In the Permian Basin and Eagle Ford Shale, Crude's Boom is the Overriding Theme

What are the most active crude oil-producing regions in the United States? The Permian Basin and Eagle Ford Shale, according to the U.S. Energy Information Administration's rig counts.

Among more than 1,500 oil rigs in operation around the nation as of early November, more than 560 were in the Permian Basin and more than 200 were in the Eagle Ford Shale. By comparison, about 190 rigs were operating in the Bakken Shale.

And at third quarter's end, the Permian Basin and Eagle Ford Shale housed 7,787 and 3,541 wells, respectively, while 2,062 wells were located in the Williston Basin, which includes the Bakken, according to data compiled by oilfield service firm Baker Hughes.

Considered the nation's largest oil-producing region, the Permian Basin is about 250 miles wide and 300 miles long, traversing a portion of western Texas and southeastern New Mexico. Located in south Texas, the Eagle Ford Shale is nearly 50 miles wide and 400 miles long, and extends into northern Mexico's Burgos Basin.

Oil production continues to increase in both plays. For example, Eagle Ford Shale production in September climbed 38.3 percent year over year to more than 414,000 barrels per day, according to analytics and forecasting firm Bentek Energy.

Much of the oil produced in the regions is transported by pipelines to nearby Gulf Coast refineries, but some is moved by rail. For railroads, the much more lucrative aspect is the constant flow of inbound materials — such as frac sand, minerals, pipe, fracking fluids, cement and construction aggregate — used to support drilling operations in the regions. Railroads that are bringing in support materials and/or carrying out crude in the plays include BNSF Railway Co., Union Pacific Railroad, Gardendale Railroad Inc., the Texas-New Mexico Railroad, West Texas & Lubbock Railway and Texas-Pacifico Transportation Ltd.

Although BNSF doesn't move any crude out of the Eagle Ford Shale, it operates one unit train of crude per day out of Carlsbad, N.M., in the western part of the Permian Basin. Through 2014's first 10 months, the railroad averaged about 10 crude unit trains per day across all shale plays compared with an eight-train average in the same 2013 period, said BNSF spokesperson Roxanne Butler in an email.

Crude volume doesn't figure to grow a lot for BNSF in the Permian, but the Class I is counting on a new facility in Sweetwater, Texas, to help generate and handle more inbound drilling-support materials there. On Nov. 6, the railroad marked the opening of the $45 million BNSF Logistics Center at Sweetwater, a 75-acre facility that provides rail, truck and transload services, and handles such commodities as frac sand, pipe, aggregates and agricultural products.

The terminal features a 100-car unit train sand terminal, 110-car unit train ag terminal for wheat and cotton seed, 90-car unit train aggregate terminal, 30-car dimensional transload site and expandable switch yard.

"The completion of this project is another example of [our] commitment to industry in the Permian Basin," said Dave Garin, BNSF's group vice president of industrial products, in a press release. "The BNSF Logistics Center at Sweetwater will serve as a hub for economic activity in the region as the Cline Shale is explored for many years to come."

UP already has been handling support materials in the basin for slightly more than a year at its railport in Odessa, Texas. Served by UP and managed by its Union Pacific Distribution Services subsidiary, the dedicated pipe and bulk transloading facility opened in fall 2013 to serve steel, pipe, sand and other oilfield businesses, and enable non-rail customers to ship materials by rail.

Located near Interstate 20 and Texas Highway 338, the Odessa Railport features two 2,800-foot tracks for steel pipe, more than nine acres of lay-down space for short-term pipe storage, and tracks for multi-commodity transloading of frac sand and other materials.

The Permian is generating drilling-support material traffic for several short lines, as well. Count the 111-mile Texas-New Mexico Railroad (TNMR) and 140-mile West Texas & Lubbock Railway (WTLC) among them. Owned by Iowa Pacific Holdings L.L.C. and managed by its Permian Basin Railways unit, TNMR interchanges with UP and WTLC interchanges with BNSF and UP.

