Drought may spur a drop in oil production

The booming oil and natural gas fields might be stifled by an oppressive drought that’s restricting access to water and pitting the energy sector against farmers and homeowners.

According to a CNNMoney story, Neal Dingmann, an analyst at SunTrust Robinson Humphrey in Houston, said drilling could decline by 5 percent in small- to mid-size companies due to drought conditions.

More than 60 percent of the United States is suffering from drought conditions, and as a result, farmers are turning down contracts to sell water and restricting energy companies’ access to it.

“We’re having difficulty acquiring water,” Chris Faulkner, CEO of Breitling Oil and Gas, told CNNMoney.

Drillers use millions of gallons of water in the hydraulic fracturing process, which injects sand, water and chemicals underground at high pressure to release trapped oil and natural gas from shale formations.

Less water means less drilling, analysts say.

In July, Pennsylvania water regulators stopped issuing permits to natural gas drillers to siphon water from streams because of the drought, according to Reuters. The move affected about 30 companies, not all of them in the energy sector, the wire service reported.

Talisman Energy suspended some operations in the area due to the restricted access to water, but The Woodlands-based company told Reuters that the main reason for the slowdown was low natural gas prices.

“With the low natural gas prices, our frac activity is slower and therefore our consumption of water is also low as a result,” Pam Tragesser, a spokeswoman for Talisman Energy, said to the wire service.

The drought conditions are also pitting the energy sector against homeowners who are seeing their own water consumption restricted. Texas environmentalists hope to convince the Legislature to pass water-conservation requirements during next year’s session.

An environmental group, Environment Texas, is urging Texas to pass a bill that would limit drillers’ access to fresh water and require them to reuse water after fracturing.

“There are a lot of problems with fracking, and so we want to minimize the damage from fracking, including by requiring recycling,” Luke Metzger, the group’s director, told Bloomberg News in early July.

Recycling might reduce water use, but it also increases companies’ costs, analysts noted.

Recycling can cost 50 percent to 75 percent more than sending water in deep-water injection wells. Those wells have drawn criticism since researchers tied them to minor earthquakes in Oklahoma, Ohio and Texas.


Original Article: http://fuelfix.com/blog/2012/08/01/drought-may-spur-a-drop-in-oil-production/

By: Dan X. McGraw