzene and xylenes in the air were greatest at this point.
Since the EPA model gives a qualitative rather than a quantitative result for noncancer health effects, the researchers could not say how much higher the risk was to people living near a well pad.
The well-completion phase also corresponded to the complaints from residents of headaches and throat and eye irritation, states the report.
The report found that "for those living near the well, the cancer risk was slightly elevated compared to those living farther from the wells; it wasn't a large elevation," said McKenzie.
The cancer risk was associated with benzene, and it was 10 in 1 million for residents living within half a mile, and six in a million for residents living farther away.
"I think it's probably worth pointing out that the paper is based on a modeling exercise; they didn't actually go out and find real people with real health issues," said Chris Tucker, spokesman for the industry group Energy In Depth. "Because it's based on a modeling exercise, the inputs you feed into the model really matter."
HOUSTON -- Oil and gas companies are rapidly opening new frontiers in Africa, and that is raising concerns for both the industry and the governments there.
Africa's existing oil and gas producers continue to dominate the continent's industry. But recently there has been a run of new discoveries by outside companies in parts of the continent where exploration and production activity has been either minimal or nonexistent.
Last month Houston-based Hyperdynamics Corp. announced it had completed its drilling of an exploration well in 2,300 feet of water off the coast of Guinea, an impoverished nation of 11 million that's roughly the size of Oregon. That firm says it's continuing to explore its 9,600-square-mile West African concession, one of the largest held.
Before that, Anadarko Petroleum Corp. announced it had discovered oil in the deep waters off Sierra Leone's coast in 2009 and again in 2010. In subsequent years, that company and others have announced major oil and gas exploration activity and finds, on- and offshore, in various sub-Saharan African nations not known for hosting the industry, including Ghana, Ivory Coast, Namibia, Gabon and Guinea.
Development banks and the United Nations generally consider these finds a boon to the continent. Some of the nations involved, like Sierra Leone, are emerging from years of conflict and government mismanagement and are in desperate need of revenue to help their economies grow.
Others think there is reason to worry. Political scientists who ascribe to the "resource curse" theory suggest that, rather paradoxically, major hydrocarbon finds could in fact harm these societies and their economies rather than help them. And even the oil and gas industry's own advisers are warning companies to tread carefully, mindful of the risks and emerging dangers involved with investing on that politically unstable continent.
But the potential resource access is speeding things along regardless.
Particularly in East Africa, "the aerials look very promising," said Joseph Stanislaw, a senior adviser on energy and sustainability with Deloitte.
"Those preliminary shots make it look relatively attractive," he added. "You have to do seismic work and other things, but you can get in now pretty cheaply, and if even a portion of what some people think might be there is, it's significant."
Active in Africa
Last November, United Continental Holdings Inc., parent company to the merged United and Continental Airlines, announced it was launching the first daily non-stop service by any carrier from Houston to Lagos, Nigeria, a city considered a transportation hub of western Africa. Prior to that, only charter flights or connections linked Texas to the continent. The company said the uptick in interest in Africa among the city's oil and gas companies justified the new direct route.
Anadarko appears to be the most active driller in sub-Saharan Africa. On top of its offshore Sierra Leone partnership with Tullow Oil and Repsol, Anadarko has announced other recent discoveries, including in the Tano offshore block in Ghana. The new resources being developed add to Ghana's existing multibillion-barrel Jubilee field recently brought into production. Investments in Ghanian light sweet crude projects continue to advance at a rapid pace.
"Finding a significant light oil accumulation is an excellent result that enhances the value of the Greater Tweneboa, Enyenra and Ntomme complex," said Anadarko worldwide exploration vice president Bob Daniels in the announcement. "We now estimate oil makes up the majority of the resource in place."
This month Eco Atlantic Oil and Gas reported positive results by a third-party auditor looking at its data on a promising offshore find in Namibia. The assessment's "best estimate" suggests a resource of up to 7.8 billion barrels of oil.