This year, about 185,000 carloads of frac sand will be delivered to the basin compared with 86,000 in 2012, and the two short lines will handle 24,000 of them versus 12,000 in 2012, says Iowa Pacific Holdings President Ed Ellis.

"As more wells are converted to horizontal, it requires more sand. About 40 percent of the wells in the basin are horizontal now, and eventually it will be 100 percent," he says. "By 2016, I think sand carloads will reach 250,000 and our percentage will rise with new customers, perhaps to 40,000 by 2016."

TNMR and WTLC also handle some crude and natural gas liquids (NGLs) — such as diluents, propane and butane — totaling about 1,100 carloads per month. The crude volume likely will increase while NGLs will grow more slowly, says Ellis.

"The basin now produces about 1.7 million barrels per day, and that will rise to 2 million in a year or so. It's a huge opportunity there," he says. "About 300,000 barrels will need to go somewhere every day."

One direction will be toward the West Coast, Ellis believes. Kinder Morgan Energy Partners L.P. cancelled plans to build a pipeline to California because the company couldn't obtain enough volume commitments due to the emergence of crude by rail, he says.

In addition, Alon USA Energy Inc. is building a refinery in Bakersfield, Calif., that's set to open by year's end and Plains All American Pipeline L.P. is establishing a rail terminal in Bakersfield to receive three crude units trains daily by the end of first-quarter 2015. Alon also expects to open a crude-by-rail facility at the Bakersfield refinery by 2015's end to receive two unit trains per day.

"The Permian Basin is the closest play to Bakersfield. We think there will be strong demand in the coming years of crude going to the West Coast," says Ellis.

The basin also has been a considerable traffic generator the past few years for Texas-Pacifico Transportation Ltd. (TXPF), which operates the state-owned South Orient line that runs 391 miles from San Angelo Junction to Presidio, Texas. But crude volume lost to pipelines this year will hold down 2014 carloads, says TXPF Executive Vice President Federico Diaz Page. The short line — which interchanges with BNSF, UP and the Fort Worth & Western Railroad — registered 25,000 carloads in 2013 and expects to log a similar figure for 2014.

"Our carloads would have been about 30,000 this year if we had kept the oil," says Diaz Page. "There are variables in play if we can get it back, like oil prices and international demand."

TXPF's crude volume might begin to tick up again next year. Plains Marketing L.P. is building a large crude blending facility in McCamey, Texas, that will handle rail cars and generate up to 12,000 carloads annually for the short line, says Diaz Page. The company expects to open the facility in mid-2015.

TXPF's frac sand volume should continue to ramp up, too. About 90 percent of the short line's 2014 carloads will be generated by sand traffic, says Diaz Page. In 2015, total carloads should reach 40,000, with sand accounting for 82 percent and crude, 12 percent, he says.

"I believe frac sand traffic will triple in the basin by 2019 and ours, in turn, will triple," says Diaz Page. "Some customers can do unit trains of sand and are investing in facilities."

To accommodate current demand as well as prep for traffic growth, TXPF is completing a siding this year and plans to build another in 2015. Next year, the short line also expects to begin a five-year program aimed at replacing rail that dates back to 1917 or 1918. Out of 30 miles targeted in the program, the railroad might complete five miles in 2015, including lots of curves, says Diaz Page.

For the Gardendale Railroad, the Eagle Ford Shale is the traffic-building hotbed. But the short line's owner, Ironhorse Resources Inc., recently developed plans to tap the Permian, as well.

Last month, Ironhorse Resources announced it acquired 627 acres east of Big Spring, Texas, to develop a rail-served industrial park aimed at companies involved in the basin's burgeoning crude production.

The park would be similar to a 270-acre development the company established in LaSalle County, Texas, in the middle of the Eagle Ford Shale for the Gardendale Railroad. The Big Spring Industrial Rail Park will support all shale-related commodities and can be expanded in the future, says Ironhorse Resources Executive Vice President Matt Cundiff. In addition, the park will accommodate both manifest and unit-train operations.

