November 2015 by Caribbean Energy Information System

CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : NOVEMBER 2015

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CARIBBEAN Petroleum Update A Publication of the Caribbean Energy Information System (CEIS)

November 2015 ISSUE

Hydraulic Fracturing:

Unconventional Method for Oil/ Gas Extraction

Hydraulic fracturing otherwise known as ‘fracking’ or ‘hydrofacing’ refers to the procedure of drilling and injecting a mixture of sand and water into wells at high pressure to fracture (or force open) shale rocks to release natural gas inside. This process is used in 90% of natural gas wells in the United States, where millions of gallons of water, sand and chemicals are pumped underground to break apart the rock and release the gas. Wells may be drilled vertically hundreds to thousands of feet below the land surface and may include horizontal or directional sections extending thousands of feet.

To access CEIS website

Contrary to popular belief, hydraulic fracturing is not a “drilling process.” Hydraulic fracturing is used after the drilled hole is completed. Put simply, hydraulic fracturing is the use of fluid and material to create or restore small fractures in a formation in order to stimulate production from new and existing oil and gas wells. This creates paths that increase the rate at which fluids can be produced from the reservoir formations.

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Hydraulic Frac turing: Unconventional Method for Oil & Gas Ex trac tion The process includes the trucking of water and supplies to the drilling site. It takes 1-8 million gallons of water to complete each fracturing job. To create a liquid known as fracking liquid, water is mixed with sand and up to 600 types of chemicals (approximately 40,000 gallons). These include uranium, mercury, ethylene glycol, methanol, hydrochloric acid and formaldehyde. The fracking fluid is then injected into the ground through a drilled pipeline. When the mixture reaches the end of the well, the high pressure causes the nearby shale rock to crack, creating fissures where natural gas flows into the well. Once the injection process is completed, the internal pressure of the rock formation causes fluid to return to the surface through the wellbore. This fluid is known as both “flowback” and “produced water” and may contain the injected chemicals plus naturally occurring materials such as brines, metals, radionuclides, and hydrocarbons. The flowback and produced water is typically stored on site in tanks or pits before treatment, disposal or recycling. In many cases, it is injected underground for disposal. In areas where that is not an option, it may be treated and reused or processed by a wastewater treatment facility and then discharged to surface water (see Diagram 1 below).

on the surface. Contrary to this, the process of fracking includes steps to protect water supplies. To ensure that no fluid enters the water supply, steel surface or intermediate casings are inserted into the well to depths of between 1,000 and 4,000 feet. The existing industry standard for oil and gas casing was established by the American Petroleum Institute (API). It specifies the length, thickness, tensile strength and composition of casing for a given situation and is the most commonly used standard for the selection of oil and gas casing. The space between these casing called “strings” and the drilled hole (wellbore), called the annulus, is filled with cement. Once the cement has set, then the drilling continues from the bottom of the surface or intermediate cemented steel casing to the next depth. This process is repeated, using smaller steel casing each time, until the oil and gas-bearing reservoir is reached (generally 6,000 to 10,000 ft). While casing strings serve a critical element in protecting water resources, what is even more crucial is the cementation of the casings. The quality of the initial cement job is a critical factor in the prevention of fluid movement from deeper zones into groundwater resources.

Unconventional (Hydraulic Fracturing) vs. Con-

Environmentalists are worried that the chemicals used ventional Techniques in fracturing may pose a threat either underground or when waste fluids are handled and sometimes spilled Hydraulic fracturing is a technique used in “uncon-

Diagram 1: illustrating how the process of hydraulic fracturing is carried out from the delivery of the water to the piping of the product to natural gas markets. Source: http://www.ucsusa.org/

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ventional” gas production. The term unconventional is used as the gas is highly dispersed in the rock, rather than occurring in a concentrated underground location (conventional). “Unconventional” reservoirs can costeffectively produce gas only by using a special stimulation technique, like hydraulic fracturing. Extracting gas in unconventional reservoirs is relatively new, however, despite the recent emergence, hydraulic fracturing is not a new method.

oil and gas. An unconventional well usually employs sophisticated methodologies including horizontal drilling or hudraulic fracking. Vertical drilling is much simpler than that of a fracking (hydraulic fracturing and horizontal drilling) rig where some other components have to be added in order to extract oil that is tightly locked in shale rock.