The success of smaller operators has drawn interest from larger players. Last week, oil and gas giant BP announced it was increasing its investments in Namibia's offshore potential, purchasing a 30 percent interest in an exploration license held by Serica Energy. More giant operators, including Italy's Eni, Brazil's Petrobras and Norway's Statoil, all seemed determined to make Mozambique in East Africa a liquefied natural gas powerhouse on par with Qatar, currently the world's biggest LNG exporter.
Other firms are also exploring for crude in East Africa, both on- and offshore.
CAMAC Energy Inc. was recently awarded three exploration blocks on land in Kenya, a country much better known for tourism than hydrocarbons. Others are investigating the potential for crude oil and gas developments in parts of Tanzania and Uganda. In January, Canadian-held African Oil Corp. even started to drill for oil in a section of war-torn Somalia.
Companies say they are investing in oil and gas operations in East Africa because it makes economic sense, especially since many of their peers are actively doing the same.
"Not only is Kenya home to some of East Africa's most prospective basins, but the awarded blocks are adjacent to those owned by proven explorers Tullow, Apache and Ophir," CAMAC Energy CEO Kase Lawal said in a note to investors. "Once again, as with our previous announcement in Gambia, we are continuing to validate our strategy of acquiring prime frontier exploration acreage throughout the continent."
Industry's bold new moves into East African frontiers, such the Somalia drilling program, are starting to raise concerns among analysts that some companies may not be paying enough heed to the risks they face.
During a talk on East African oil plays at the recent IHS CERA energy conference, IHS upstream opportunities analyst Nick Holloway spelled out the dangers firms need to be aware of.
Security concerns remain paramount, particularly in Somalia, where pirates, kidnappers and armed insurgents are all active. Piracy is also a risk for drillers in Tanzania and Mozambique. These nations have very high crime rates and political instability, as seen recently when Kenya, a nation long considered safe to invest in, descended into relative anarchy after disputed elections in 2007.
CAMAC's exploration zones in Kenya are famous for banditry. And the infrastructure needed -- including roads, railroads and ports -- is often in very bad shape in places where oil and gas firms are now prospecting for resources.
Probably of more immediate concern to investors is the risk of "resource nationalism," as demonstrated in recent years by Venezuela. As these projects develop and grow more lucrative, companies may face pressure to rewrite contracts in ways that direct more revenue to the governments in the region. Governments may even be tempted to seize assets altogether, Holloway warned.
International organizations are more concerned about the risks the governments face as they open up their territories to the industry.
In their new book "The Dictator's Handbook: Why Bad Behavior is Almost Always Good Politics," political scientists Alastair Smith and Bruce Bueno de Mesquita argue that the discovery of major oil reserves is usually bad news for populations in developing nations. If the political leadership is determined by relatively few individuals, they assert, then oil wealth frees up the leadership from having to implement reforms that generally lead to greater domestic economic growth, like free speech and press. Other academics have made similar arguments that oil wealth is generally bad for developing nations.
In a joint study on the increased industry activity in the continent, both the African Development Bank and the African Union appear all too aware of this conundrum. In it, the two organizations advocate regional cooperation and coordination to figure out ways to deter corruption, as well as to ensure that governments get a fair share of the wealth.
The AU and ADB have even floated the idea of an African Petroleum Fund to distribute the oil and gas revenues more evenly across the continent's economy. The proposal suggests the organizations have acknowledged the fact that the existing oil and gas producers in sub-Saharan Africa -- Nigeria, Angola, Equatorial Guinea -- are still some of the least developed countries on the planet, despite their relative resource wealth.
"Given that oil is a non-renewable resource, it is vital to reduce corruption, promote intergenerational equity, and negotiate more beneficial and transparent contracts with oil companies," researchers for the ADB and AU write in their 217-page assessment. "Such cooperation can cover many areas, for example, infrastructure development, but efforts to channel oil revenues so that they can be used to meet the continent's development needs are particularly important."