Ironhorse Resources plans to form a short line to serve the Big Spring park. To launch service in third- or fourth-quarter 2015, the short line would interchange with UP, says Cundiff.

For now, the company is focusing on expanding operations in LaSalle County and building more business for the Gardendale Railroad, which operates about 30 miles of track in an area midway between Laredo and San Antonio. The short line interchanges with UP in Gardendale, Texas.

Ironhorse Resources leased 270 acres through a two-phased initiative and sub-leased parcels to shippers, including one crude customer and others involved in line pipe, drilling fluids, condensates and aggregate. But the lion's share of business at the development involves frac sand, a sector that continues to grow, says Cundiff. The Gardendale Railroad now receives seven manifest trains per week and supports unit trains to and from customer facilities.

"Market feedback suggests continued growth in frac sand demand, and we have the infrastructure and designs in place to support all of this growth," says Cundiff. "We look at a 60-mile radius as our area of demand, and it's still going strong."

So much so, Ironhorse Resources recently purchased another 220 acres in LaSalle County for a third-phase development that's being marketed now.

"We see an opportunity to sell a lot of property in the next couple of years," says Cundiff. "Texas is close to the Gulf, and the way oil is [more easily] extracted from the Eagle Ford and Permian Basin, there's a good drill-to-cost ratio."

When the third phase is built out, additional rail infrastructure likely will be needed, such as an expanded yard, new sidings to support the parcels and perhaps five to 20 more miles of track, he says.

Burgeoning crude production in the Eagle Ford Shale has enabled the Gardendale Railroad to grow from zero to 11 customers and from zero track miles to 30 miles since 2011, says Cundiff. Iowa Pacific's TMNR and WTLC have experienced accelerated growth in the Permian Basin during that timeframe, too.

The explosive traffic growth wasn't expected, but it sure is welcome, says Iowa Pacific's Ellis.

"It's been a great ride," he says. "Things like this don't come around very often."

I rode through this area this past summer.

As a guy from the Northeast, the rigs reminded me of something out of War of the Worlds. Big machines, just pumping on and on, over and over.

It was eerie to see it go one for miles and miles on both sides of the road.

And Midland was just a huge mess of temp housing and lousy hotels.

Just a crazy experience.

For those who want to see a video showing how horizontal drilling and fracking is done, Northern Gas and Oil has a great one. It’s 6 minutes.

It includes a visual piece on how fresh water aquifers are protected from contamination.

http://www.northernoil.com/drilling-video

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Here is another video, this one a walk-through of an ordinary type drilling rig done by a company CEO, apparently for his investors. No drama, just a real-life description by a real life guy of equipment and processes.

I’m not connected with this company in any way. Not an investor, don’t know anyone who works there, or invests in it. Posted for your enjoyment and education.

About 30 minutes.

https://www.youtube.com/watch?v=h7GVHPEfpU4

When I was a sophmore in HS, the folks at Greenwood decided to form a high school. All that was there was a K-8 school, a small store/gas station, and some teacher housing. I definitely don’t recognize Greenwood any more.

By looking at that map of the shale plays in the USA it looks as though there was a huge world wide flood at one time and all the plant and aninimal life was concentrated in those areas and buried under heavy rock and sediment.
The flood that God sent in the bible could have caused this ?
Please , the next big shale play that is found in the USA to be named The NOAH shale basin.

Has Governor Chickenlooper(D) put fracking fluid on tap down at his yuppy mill/brewery yet? No?

And hmm —

“California Halts Injection of Fracking Waste, Warning it May Be Contaminating Aquifers

State’s drought has forced farmers to rely on groundwater, even as California aquifers have been intentionally polluted due to exemptions for oil industry. “
http://www.propublica.org/article/ca-halts-injection-fracking-waste-warning-may-be-contaminating-aquifers

I s’pose at least folks will be able to buy bottled water and corn syrup with their EBT...

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