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Mon Jul 11 18:40:10 EDT 2011

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The "Fracking" Issue and A Question About Morocco
by KENT MOORS PH.D. | published JULY 11TH, 2011
As I await my next flight to London, now seems a good time to answer a  
couple of recent emails from your fellow Oil & Energy Investor  
subscribers.

If you've got a question or comment of your own, please write to me at customerservice at oilandenergyinvestor.com 
. I can't offer any personalized investment advice, but I can address  
your questions and comments in future broadcasts.

Let's get right to it.

Q: Kent, can you address the "fracking" issue one more time?

The 2010 documentary Gasland showed how bad things can get when 600+  
chemicals are used to get the oil out of the ground, especially in  
close proximity to water resources. What companies employ this  
technique?

Also, the French recently revoked the licenses of one company –  
Toreador Resources in Paris – because fracking would have been their  
preferred method of oil extraction. The stock plummeted on the news.  
Will other companies (and countries) that use fracking find it  
difficult to lease land where the water table may be affected? ~ R. J.

A: Actually, several of you have written in with similar questions  
surrounding the French decision on fracking. But R.J. asks several  
questions here, so let me address them in order.

First, all companies that utilize horizontal drilling for shale gas  
extraction use hydrofracking.

Second, the French decision results from where the drilling would be  
located.

To date, significant shale gas deposits have been determined at Bassin  
d'Ales, Plaine d'Ales, Montélimar, and Moselle (where there is also  
coal bed methane). The first three are most advanced in terms of  
exploration; unfortunately, they are also in the Paris region and have  
population density concerns.

This has become a political issue in the days before an election… and  
that is rarely a good time to get an objective appraisal.

Still, the environmentalists do have it right – if a company cannot  
provide sufficient guarantees that drilling poses no danger to water  
tables, it should not receive a license.

And these French companies will have a hard time providing the  
required guarantee. France has no history of combining hydrofracking  
and horizontal drilling. There have been no environmental baseline  
studies completed and no previous unconventional drilling as a basis.

Third, there is shale drilling under development in other European  
countries: Lower Saxony (Germany), Alum (Sweden), the Makó Trough/ 
Szolnok Formation (Hungary), the Vienna Basin (Austria/Slovakia), as  
well as four very promising basins in Poland.

The French have a valid concern about heavy populations in proximity  
to drilling. True, the Barnett in Texas was initially an urban-based  
play (Fort Worth to Denton)… but France's density distribution is  
different.

Now let's return to the documentary…

The episodes portrayed in Gasland were the results of early drilling  
in Colorado, where, in my judgment, the companies were clearly at  
fault. There have been some questions raised about more recent  
drilling in the Marcellus on the East Coast, but these are quite  
infrequent.

Shale gas wells are at least 5,500 to 7,000 feet below the surface.  
Some – such as the Eagle Ford in Texas and the deep Utica, currently  
under evaluation below the Marcellus – are more than 12,000 feet down.

These are well below any water resources.

The problems arise in two other ways:

Gas contamination on its way up to the surface, and
The use of fracking fluid.
Gas contamination is a standard problem for both traditional –  
vertical – drilling and the newer unconventional drilling. It is not,  
therefore, something that has emerged only with the advent of shale  
gas development.

In passing, gas contamination is what caused the igniting water shown  
in Gasland.

Yet the problem can be resolved with the use of concentric pipe  
strings. Range Resources Corp. (NYSE:RRC) has an excellent system used  
in the Marcellus.

Regulators need to require the usage of the better pipe strings. Most  
of them do already.

The other matter, fracking fluid, is more contentious.

Of the hundreds of chemicals used for fracking, most are of no  
consequence to health or environment.

The problems emerge with the danger of leakage from the use of  
ethylene glycol (to inhibit the formation of scaling; also used in  
antifreeze), petroleum distillates (to reduce friction), and  
especially glutaraldehyde (as an antibacterial agent).

Once again, a secure system of returning the fluids (along with the  
flowback water) to the surface, and safe disposal of that water, is  
essential. Today this is accomplished by injecting it into deep  
disposal wells after processing.

However, new developments are already in field use in the Fayetteville  
in Arkansas and the Woodford in Oklahoma that eliminate the use of  
chemicals altogether… and even reduce overall operational costs per  
well at the same time.

Next, here's a direct question related to my recent travels.

Q: If Morocco is any good, why is TransAtlantic Petroleum pulling out?  
~ Norman C.