Stanislaw at Deloitte argues that the industry is used to dealing with operations in conflict zones and other risky areas, so East Africa poses no new great challenges for them. The physical environment is also attractive, as the industry is much more familiar with tropical environments than with places like the Arctic, he said, giving a further boost to the new rush of activity coming Africa's way.
"A lot of the areas that have natural resources like oil and gas are in conflict areas, and industry has gotten used to being there, so it doesn't put them off; they know how to deal with it," he said. "And if the resource base is there, then infrastructure is not an issue."
HOUSTON -- The public has become more open to offshore drilling and the oil and gas industry in general than it was a year ago, a new opinion poll finds.
Though the results find the public still favors a greater shift to alternative energy sources, the survey released yesterday by the Pew Research Center for the People and the Press shows increased support for more oil and natural gas extraction in the United States. The public has also largely gotten over its concerns about offshore energy development since the 2010 Macondo well spill, the organization finds.
Almost two-thirds of respondents, or 65 percent, said the United States should develop more offshore oil and gas wells. Pew says the level of support for offshore drilling is now where it was before the Deepwater Horizon oil rig disaster.
Just 44 percent said the same in June 2010, during the Gulf of Mexico oil spill, though support had recovered to 57 percent in favor last year.
And although more people say the nation should prioritize alternative energy first, the new survey suggests that wind, solar and other alternative energy industries actually lost some public support they enjoyed. Meanwhile, oil and gas companies gained it.
In March 2011, Pew reported that 63 percent of the public thought a shift to alternative sources of energy should take higher priority over oil and gas in the nation's energy policy. Just 29 percent said oil and gas should be prioritized first.
This year, that gap has narrowed by a significant margin. Just 52 percent now tell Pew that alternatives deserve top priority, while 39 percent want the nation to first focus on getting more oil and gas out of the ground. The survey released yesterday was conducted March 7-11 among 1,503 adults.
Pew's numbers may also give some comfort to firms that plan greater use of hydraulic fracturing, or "fracking," for oil and gas extraction. Of those who indicated they have heard about the technology, 52 percent said they favored its use, while 35 percent said they opposed it. Men tend to be more supportive than women, and opinion is evenly split among college graduates.
"Although young people are less likely to have heard about fracking, those who have are just as likely as older people to favor it," Pew researchers say in the report. "But there is a wide education difference in views about fracking. College graduates are about evenly split: 45 percent favor fracking while 43 percent are opposed. A majority of those with some college (56 percent) or a high school education or less (56 percent) support fracking."
Lisa Christian, a senior researcher at Pew, said this year's survey marks the first time her organization asked participants about their opinions on hydraulic fracturing. She said the results suggest only tenuous support for the practice. Far more people demonstrate support for the Keystone XL pipeline project, a similarly controversial topic in the energy world today, she noted.
"We asked last month about the Keystone pipeline, and awareness is about the same -- about a quarter heard a lot, a little over 60 percent had heard at least a little -- but the balance of opinion there was, I think, 66-23," Christian said. "So by more than two to one, people were saying the government should approve the Keystone pipeline rather than saying they shouldn't approve it."
The presidential campaign season seems to have largely flipped support for renewable power among Republicans.
Last year, Republicans narrowly favored renewables over oil and gas, 47 percent versus 44 percent. This year, however, Republican support for wind, solar, hydrogen fuels cells and other technologies has dwindled to just 33 percent saying those should be prioritized, while 59 percent now want the country to focus first on oil and gas.
Pew attributes higher gasoline prices to the stronger showings for offshore and onshore oil and gas production in this year's survey. But the financial pain at the pump hasn't affected public opinion in other areas.
According to the survey, the vast majority of U.S. residents want the government to mandate the production of more fuel-efficient vehicles, 78 percent versus the 19 percent who say they oppose such regulations.
