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Industry Editorials/Opinions

This section of the website presents some editorial opinion on the energy industry. There is a rough semblance of organization: initial background items are fairly general and the later items on Federal and state energy policy are more specific.

All of these personal opinions and prejudices are based on experience with a start-up company during the past three to four years. Before that, I did geology as a consultant and worked in federal and state agencies on the peripheries of the oil business. You no doubt have opinions and prejudices that spring from your own unique set of experiences.

I’m prejudiced in favor of shallow natural gas. As an informed citizen, I believe that shallow gas represents an extremely important domestic energy resource. That’s why it is the focus of GeoShurr Resources, LLC. And, I think that shallow gas has not received enough attention from government agencies, research scientists, large corporations and individual investors.


GENERAL BACKGROUND
Shallow natural gas will save the world, in some places and for a finite period of time. A reviewer recently put these comments on one of my manuscripts: “...the authors keep coming back to the idea that many of the world’s gas problems can be solved by exploiting shallow biogenic reservoirs.” Damn right! I do believe because:
••Shallow gas is relatively cheap and accessible. In an area where it’s available, no big ticket, high tech toys are needed for exploration and development.
••Shallow gas is the environmental fuel of choice. Environmental awareness and concerns are here to stay. Live with it.
••Shallow gas resources are relatively under exploited. Domestic reserves have only recently been pursued aggressively. Internationally, shallow gas will aid in the economic development of emerging countries.

The gas business is not the oil business, although many companies do not make a distinction. The economic and technological aspects of shallow gas accumulations are different than those of deep gas or oil.
••For many years, oil hunters avoided generating gas prospects. Gas prices were low and oil prices were high. “Don’t find us natural gas.”
••More recently, improved gas prices have inspired many oil companies to explore for gas. But, they use the strategies and models familiar from oil exploration.
••Shallow gas development generally requires a lot of shallow wells and a large area. This contrasts with sticking a single straw into a deep, prolific, but limited reservoir--like a reef.
••Although flow rates and ultimate recoveries for individual wells are relatively low, the shallow gas wells usually produce for a long time and there are a lot of them.

Little guys rule the world of domestic shallow gas production. Gas is an important part of production for small independent companies. It’s cheap to develop and it’s located where the little guys are located. There is an organic view of the oil and gas industry that compares it to the food chains--or trophic structures--found in the world of Nature.
••Small independents dominate the beginning and the end of the hydrocarbon development cycle.
••Little guys drill most of the domestic wildcat wells at the beginning of the cycle.
••Little guys operate most of the stripper wells at the end of the cycle.
••In the middle of the cycle, the big guys move in to deplete the accumulation and make it “uneconomic”.
••Like the food chains in nature, the whole structure would collapse without the little guys at the beginning or if they are missing at the end, we’d all be in a mess.

Bigger is not better in the private sector, anymore than in government. Bureaucracies, whether corporate or government, are not efficient. Enron is an example. “Economies of scale” are not always genuine economics. Megamergers are creating megacompanies bigger than the governments of most countries. Large independents may look and act like megacompanies, especially in merger and acquisition activities. But, megacompanies aren’t doing domestic shallow gas--yet.
••Megacompanies are mostly offshore and overseas chasing oil.
••The big guys are experts at exploitation and acquisition, but in general they are not holding up their end in the work of replacing domestic reserves.
••The new megacompanies are no longer doing the basic geologic research that big oil used to do and they are not drilling shallow gas wildcat wells.

SPECIFIC SUGGESTIONS
Federal energy policy must include development of domestic shallow gas resources. Much of what passes for energy “policy” is aimed at the large corporations. But, it is the small independents that do most of the exploration and development of domestic gas. Consequently, federal energy policy should include:
1. Dollars for increased research in both the public and private sectors. The research should be aimed in particular at building exploration strategies unique to shallow natural gas.
2. Dollars to provide economic incentives to small independent companies. They are the ones routinely doing domestic exploration and production.
3. A rational approach to Federal lands, including the Arctic National Wildlife Refuge (ANWR). This whole debate is basically a non issue generated by big companies battling with big government. There’s plenty of work to do in other areas--especially chasing shallow gas. Let’s get on with new ideas instead of rehashing old agendas.

State energy policies should go forward no matter what the Feds do or do not get accomplished. It’s ironic that the state of Alaska already has incentives in place to encourage the development of shallow gas. And, that’s the state that also has the ANWR issues. State governments need explicit energy policies that should include:
1. Initiatives by state agencies to carry out and publish basic geology. This can be used for exploration as well as for environmental applications.
2. Incentives for drilling wildcat wells and establishing new production. Many states have done this in the past, so there is historical precedent. And, the states’ incentives can work in tandem with the Federal dollars.

FEEDBACK
This whole section probably represents a “starter” for feedback. You’d like to yell “Yeah” or stab back with a particularly pointed question or comment. So go ahead.


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