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Drilling by the Numbers, Again
 

Drilling by the Numbers, Again

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What's wrong with the State of Mississippi's efforts to open state waters in the Gulf to gas and oil drilling, 2012 edition.

What's wrong with the State of Mississippi's efforts to open state waters in the Gulf to gas and oil drilling, 2012 edition.

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Drilling by the Numbers, Again Drilling by the Numbers, Again Presentation Transcript

  • Estimated Impactof Gas and Oil Exploration in Mississippi State Waters Dr. Jeffrey K. Bounds 14 February 2012
  • What are the economic risks?• Subsidence and loss of barrier islands (unknown risk, catastrophic impact)• Contamination of Mississippi Sound (known risk, avoidable with very strict enforcement)• Economic losses due to damage to Coast tourism industry (high probability)
  • How much oil and natural gas is there in offshore MS? Experts say there is no oil in MS state waters Best estimate of total amount of natural gas under Mississippi’s state waters according to MDA experts: 350 BCF Amount of natural gas in Alabama’s offshore reserve: 9,000 BCF
  • So how much $$ is it worth?Natural gas prices over the last several years: 2008 2010 2009 2011 2012
  • So how much $$ is it worth?Hmmm, but is there a trend here?US Gas Prices, Henry Hub But why would that be??
  • So how much $$ is it worth?Basic economics: Supply and demand
  • So how much $$ is it worth?New technology continues to explode shale productionNatural gas reserves now exceed 1970 levels
  • So how much $$ is it worth? About those price trends . . . U.S. EIA projected price ceiling through 2025
  • So how much $$ is it worth?Price forecasts by US EIA, vs MDA Effective min.-max. price range including yield surplus assumed by MDA
  • Production glut and price drops lead to production cuts and well shutdowns Share Report Abuse Next Blog» Create Blog Sign In HOME TODAYS GLOBE NEWS YOUR TOWN BUSINESS SPORTS LIFESTYLE A&E THINGS TO DO TRAVEL CARS JOBS REAL ESTATE Local National World Politics Business Education Health Science Green Obituaries Special reports Traffic Weather Lottery Robert Charles Trading Blog HOME / COLLECTIONS / NATURAL GAS PRICES ADS BY GOOGLE Drillers cut natural gas production as prices drop Updates on news for investing in the futures and futures options markets February 12, 2012 | Kevin Begos, Associated Press powered by Gold BusinessWeek - Gold May Decline as Stronger Dollar Cuts Demand After Downgrades Recommend Tweet 2 Share E-mail Print Latest News: Seven Fields man says fatal shooting was accident Enter Search Terms As natural gas prices continue to drop, the recent nationwide boom in drilling is slowing. Keep your comments clean and respect others opinions. Profanity and insults are not acceptable. don’t make money if prices go too low — and drilling wells isn’t cheap. Drillers Monday, February 13, 2012 Total is safe to say “It Pageviews that there will be fewer natural gas wells drilled in 2012,’’ said Kathryn Klaber, president of the Marcellus Shale Coalition, an industry group based in Pennsylvania. Natural gas production cuts continue 1 5 5 9 4 In recent weeks, several companies have announced plans to cut gas production around the Member Center |experts say the low prices are also opening up new markets. nation, but Become a Member Home Delivery | E-Newsletters | Kindle | Mobile | RSS Drillers cut natural gas production as prices drop - Boston.com SearchBY GOOGLE ADS This Blog As natural gas prices continue to drop, ADVERTISEMENT nationwide boom in drilling is the recent Marcellus Shale In PA News Search Enter Search Terms TribLIVE.com Web Search by YAHOO! slowing. Drillers don’t make money if Marcellus Shale News. Leases, Pipelines & More. Learn More Today. Home News Sports A & E Lifestyles AskChesapeake.com/MarcellusShalePA Business Opinion Things to do Your Town Photos Classifieds Autos Real Estate Jobs Trib Store prices go too low — and drilling wells isn’t cheap. “It is safe to say that there will be Pittsburgh / Allegheny Regional Westmoreland Fayette State Campaign 2012 Nation World Columnists Most Read Articles fewer natural gas wells drilled in 2012,’’ See Todays Mortgage Rates Larger text Smaller text said Kathryn Klaber, president of the Mortgages Plunge to 2.5% (3.01%APR) As Seen on Good Morning America! Marcellus Shale Coalition, an industry group based in Pennsylvania. In recent