SAN ANTONIO — The Eagle Ford Shale zoomed from basically nothing — a rock that companies drilled through on the way somewhere else — in 2008 to around 1.5 million barrels of liquid production per day now.
But Marathon Oil Corp. President and CEO Lee Tillman said Tuesday that the industry now needs to address key “legitimate issues” including air quality, water management and roads — with a sense of urgency.
“We must be responsible corporate neighbors and never lose sight of the fact that we’re guests in these communities and will be judged by our individual and collective actions,” Tillman said. “We as an industry must earn our license to operate each and every day.”
Tillman gave the opening keynote speech at Hart Energy’s DUG Eagle Ford Conference at the Convention Center, where about 4,800 oil and gas professionals are meeting through today.
A recent San Antonio Express-News investigation found statewide flaring and venting in Texas had surged by 400 percent to 33 billion cubic feet in 2012. Nearly two-thirds of the gas lost that year — 21 billion cubic feet — came from the Eagle Ford.
The rate of Eagle Ford flaring was 10 times higher than the combined rate of the state’s other oil fields.
By 2012, pollution levels from flaring exceeded the total air emissions of all six oil refineries in Corpus Christi. And despite assurances by the Texas Railroad Commission that gas flares are safely regulated, the newspaper found seven Eagle Ford operations with some of the highest amounts of flaring had failed to obtain the necessary permits from the agency.
Tillman called for regulatory compliance and said Marathon has dramatically reduced the amount of time gas gets flared before going into pipelines to market.
“We now count that time in hours, and have averaged less than seven hours of flaring per well this year before we’re able to send the gas to sales,” he said.
Related: Nelson Wolff wants better regulation of flaring in the Eagle Ford
The Houston company also has dropped its water use by 45 percent for hydraulic fracturing, and relies on a water supply that’s mostly brackish — even though those wells are deeper (and more expensive) for it to drill.
Tillman also encouraged voters to approve the November constitutional ballot constitutional amendment that would divert about $1.2 billion a year in oil and gas taxes paid by drilling companies from the state’s Rainy Day Fund and use it for transportation. Deteriorating road conditions have become a key quality of life issue in South Texas, where heavy trucks now dominate a road system built for farmers and ranchers.
Tillman and other speakers talked about the technical aspects of drilling and completing better wells in the field, but also hit on larger issues.
The Eagle Ford and the Permian Basin in West Texas have pushed up Texas oil production past 3 million daily barrels for the first time since the late 1970s, U.S. Energy Information Administration says.
With production surging, talk in the industry has turned to: What to do with all of the production?
Light sweet crude oil is flowing toward Gulf Coast refiners in such volume that a supply-demand problem is looming.
Crude oil exports have been banned since 1975, but the federal government opened an avenue for export in June when it ruled that condensate could be exported with minimum processing through a distillation tower.
Condensate is an ultralight oil that condenses from gas to liquid when it reaches the surface. It’s clear and resembles lighter fluid more than black crude oil.
It’s also prolific in the Eagle Ford — as much as 40 to 45 percent of the liquids production in the field is condensate, according to Hart Energy.
Pioneer Natural Resources Co. and the midstream company Enterprise Products Partners already have permission to export the condensate. Pioneer President and COO Timothy Dove said Tuesday that the companies in August and September shipped three cargo loads.
“They’re finding homes in places like Singapore, Japan and also Rotterdam, so there’s a very, very large petrochemical market out there that would love to diversify with U.S. supply,” Dove said.
Dove also pushed Tuesday for lifting the export ban on crude oil, as did other speakers.
“We want to avoid the cliff or the wall or the day of reckoning that has to do with having to lay down rigs” because of the inability to take more light, sweet crude into the refining system, Dove said.
Tillman told the audience in his morning keynote, “We want our barrels to compete on the global market, and so should you.”
Although there hasn’t been much focus on the Eagle Ford’s gas production, the field has a large dry gas “window” that could see increased drilling if natural gas prices rise or if the government permits the export of liquefied natural gas to markets in Asia and Europe.
In Texas, the Eagle Ford arcs from the border to East Texas. While wells bring up a mix of hydrocarbons, the top lip of the swoosh makes mostly crude oil, the middle makes mainly condensate and the bottom lip makes dry natural gas.
Eagle Ford operators also continue looking at Mexico, which is giving foreign companies a crack at contracts to drill for oil and gas for the first time in decades.
The Eagle Ford extends across the Rio Grande into the Burgos and Sabinas basins.
Trevor Sloan, managing director and energy research analyst with ITG Investment Research, said the early test wells in Mexico “don’t look fantastic” but are “encouraging enough” for drillers to keep trying, especially if well costs can come down and operators improve well completions.
“You’ve got 17 million acres to poke around in in Mexico, so it’s a big prize,” Sloan said.
Several speakers said that Mexican shale is likely to develop more slowly than the Eagle Ford in Texas, especially with surface owners having no stake in the minerals.
It’s also not yet clear what foreign companies can expect in Mexican shale in terms of security, contracts and regulation. But there’s a sense that there is likely to be plenty of potential work for both drillers and companies that build infrastructure such as pipelines.
“Mexico has 6,000 miles of pipeline in the whole country, vs. the state of Texas, which has 300,000,” said Josh Weber, senior vice president of commercial and business development with San Antonio-based Howard Midstream Energy Partners LLC. “There’s going to be plenty of opportunities.”