And though 65 percent favor more offshore drilling, a greater percentage, 69 percent, want more funding for research into alternative energy technologies. Support falls along partisan lines -- 81 percent of Democrats and 70 percent of independents said they favored more funding for alternative energy research and development. Only 52 percent of Republicans agreed.
The public remains evenly split on the topic of tax credits for oil and gas companies.
When asked if firms should be given tax cuts to encourage more drilling, just 46 percent said they favored this idea. Fifty percent said they were against it. Pew said those numbers largely remain unchanged since 2008.
HOUSTON -- Royal Dutch Shell PLC will soon dispatch a new oil-spill-response vessel to Alaska as the company lays the groundwork for drilling in the Beaufort and Chukchi seas.
This weekend, Alaska Sen. Lisa Murkowski and Lt. Gov. Mead Treadwell are slated to meet with Shell's Alaska exploration vice president Pete Slaiby to tour the Aiviq, a new ice-class vessel now docked at Port Fourchon, La. The media and other elected officials have also been invited to attend the christening ceremony Saturday.
According to Shell, the Aiviq is the most sophisticated ice-class vessel of its kind. The company also claims the ship is the toughest nonmilitary icebreaker in existence.
A specially designed hull that's more than 3 inches thick in some parts will be powered by engines boasting more than 30,000 horsepower. The reinforcements and engine capacity are designed to allow the new ship to cut through or deflect ice floes and other Arctic hazards in Alaska's portion of the Chukchi and Beaufort seas, which extend well north of the 66 degrees north latitude line.
The ship was built by Louisiana-based Edison Chouest Offshore and is slated to be pre-positioned in Alaska's Arctic waters as part of Shell's spill response plan.
"It has already created more than 800 jobs and will be the leader in vessel technology in the Arctic," Shell spokeswoman Kelly op de Weegh said in an email.
The 360-foot-long, 70-foot-wide Aiviq is Shell's newest oil-spill-response vessel, but only one part of the company's on-site emergency service and spill response measures. Shell has been taking pains to alleviate public worries about its Arctic drilling program in the wake of the 2010 BP Gulf of Mexico oil spill, and executives there insist the company is making the most aggressive spill-response preparations in the history of the industry.
Shell has already dispatched the Noble Discoverer drill ship from a port in New Zealand. The ship's departure was delayed when protestors from Greenpeace boarded and occupied it.
Earlier this month, a federal judge granted Shell's request for a temporary restraining order against Greenpeace, ordering the group to stay away from its Arctic operations.
About 22 vessels in total are being staged to support Shell's exploratory drilling that's set to begin this summer. Op de Weegh said Shell plans to drill up to 10 exploratory wells in the Arctic's shallow waters over the course of two years.
The shallow-water drilling itself isn't expected to be all that technologically complex, but its spill response system is. The company's plan envisions a three-tiered system in operation 24 hours a day. Spill response vessels like the Aiviq will be backed up by near-shore barges and pre-staged spill recovery equipment. Shell says it will be capable of responding to an oil spill within an hour of its onset.
"Possibly drilling up to 10 wells across both seas in 2012 is an appropriate pace for the time frame that exists in an open water drilling season," op de Weegh said. "We are certain we can conduct these operations safely and according to Shell's stringent offshore drilling standards."
Chevron Corp.'s former leader of Saudi Arabian operations yesterday took over as Mediterranean Oil & Gas PLC's new CEO.
Bill Higgs spent 23 years overseeing global exploration, development and operations for Chevron. He served in a number of roles for the oil major, including chief strategist in charge of setting action plans with Chevron executives and his most recent position as senior vice president responsible for the company's Saudi Arabian exploration, development and production.
"We are delighted that Bill has agreed to become our chief executive officer, bringing his extensive experience of international exploration and development to our board," said Mediterranean Oil & Gas (MOG) Chairman Keith Henry. "His broad expertise and proven innovative and strategic leadership will be invaluable to the company."