As oppose to conventional gas formations, unconventional resources have lower permeability, therefore, depending on the geological characteristics of the formation,hydraulic fracturing is required. Although there are also other methods to extract these resources, such as conventional drilling, extraction by fracking is considered more economically viable. The multi-stage fracturing technique has facilitated the development of shale gas and light tight oil production in the United States and is believed to do so in the other countries with unconventional hydrocarbon resources.

Environmentalists are worried that the chemicals used in fracturing may pose a threat either underground or when waste fluids are handled and sometimes spilled on the surface. During this process, methane gas and toxic chemicals leach out from the system and contaminate nearby groundwater. Methane concentrations are considered higher in drinking-water wells near fracturing sites than in normal wells. Additional, environmental impacts of hydraulic fracturing include air emissions and climate change, land use, risk of earthquakes, noise pollution, and health effects on humans. Effects such as sensory, respiratory, and neurological damage due to ingested contaminated water. Air emissions are primarily methane that escapes from wells, along with industrial emissions from equipment used in the extraction process.

Trinidad and Tobago has been commercially producing oil since 1908, so it’s one of the oldest oil-producing countries in the world. It predates oil production in the Middle East. It produces about 4.3 billion cubic feet of natural gas per day and 82,000 barrels of oil per day. The oil and gas industries in Trinidad and Tobago are categorized into three sectors, the upstream, midstream and downstream. Generally companies operating in the upstream sector are involved in finding oil and gas resources under the sea, drilling exploratory wells and successfully developing these wells in order to bring hydrocarbons to the surface.

Environmental impacts

Conclusion

Hydraulic fracturing has had an enormous impact on America’s energy history, particularly in recent times. However, while fracturing revolutionized the North American shale gas production, in times of plummeting oil prices many investors are rethinking the use of these high-cost methods. Advanced horizontal drilling Most of Trinidad and Tobago’s supply of oil and gas has and hydraulic fracking for extraction is much more exbeen produced via conventional oil and gas drilling. pensive than conventional drilling. There are a few different ways to conventionally produce oil. These include: onshore drilling, shallow water drill- Additionally, shale wells deplete much faster and during ing (less than 1,000 feet), deepwater drilling (between peak production, they are “highly leveraged to the pre1,000 and 2,500 feet), and ultra-deepwater (greater than vailing energy price”. One way that investors are looking 2,500 feet). The commonality between all of these con- to hedge their bets is to move away from unconventionventional methods is that companies drill vertically be- al methods and towards underexplored conventional low ground (whether underwater or onshore) and hit a methods that don’t require expensive horizontal drillreservoir of oil, called an oil field, then proceed to pump ing or fracking for extraction. Vertical drilling is once the oil into a well. again being examined as the safer bet for gas extraction and production. An unconventional well is different in that it drills deeper to tap the organic rock that is the actual source of the

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : NOVEMBER 2015

PETROLEUM NEWS & HAPPENINGS Gas Prices Up $0.69, Diesel Up $2.06 [...]...Read more JPS Net Profit Four Times Higher Than Year Ago [...]... Read more Gas prices up $0.02, diesel down $2.30 in Jamaica[...]...Read more NIA, NEVLEC AND NREI SIGN GEOTHERMAL POWER PURCHASE AGREEMENT [...]...Read more

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Bidder on Verge of Bankruptcy but JPS says Plant Still on Track [...]... Read more Gas Prices Down $3.47, Diesel Down $2.42 [...]...Read more Gas Prices Down $1.24, Diesel Down $0.47[...]...Read more Cuba Planning New Oil Exploration In Gulf Of Mexico [...]...Read more