Chesapeake to cut natural gas production Blog Top Sites www.MortgageRates.LowerMyBills.com weeks, several companies have announced plans to cut gas production around the nation, but experts say the low prices are also opening up new markets. drastically When the shale drilling boom was starting in 2008 the average price for a unit of gas was about By Kimblogs Finance Leonard and Tim Puko, PITTSBURGH TRIBUNE-REVIEW $8. Two years ago it was down to $5.50, and now it’s dropped to about $2.50. Part of the Tuesday, January 24, 2012 Posted by Robert Charles Trading at 12:58 PM reason is that the shale gas formations became productive more rapidly than expected, as Recommend this on Google Chesapeake Energy Corp. said on Monday it will slash drilling and production Rigs on Me move new wells have been drilled nationwide. About the thousands of due to low natural gas prices and will focus attention on shale holdings that Chesapeake Energy Industry reports Charles the national count of activepossibly including parts of Western in early contain more lucrative liquid gases -- new gas drilling rigs fell to 775 Corp. has 26 drilling rigsnote thatTrading Robert Pennsylvania. 0 comments: in Pennsylvania:down from California, United2008. February, San Diego, about 1,500 in States MORE LIKE THIS » The nations second-largest natural gas producer -- with the largest Marcellus -- Eight are in theRobert Charleslow pricescommodities and it will reduce overall production by 8 percent use Yet Klaber said that the invests in by acreage -- said shale holdings create opportunities for more people and industries to Post a Comment southern Marcellus emissions markets both for its own account and Electric plants shift from coal to natural gas the product. For example,away and might double that if are focusing more on the so-called “wet right some drilling companies prices continue to slump. region, commodity trading advisor and pool operator. as a with two in January 16, 2012 gas’’ that sells for a higher price because it can be transformed by refineries into consumer 1. PSUs costs from Sandusky scandal top $3 Southwest Pennsylvania Enter your comment... View my complete profile Drilling in "dry gas" regions will slow to about 24 operating drilling rigs, from 47, million and products such as plastics and fertilizer. six in northern West and spending will shrink by 70 percent to the lowest level since 2005, the Saudis, foreign firms sign natural gas deals 2. Growth snarls Butler County thoroughfare Virginia. company said. 3. County jail gets another interim leader March 8, 2004 Last month, Chesapeake Energy of Oklahoma City said it is reducing the number of new dry 4. Girl, 4, seriously hurt when SUV rolls into -- Trading Links 18 are in the northern Chesapeake has 1,500 employees in Pennsylvania and more than a dozen gas drilling rigs from 47 to 24 this year. In addition, it immediately cut existing production by creek Halliburton rides oil boom to 4Q profit Marcellus, encompassing facilities in locations including Canonsburg and Mt. Morris. No immediate layoffs 5. $67 million requested for pipeline safety January 23, 2012 dry gas areas of million cubic feet per day, Stacey Brodak, senior director of corporate development, but about 500 are planned, said adding that if low prices persist, it may double the cut, to Robert Charles Trading Webpage 6. Cyril Wecht suspects accidental overdose Northeast Pennsylvania. perthe 26 rigs across Pennsylvania will be cut to 18 in coming months. 1 billion cubic feet day. Comment as: Select profile... Robert Charles YouTube Trading Channel 7. Maglev assets headed to auction Eight rigs running in the its nationwide drilling expenditures this year will be Mt. Pleasant artist enjoys getting his work -- Robert company said that about 85 percent ofsouthwest corner of Pennsylvania and in northern West The Charles With Mondays & Co.s Facebook Page 8. Publish Preview out cutbacks, the southern Virginia will be cut to six, all operating in "wet gas" areas of the play. "While its toward the more profitable wet gas. too early to be specific," Brodak said, "this year the liquids-rich area of the 9. Noodles dispute linked to slaying FIND MORE STORIES ABOUT » MarcellusCharles Trading on Twitter Robert will have six 10. Knoxville boys death result of failure rigs A spokesman for Chesapeake didn’t respond toan request for comment. focused in liquids-rich Marcellus should experience a increased level of investment in completing Natural Gas Prices Bloomberg gas, new