Higgs, who holds a bachelor's degree in geological science from the University of Leeds and a Ph.D in structural geology from the University of Wales, stepped into his new role at MOG yesterday.
Interim MOG CEO Sergio Morandi will resume his role as the company's chief operating officer. Morandi has been holding the position of CEO since former Mediterranean Chairman and interim CEO Michael Bonte-Friedheim, who was appointed to his position during a company reorganization last year, left MOG in November.
MOG owns and operates the Ombrina Mare oil and gas field in the Adriatic Sea. All of the firm's assets are in the Mediterranean region, with most located in Italy, Malta and France.
Private resources companies will soon have access to Russian oil and gas fields, and the Arctic nation will soon change its tax system to promote the emerging industry's growth, said the CEO of a major Russian energy firm.
Russia's previous policy of offering exclusive access to the resources in the region to state-owned groups Gazprom and Rosneft had "yielded no positive results," and Russian President Vladimir Putin now firmly supports opening the fields to privately held firms, said OAO Lukoil CEO Vagit Alekperov.
Putin "understands that we have to resolve this issue," Alekperov said. "State companies take the licenses and do nothing with them."
Traditionally, nonstate-owned firms have been allowed to enter the region only if they are in partnership with Gazprom or Rosneft. Attempts at such a deal between BP PLC and Rosneft collapsed last year (Greenwire, May 17, 2011). Exxon Mobil Corp. has a fledgling deal with the Russian company.
Alekperov added that, without the tax overhaul, Russian oil production would fall sharply after 2016.
The Lukoil CEO said Russia's existing tax structure does not provide enough incentives for companies to develop new resources. Rather than taxing energy firms' profits, the nation taxes production and offers breaks for specific projects.
Oil and gas companies want a more stable, consistent system, Alekperov said.
His wish could be granted if Russia approves a new tax regime, which the nation's Energy Ministry backs. The system would reduce crude oil export taxes from 65 percent to 60 percent. Further changes include a proposal to tax companies at a low rate in the early stages of an oil field's life, raise duties as output rises and lower rates once again as the field is depleted.
Alekperov said there is a "strong likelihood" Russia will adopt the new tax structure (Guy Chazan, Financial Times, March 18). -- PK
North Dakota landowners are up in arms about century-old riverside protection laws that allow the state to lay claim to minerals beneath riverbanks and lakeshores, potentially robbing property holders of millions of dollars in rent and royalties from drilling companies.
Historically, private property owners hold title to mineral rights on land down to the low-water mark on navigable waterways, unless they sell or give away those rights, said Charles Neff, an attorney representing a group of landowners who are suing the state for "unlawful taking of mineral interests" by invoking an 1889 public-use doctrine to claim mineral rights up to the high-water mark.
"Now that oil wells are being punched all over the place, there's a lot of fussing about who owns the minerals," said Neff, who works for the firm Neff Eiken & Neff PC in Williston, N.D. "The state has the right to make sure the public has access to things they can use like parks, lakes, roads -- not minerals 10,000 feet underground that no one even could conceive of 100 years ago."
Oil companies have been circumventing the issue by double leasing, or paying both the state and a private landowner for the right to drill wells, he said.
"An oil company is not going to drill a $10 million well with any title problems, so they're paying both sides for leasing," Neff said. "With the wells that have already been drilled and are now in production, the oil companies don't know who to pay."
Stanford Reep, the lead plaintiff among the group of suing landowners, said the well that Statoil ASA's Brigham Exploration Co. drilled on his riverfront property produced 100,000 barrels of crude oil over the last year. But since the Norwegian company had a deal only with the state, Reep said, he did not share in the profits.