A: The Canadian TransAtlantic Petroleum Ltd. (AMEX:TAT) stated in a  
June 28 SEC filing that it was likely to cap an exploration well and  
move associated equipment to its Turkish operations. The well in  
question, GRB-1, is on the Asilah exploration permit in Morocco.

The company further said that the well would probably be abandoned as  
noncommercial. However, the company provided no information in the  
filing about why it has decided to move equipment to Turkey.

The move comes only some three weeks after TAT acquired the production  
and oilfield assets of Thrace Basin Natural Gas in Turkey. The company  
may simply consider this one a better overall development opportunity.

Sincerely,

Kent

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Please note: Kent cannot respond to your comments and questions  
directly. But he can address them in future E-mail alerts... so keep  
an eye on your inbox.

Comments (11)Trackbacks (0)LEAVE A COMMENTTRACKBACK
miodrag savic July 11th, 2011 at 12:21	 | #1 				Reply | Quote 									
Hi Mrs.Kent,
How to help to be more info about energy.I am still in Balkan.
regards
Miodrag S.
Maurice G. Keeny, M.D. July 11th, 2011 at 12:45	 | #2 				Reply |  
Quote 									
Kent, In your July 11th reply about fracturing, was there some reason
you didn't mention GASFRAC's LPG fracturing? Seems a viable  
alternative to hydraulic fracturing and seems to eliminate the ground
water contamination issue. Questioning One!
Malcolm Douglas July 11th, 2011 at 12:53	 | #3 				Reply | Quote  

Are you ecommending RRC as a good buy now?
Albert Johnson July 11th, 2011 at 12:54	 | #4 				Reply | Quote  

Hi Kent,
While you were traveling I was visiting Potter County, PA. There were  
stories re fracking in newspapers from Pgh to Buffalo. PA closed down  
the only two sites in the state that were receiving wastewater from  
wells that had used fracking. The state determined that they were  
unable to remove all the toxic chemicals during the treatment process  
before the wastewater was released into local waterways. As a result  
all wells in PA had closed until the issue could be resolved.
CBS "60 Minutes" had a segment last night on fracking. I suspect after  
comments are received they will have a follow-up segment to air more  
recent developments. CEO of Chesapeake Energy did a good job during  
the program.
Al
S.G. Linardos July 11th, 2011 at 13:00	 | #5 				Reply | Quote 									
Subject `; Gasfracking This specific company claims it uses a process  
such that water in not used. Consequently, minimizes polution  
problems.  Symbol ( GSFVF ) Would appreciate any insight you may have  
as to wether this an acceptable process in the current environment.
Thank you SGL
john m van zandt July 11th, 2011 at 13:02	 | #6 				Reply | Quote  

i fracked one of the first wells-if not the first well- in Rice county  
Kansas in 1953// 3600ft deep and brought a Mississippi chert lime well  
that was hard and tight and producing 13bbls a day at 2.85/bbl up to  
350 bbls/day..This was perpendicular drilling only and not horizontal  
which did not exist..at the time sand in an inert gel was used..had to  
bribe the night drilling superintendent to try it as contractor feared  
a blow out and distruction of his rig…buying my first natural gas  
Honda car this week, john m van zandt
Walter Mitchell July 11th, 2011 at 13:47	 | #7 				Reply | Quote  

Please force the government to open leases in the good ole U.S. of A.
Our gasoline just runs better!
Nathaniel Fine July 11th, 2011 at 13:48	 | #8 				Reply | Quote  

Dr. Moors,
What credibility is there to the "whisper" that a world-class oil  
deposit has been found in Israel; 250 billion barrels?
If this is true, what will be the politcal jockeying of European and  
Middle Eastern countries because of it? Thank you
Stuart Wesson July 11th, 2011 at 14:17	 | #9 				Reply | Quote 									
I know that you are in another region, but what is your feeling about  
the price of Oil and Chavez's serious health problems…
Russ Quick July 11th, 2011 at 15:40	 | #10 				Reply | Quote 									
Dr. Moors–What isyour opinion re: the status of Compton Petroleum  
which seems to be doing all kinds of financial restructuring. Will it  
pay off?
jack gordon July 11th, 2011 at 15:46	 | #11 				Reply | Quote 									
i know nothing about israeli petroleum resources but they do have oil  
shale in the negev, it is crushed to size & burned in circulating  
fluidized bed (CFB) boilers for electric power.
 > jack
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