US shale plays take center stage

Despite all the negative news coming out of the Gulf of Mexico, US onshore is seeing a revival of activity centered around the massive natural gas assets contained in the many shale plays across the nation.

In fact, America's Natural Gas Alliance just reported that the shale plays make the US the largest producer of clean energy in the world. Furthermore, a study by Penn State University found that the Marcellus Shale alone is injecting billions of dollars into the economy and providing tens of thousands of jobs.

In reviewing traffic and trends on the energy website I manage PennEnergy, shale stories consistently rank as the biggest drivers of page views. In addition, shale deals have earned the biggest dollar amounts for contracts and JVs -- a new trend. For the past couple of years, offshore -- and namely deepwater -- has typically seen the most activity.

Although I don't think the change can be solely pinned on the Deepwater Horizon incident and subsequent deepwater drilling moratorium, certainly it helped.

When Anadarko announced last week that it was going to have to force majeure three of its four ultra-deepwater drilling rigs contracted in the Gulf of Mexico, the company said that it would refocus that exploratory budget onshore the US, specifically on its Marcellus, Haynesville and Eagle Ford shale plays.

"Although our Gulf of Mexico drilling activity has been suspended due to the moratorium, we are evaluating opportunities to reallocate some of the 2010 capital from the Gulf to other areas of our global portfolio, including our numerous onshore liquids-rich opportunities, and we remain committed to our worldwide exploration, appraisal and development programs," said Jim Hackett, Anadarko chairman and CEO.

Just today, India's Reliance Industries committed $1.15 billion in a joint venture agreement with Pioneer Natural Resources to enter into its Eagle Ford Shale acreage in South Texas. This is the second major investment the Indian major has made in the last few months. In April, Reliance paid $1.7 billion to form a JV with Atlas Resources on its Marcellus Shale properties.

The work the US shale plays offer has been bulking up jobs and company backlogs for months. In addition to a growing number of onshore rigs working in the US, pipeline construction contracts abound. 

Also, Cheniere has decided to add liquefaction capabilities to its LNG terminal at Sabine Pass in Louisiana. The company has contracted Bechtel for the design and construction of the liquefaction facilities to be able to export excess natural gas produced by the prolific shale plays.

Hot Topic: Falkland Island Offshore Drilling

In addition to the strife built up by Argentina before drilling ever started, the Falkland Islands are a hot topic for petroleum experts and investors, alike.

While Argentinian President Cristina Fernandez may have been trying to stop exploration offshore the Falkland Islands in the South Atlantic Ocean, she really just turned up the volume on the buzz that was already humming about this new exploration areas. And to top it off, she wasn't successful at stopping the drilling rig and supplies from getting offshore the Falklands.

Now, Desire Petroleum, Rockhopper Exploration and Falklands Oil & Gas Limited (FOGL) are drilling successfully offshore the Falkland Islands. Desire reported gas after drilling its exploration well at the Liz prospect, and Rockhopper has confirmed oil at the Sea Lion prospect.

Now FOGL is drilling its first well in the South Atlantic with Australian major BHP Billiton, targeting the Toroa prospect. The oil and gas community, as well as investors in the know, are eagerly awaiting the results of this well -- hoping that the Falkland Islands and the South Atlantic prove an altogether new oil and gas region.

In fact, Desire Petroleum has already tagged Rachel, Ninky and Anna prospects as similar to the Sea Lion discovery -- with plans to drill Rachel next.

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.

How will BP overcome hurricane threats?

It's official, the 2010 Atlantic Hurricane Season has begun, and it's expected to be a big one. Experts predict that the Gulf of Mexico could be hit with a record number of storms this year.

In addition to threatening offshore facilities, subsea pipelines and coastal refineries with huge winds and waves, this year's hurricane season could pose a real threat to the ongoing oil spill containment efforts in the Gulf of Mexico.

Not only would an oncoming hurricane stop the oil spill clean-up efforts at sea and onshore, a hurricane would most likely threaten the oil spill containment successes we have seen in the last week with the LMRP oil spill cap.

The LMRP oil spill cap involved severing the damaged drilling riser from the top of the BOP and placing a cap on the cut, connected to a new riser. This new riser transports the oil and natural gas that is spilling from the Macondo well to the Discoverer Enterprise drillship 5,000 feet above.

Today, James Watson, US Coast Guard Rear Admiral and federal on-scene coordinator of the oil spill response gave BP a 72-hour deadline to submit contingency plans should a hurricane threaten or vessels/facilities fail.


Should the Discoverer Enterprise fail, another rig can be on site to pick up the slack; additionally, BP has a number of coals in the fire in efforts to enhance its current oil spill containment efforts.

Nonetheless, the oil and natural gas that is spilling from the Macondo well needs to be collected by a facility on the water's surface. If a vessel is located in the direct path of a hurricane, it would have to move out of the way. Thus, disconnecting from the Macondo well and again spilling the hydrocarbons into the water.


Or would it? Would BP be able to acquire an FPSO to retrieve the captured oil and gas, offload it, and face a hurricane? 


In general, FPSOs are popular both because pipelines are not needed because the vessels can offload to tankers, and because the FPSOs can unhook and travel out of the way of threatening storms. FPSOs have been widely used in Asia Pacific, where typhoons actively threaten offshore oil and gas production.


Here, hydrocarbon flow is shut-in via a valve on the BOP, but as we all know, the shut-off valve on the Macondo BOP is not operable.


I'm interested to see what BP comes up with ... stay posted.