Representatives for the defendants -- the state, the North Dakota Board of University and School Lands, and North Dakota Trust Lands Commissioner Lance Gaebe -- would not comment or were not available to comment on the case (Joe Carroll, Bloomberg, March 15). -- PK
As drillers roar into eastern Ohio's Utica Shale, attorneys with expertise in leasing, exploration and drilling are in high demand.
Law firms with existing oil and gas practices are now expanding those departments. Law schools are beginning to offer courses dealing with shale exploration. Small firms and solo practitioners are taking on landowners' cases, while bigger firms are looking to represent gas companies.
"I wouldn't be surprised if there wasn't tens of thousands of disputes already," said Roger Proper Jr., an attorney from Critchfield, Critchfield & Johnston Ltd. in Wooster, Ohio. It just might be that many of those cases have not yet reached the courtroom, he said.
It used to be that energy companies leased land from farmers for $10 or $15 an acre and plunked down seesaw-shaped natural gas "grasshoppers" that looked a whole lot like rusty farm equipment, said Lee Plakas, managing partner of Tzangas, Plakas, Mannos & Raies Ltd. in Canton, Ohio. These days, drilling rigs reach as high as 90 feet, surrounded by acres and acres of rock and gravel well pads.
"In numbers there is strength, and because of the dramatically different technology of the horizontal drilling, all of the procedures and customs have been thrown out the window," Plakas said.
To help clients reap the benefits of oil and gas development, Plakas' firm assists property owners in forming associations that combine their land into bigger sections.
The increased size of drilling operations has made some landowners more cautious.
"Because the equipment is bigger, and it makes more of a mark on the land, it's very important that landowners have provisions in their leases that protect them," said attorney Richard Emens, who has 60 years of experience in oil and gas contract law and represents nine landowner groups with more than 350,000 acres along the eastern side of Ohio.
Michael Hardy, who heads a 25-attorney multifirm "shale team," said he expects the demand for legal assistance will not remain constant forever.
"I would guess there will be a sharp trajectory upward in terms of increased legal services for a while, and then it will level out and flatten as people become comfortable with the process," Hardy said.
Law schools are seeing their students become more interested in shale.
Cleveland-Marshall College of Law has already added a course on oil and gas law and plans to add more energy law classes, said school spokeswoman Elaine Terman. Case Western Reserve University School of Law tackles shale exploration in its environmental and land-use courses.
The Ohio State Bar Association is also stepping in to provide seminars to teach lawyers about hydraulic fracturing. But for some time, at least, there will be a learning curve, said Dale Arnold, energy specialist for the Ohio Farm Bureau Federation.
"Things have changed dramatically," he said. "The need for good legal counsel and having legal counsel up to speed is paramount right now" (Alison Grant, Cleveland Plain Dealer, March 17). -- PK
European and Chinese shale gas projects are not guaranteed to succeed and may take years to come into production, a Chevron Corp. official said.
It will take three to five years for Chevron to decide whether it would be profitable to start up any shale projects outside America and about another 10 years before the projects produce any gas, said George Kirkland, head of oil and gas production for the company, in an interview with The Financial Times.
Chevron has drilled its first shale exploration well in Poland and has plans for other wells in Europe, China and Argentina this year. But Kirkland said geological uncertainties mean these wells might not serve as a launching pad for a shale boom of the magnitude the United States has experienced.
"Almost every one of these shales that we are drilling and producing from in the U.S. today, we drilled through those 20, 40, 50, 60 years ago, because we drilled other formations in there," Kirkland said. "We had tremendous data in the U.S. and Canada, and we frankly just don't have that kind of data around the world. There's a huge catch-up in knowledge and data that's got to happen."
Poland has "reasonable possibilities" for shale gas success, he added, but that will hinge on whether the nation can build appropriate pipeline infrastructure and whether the country's shales respond to hydraulic fracturing in the same way U.S. formations have.
"If we can't fracture it, then we won't be able to build the flow paths for the gas to get out of there," Kirkland said (Ed Crooks, Financial Times, March 18). -- PK