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : NOVEMBER 2015

Prices at the Pump NOVEMBER 2015

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Retail prices for Regular Unleaded Gasoline in the twelve Caribbean countries reviewed at the end of November 2015 showed overall decreases in prices for seven countries; Barbados, Dominica, Grenada, Guyana Jamaica, St.Lucia and St.Vincent ranging between 1.3% and 11.8%. St.Vincent and the Grenadines recorded the highest decrease of 11.8% in prices. Prices in the remaining five countries were stable. The average retail price was 3.5% lower when compared to the previous month.

Unleaded Gasoline: Regular : Average Retail Price – January - November (US$/Litre) 2015 COUNTRIES

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

AVG

ANTIGUA/ BARBUDA

1.11

BARBADOS

1.53

1.42

1.43

1.51

1.55

1.60

1.64

1.62

1.55

1.45

1.54

B.V.I [87 OCT]

1.21

DOMINICA

0.92

0.85

0.83

0.98

1.51

1.60

1.59

1.49

0.92

0.83

1.14

GRENADA (95 OCT)

0.97

0.90

0.95

1.03

1.10

1.14

1.15

1.12

1.10

1.07

GUYANA

1.06

0.83

0.93

0.97

0.93

0.87

0.84

1.00

0.97

0.92

JAMAICA 87 Octane[E10]

0.96

0.99

1.06

1.12

1.15

1.16

1.15

1.09

0.98

0.95

0.89

1.05

MONTSERRAT

1.04

0.95

0.96

ST. KITTS/ NEVIS

0.96

0.94

ST. LUCIA

1.21

1.04

0.98

1.03

1.05

1.07

1.10

1.06

0.91

0.89

1.04

ST. VINCENT/ GRENADINES

1.03

0.93

0.85

1.01

1.03

0.91

0.95

TRINIDAD/ TOBAGO [92 OCT]

0.42

AVERAGE RETAIL PRICES

1.04

0.97

1.01

1.02

1.07

1.09

1.07

1.01

0.97

1.03

NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.

US$/Litre

Comparative Retail Pump Prices Regular Unleaded Gasoline November vs. 11Mths Avg (Jan - Nov 2015) 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

NOV

12 Caribbean Countries

See prices for all products at www.cippet.org

11 Mths AVG

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : NOVEMBER 2015

International OIL PRICES

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CALL: 1-876-927-1779 | CARIBBEAN PETROLEUM UPDATE : NOVEMBER 2015

Average Weekly and Monthly Crude Oil Prices (September - November 2015)

50 48

46.34

US$/Bbl

46 45.78

44 42

42.48

40 Sep-15

38 36 Period WK1

WK2

WK3

WK4

Nov-15 MTH AVG

Average Monthly World Crude Oil Prices (2012 - 2014) 110.0

US$/BBL

Analysis of International Crude Oil Prices for the September to November 2015 period showed an average price of US$42.48/bbl . This average price was 7.2% lower than the average price reported in September 2015 and 8.3% lower than the price in October 2015. The highest weekly price seen in November 2015 for the commodity was US$45.98/bbl-reflected in week one while week three accounted for the lowest price of US$40.62/bbl. Oil prices continue to plummet due to an ongoing global supply glut. Depressed oil prices are likely to linger longer as speclulation is that OPEC will not cut output given its pressure on non-OPEC producers to curtail output.

Oct-15

106.6

105.8

90.0

70.0

2012

2013

2014

50.0

Period

FEATURED OFFERS: P E TS TATS - t h e Ca r i b b e a n E n e rg y I n fo r m at i o n System (CEIS) primary report of historical annual petroleum energy statistics provided for 18 Caribbean Countries. Included are data on total energy production, consumption, and trade; overviews of petroleum, natural gas, electricity, as well as financial and environmental indicators for over twenty years.

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