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Experts predict Eagle Ford Shale will bring enormous boost to local economy
by Joe Baker
Mar 10, 2011 | 6472 views | 0 0 comments | 13 13 recommendations | email to a friend | print
Dr. Dominique Halaby from the University of Texas at San Antonio talks about the expected economic impact to communities as a result to development within the Eagle Ford Shale play.
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For the people who live in the 24 counties above the Eagle Ford Shale, what’s been seen during the last year, is only the beginning of an expected explosion of economic growth related to production of oil and gas from the rock formation lying roughly two miles underground.

This was the message presented by a panel of experts during an Eagle Ford Shale Open House event presented by America’s Natural Gas Alliance (ANGA) and Coastal Bend College (CBC) at the City of Kenedy Municipal Auditorium on March 3.

CBC Dean of Institutional Advancement Glynis H. Strause welcomed visitors to the event.

Strauss said the event was a prime opportunity for people to learn the real answers to questions about the development of the Eagle Ford Shale and how these changes would affect the communities in the south Texas area.

David Blackmon, who is the director of government affairs for El Paso Corporation and also chair of ANGA’s Texas State Affairs Committee, told the large group in attendance that development of the Eagle Ford Shale only began a short time ago.

“Petrohawk has the distinction of having drilled and completed the first well into the Eagle Ford Shale in 2008,” Blackmon said. “We have only been at this – in this formation – for just a couple of years. We are in the very early stages of the development of this resource.”

Blackmon said that just a few years ago, natural gas was considered a very scarce product but with the recent development of these shale plays, natural gas is now a very abundant resource. He said that the Eagle Ford Shale was unique because of the fact that depending on what part of the play a driller was operating in, dry gas might be produced, or a mixture of gas and liquids, or just oil.

“It is an extraordinary resource,” Blackmon said. “Some of our companies believe that once we have fully evaluated the resource under the ground, this will rank as one of the three or four largest oilfields ever discovered in the State of Texas and one of the three or four largest natural gas fields ever discovered in the State of Texas.”

Blackmon said that as of February 2, there have been 1,132 wells permitted in the shale so far.

“Thirteen months ago we had 11 total rigs running in the Eagle Ford,” Blackmon said. “The last number I saw – we have about 113 rigs running today.”

Blackmon said it is expected that by the end of 2011 there will be around 250 rigs running in the area.

“It is ramping up quickly,” he said.

Dr. Dominique Halaby from the University of Texas at San Antonio talked to the crowd about how production within the Eagle Ford Shale is expected to impact the local economy.

During 2010, Halaby said that $2.9 billion in total economic output was generated by the activity, which supported 12,600 full-time jobs in the 24-county area. More than $500 million was paid in salaries and benefits, and more than $47 million went to local governments for schools, hospitals, emergency services, etc.

A dramatic increase is expected over the next decade, Halaby said.

Halaby said that it is estimated that by 2020, there will be close to $21.5 billion in total economic output for the area with 68,000 full-time jobs and $3.2 billion paid in salaries and benefits. More than $450 million in contribution to local government revenues is expected, Halaby said.

“Who gets to benefit?” Halaby asked. “We all do!”

“ Not just the individuals working in this or the people residing here that get that direct impact or the businesses that get to take advantage of it, but us as individual taxpayers – we get the benefit of being able to sustain a certain level of services that we might not otherwise be able to do.”

Halaby said that his report can be downloaded at ccbr.iedtexas.org. He said the report is on the front page.

Dr. Michael J. Economides, from the University of Houston, spoke about shale drilling.

Economides said that 87 percent of the world’s energy demand comes from oil, gas and coal.

He said that in 1973, it was also about 87 percent.

In 2030, Economides said it was expected to also be about 87 percent.

Hydro-electric, nuclear, biomass, solar or wind energy production is not expected to grow significantly, he explained.

“Rhetoric aside,” Ecomomides said, “There are no alternatives to hydrocarbon energy resources in the foreseeable future. Oil and gas and coal will dominate the society for the next century.”

Economides then talked about hydraulic fracturing, otherwise known as “fraccing.”

He explained that high pressure fluids are injected to crack the rock to release the gas, oil and fluids that inhabit within the shale formation.

Tiny cracks are created to facilitate the flow of oil and gas and this process greatly increases the production from each well.

Economides said that in terms of public safety, the dangers associated with fraccing are often distorted in media reports.

Because the fraccing happens thousands of feet below groundwater sources, and happens beyond multiple levels of telescoping cement casements, contamination of the water supply is virtually impossible, he explained.

Darrell Brownlow, who is a voting member of the South Central Texas Regional Water Planning Group, talked about what could be expected in terms of impact on local water supplies.

Brownlow said that perspective is the key, when looking at how much water is used for drilling and hydraulic fracturing.

The amount of water used for one well, Brownlow said, is roughly equivalent to the amount of water used to irrigate 7.5 acres of land for one year.

“How much water could be used for the Eagle Ford Play?” Brownlow asked.

Assuming 1,000 wells per year for 15-20 years at 15 acre-feet of water per well, spread across a 6 million acre area – this is roughly equivalent to irrigating 7,500 acres of cropland, Brownlow said.

“We have got a lot more than 7,500 acres of irrigated cropland across these 6 million acres,” Brownlow explained.

Water used related to oil and gas production within the Eagle Ford Shale is expected to amount to about one percent of the total water usage for the entire 24-county area, Brownlow said.

“It doesn’t seem like a lot of water,” Brownlow said.

The estimated water usage is relatively minor, Browlow explained.

“The economic benefits are substantial,” he added.

Brownlow also said that using natural gas to generate electricity uses much less water than electricity generation from coal or nuclear. In the long run, a switch to use of natural gas could benefit the region through consumption of less water.

Glynis Strause spoke about educational opportunities available at CBC through classes for commercial driving licenses, courses in industrial safety and other courses.

Manuel Ugues, representing Workforce Solutions of the Coastal Bend spoke about local training opportunities for both employers and prospective employees who are interested in working in fields associated with production within the Eagle Ford Shale play.

During the question and answer session following the presentation, one person asked what was the average lifespan of an Eagle Ford Shale well and what was expected in terms of the price of natural gas in the marketplace in the near future.

“We expect the life of these wells to be quite long,” David Blackmon said in response to the question. “A span of decades. These are going to be very long-life wells. They will come in at a much higher production rate initially, and you will have a pretty steep decline rate in these wells for the first several months and then they will level out and produce for a long period of time.”

In terms of projected natural gas prices, Blackmon said that within the industry, prices are expected to remain fairly flat and may increase toward the five to six-dollar range in the next several years.

Dr. Economides, in response to the question, said that he disagrees with the predictions he has seen within the industry.

“I think within four years, when we literally and figuratively burn this excess capacity, natural gas prices will go up to eight dollars and stay there ad infinitum.”

The reason, he explained, is that natural gas prices will begin to be set in a way similar to the way oil prices are set, and prices will become universal throughout the world because of improvements in technology, connectivity and other factors.

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