wells." shale. The dry15 MIn. Delayed Market Data northern region will have Experts say the companies have ways to cushion the low prices. It’s called hedging, and 12 rigs. Charles EmissionsCEO Aubrey K. McClendon said Oklahoma-based Chesapeake is responding Robert Trading Blog business people have used such tools for hundreds if not thousands of years, said Sara Moeller, to a "rapidly changing" market. Poll On City Financing SD Chargers New Stadium ADVERTISEMENT a professor of business at haveUniversityto cut our dry gas drilling to bare minimum levels," he said, Sources: Chesapeake "We the committed of Pittsburgh. Energy Corp., Wood adding this is "likely to be maintained until expected economics on dry gas
  • So, how much $$ revenue? Revenues to state and local governments from offshore oil and gas drilling: $67–$167 million Revenues to state from tourism in three Coastal counties: $3.4–$5 billionTotal revenues over life of reserve assuming 20 years to depletion
  • a flood-regulation compliant structure virtually anywhere along the Csuch gas rigs would be visible from 14.7 miles. Anecdotal observatioBayDistances 60 feet tall. Also, from to some key locations: ma are about from leasable blocks the MDA-provided leasingeas, one can easily verify the following distances from well-known po blocks MDA is making available: Downtown Gulfport: 8 miles to leasable blocks Downtown Pass Christian: 5 miles to leasable blocks Old Town Bay St. Louis: 5 miles to leasable blocks Biloxi (multiple points): 10 miles to leasable blocks Ocean Springs Front Beach: 10 miles to leasable blocks Pascagoula near downtown: 8 miles to leasable blockssable areas form an east-west band typically two miles deep (north e at one point south of Biloxi the leasable band is as much as 8 miles docations listed above, then, gas rigs within the leasable blocks wouldaction of the leasable areas are sufficiently remote to hide a rig taller e mainland.
  • Will rigs be visible from the mainland? Yes.A 50-foot rig would be visible from about 14 miles froma typical patch north of U.S. 90, or from 15 miles frommany of the most populous areas along the Coast, which are5 to 10 miles from the designated leasing areas.
  • Tourism impacts: What’s at Risk• Second largest employment sector on MS Coast• 2010 State revenues credited to tourism from 3 coastal counties (MDA source): $3.37 billion• Would be $5 billion with full recovery to pre-Katrina industry size• 9% of Gulf Coasts non-local tourists are visitors to the Mississippi barrier islands• A 3% drop in tourism would leave the state with a net loss of revenue due to drilling, ignoring associated costs due to employment loss
  • BP Spill demonstrated & increased tourist sensitivity• BP spill caused a 50% drop in tourism on the Mississippi Gulf Coast• Brown water of the sound doesn’t help perception• Visible presence of rigs will reinforce bad memories
  • What about Alabama’s experience?Alabama protects its revenue-generating Coast tourism areas with a 15-mile viewshed buffer • In 1996 after 15 years of gas drilling, Feds tried to open leasing within view of Baldwin county tourism centers • Chamber, municipalities, and Baldwin county passed resolutions opposed to drilling within 15 miles of coast • State legislature passed resolution opposing drilling within 15 miles of coast • Governor relented • State asked Feds NOT to lease within 15 miles, Feds implemented 15 mile limits
  • What about Mississippi?• Alabama, with all their drilling, doesn’t allow it within 15 miles of their tourism industry• MDA’s Dan Turner: “We don’t think it will affect tourism.”• Turner: Tourism is bigger than gas for now. The reserve isn’t growing; is MDA that uninformed about the numbers?• MDA has placed no restrictions on rig size, or aesthetics, or shown in any way the attention to detail shown by Alabama in protecting its waters and tourism.• MDA has provided no budget for enforcement and environmental monitoring or protection.
  • Our conclusions: • The Coast economy is seriously threatened by the current MDA proposal. • MDA projected revenues are a fantasy • Relatively speaking Alabama’s efforts were well considered and meticulously executed. MDA has made NO effort to consider damage to Coast tourism, to the risks to state revenue, or to environmental risks. • MDA has free reign to tailor or forego leasing to protect the state’s economic interests. Instead they are acting recklessly.Anyone with an interest in state revenues or the Coast economy needs to speak up NOW.