Kentucky
Strengths & Opportunities for Growth

• Kentucky's existing oil and gas infrastructure is extensive
• Almost 150 years of proven oil production
• Remaining oil estimated at 1.7 Billion barrels (at 29% recovery efficiency)
• Remaining Devonian shale gas of 12 tcf (estimate as high as 112 tcf)
• Finding and production costs are typically low because resources are shallow
• There is significant natural gas in known fields (mostly in the Devonian black shale)
• Much of Kentucky's subsurface data are available in digital format
• The state is centrally located for access and distribution to northern and eastern industrial markets
• Federal and State funded oil and gas exploration research in being undertaken
• Industry has been dominated by small operators with limited access to investment capital and research funding. Application of new drilling and production technology has rarely been used.
• Thousands of landowners with small acreage and wells that are small by industry standards has kept new oil companies from coming into the state.
• Lack of production data limits and discourages investment from outsiders. For locals and veteran landmen however, the opportunities can be significant as they know where/how to drill.
• Official stats for 2007 (public record) list over 10,000 abandoned wells across the state. This data can be used to identify trends and opportunities for workovers, etc.
• Deep well opportunities have rarely been pursued because of past technology, drilling limitations, and inadequate funding for exploration research. Any success in deeper resevoirs applying new technology and drilling techniques could make leases very valuable.

 

The USGS estimates as much as 1.9 TCF of technically recoverable reserves exist in the region’s New Albany Shale. The formation is drawing significant interest. Several companies are consolidating large lease blocks or obtaining gas production permits. Companies successfully drilling New Albany wells in Kentucky include Inexco Oil Company (Butler County) and Endeavor Energy Resources LP (Breckinridge County), with Quicksilver Resources (Meade County) and El Paso Production Co. (Daviess County) having success in Indiana (IOGCC, March 2006). Chesapeake Energy Corporation is also active in the area.

 

Chesapeake Energy Corporation, the 3rd largest independent producer of natural gas in the U.S., from its 2006 Annual Report states that it acquired Columbia Natural Resources for $3 billion in 2005. This acquisition was for future growth and value creation in Appalachia, where Chesapeake’s 2006 reserve and production growth “exceeded our expectations”, according to the company’s Annual Report. Chesapeake reports it is pursuing new initiatives to develop unconventional shales in western Kentucky, Illinois and Alabama and expects to drill its first operational horizontal shale well in Appalachia this year.

 

Hubbert Peak
Oil Theory

 

The outlook for energy continues to look very strong and for the first time in the history of oil, it appears the days of boom and bust cycles may be over. Even if oil were to correct below $100, there is still substantial money to be made above $80. An economic slowdown is inevitable in North America and Europe but only a small percentage of the 2 Billion people in China and India drive vehicles. As the middle class grows by huge amounts in those countries, the demand for oil should more than offset the impact of a slowdown in North America.

 

The Hubbert peak theory states that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It is one of the primary theories on peak oil and something that is gaining more and more respect as the price of oil fails to fall below $100.

 

The Hubbert peak theory is based on the observation that the amount of oil under the ground in any region is finite, therefore the rate of discovery which initially increases quickly must reach a maximum and decline. Extraction roughly follows the discovery curve after a time lag (typically about 35 years for development
OPEC unable to replace Irans production in case of war
2008-07-14 09:05. Headline news

The head of the Organization of Petroleum Exporting Countries warned that oil prices would see an "unlimited" increase in the case of a military conflict involving Iran, because the group's members would be unable to make up the lost production.

 

"We really cannot replace Iran's production - it's not feasible to replace it," Abdalla Salem El-Badri, the OPEC secretary general, said in an interview.

 

Iran, the second-largest producing country in OPEC, after Saudi Arabia, produces about four million barrels of oil a day out of the daily worldwide production of close to 87 million barrels. The country has been locked in a lengthy dispute with Western nations over its nuclear ambitions. In recent weeks, the price of oil has risen higher on speculation that Israel could be preparing to mount an attack on the country's nuclear facilities. The saber-rattling intensified this week with missile tests by Iran. That has further rattled oil markets because of concerns that any conflict with Iran could disrupt oil shipments from the Gulf.

 

"The prices would go unlimited," Badri said during the interview, referring to the impact of a military conflict. "I can't give you a number."