H2S, Labor & Pipeline Shortages, Higher Service Costs Headline 2011

Eagle Ford Shale oil & gas was the talk of the town in San Antonio today. The oil and gas conference goes through tomorrow and will continue with both operators and service providers presenting. For everyone who wasn't able to attend, here are a few things we're hearing around the conference:

  • H2S is a much bigger issue than reported in early Eagle Ford wells. No one was able to describe why, but wells are producing various amounts of H2S throughout the play. H2S can be treated, but wells aren't consistent either. In some cases, adjacent leases are producing vastly different amounts of the corrosive gas
  • A lot of liquids are being produced, but we don't have enough pipelines to move the crude effectively. That will change over the next few years, but we'll experience a period of larger price differentials before it corrects itself
  • Higher service costs have hit the operators hard in 2011. We've heard examples of well costs going up 50%+ year over year. A lot of it is service costs inflation, but a lot of it is longer laterals, larger completions, and wide spread use of more expensive proppants
  • The labor shortage is a big issue. I won't guess a number, but there would be a lot more rigs active if there were people to provide all of the needed services
  • If you've missed it, there's also a housing shortage across South Texas. As you move closer to the border, we've heard companies might build large scale man camps and move to a two weeks on, two weeks off schedule