BP Creates New Business to Maximize Efficiencies in the Eagle Ford

BP Eagle Ford Shale Map

BP plans to split its U.S. onshore oil and gas segment into a separate business, company officials said in a March 2014 statement. In recent years, BP has divested non-core assets to focus on the development of unconventional plays like the Eagle Ford Shale.

The new business, which will operate separately from BP, will have control of ~5.5 million acres in assets and over 21 wells. Approximately ~450,000 gross acres are in the Eagle Ford Shale alone. BP hopes to maximize competitiveness in the company's US Lower 48 onshore dealings with this new endeavor.

Read more: BP's Eagle Ford Shale Position Reaches 450,000 Net Acres

“Over the last few years, we have fundamentally reshaped our North America Gas portfolio,” said BP Upstream Chief Executive Lamar McKay. BP has done so by divesting non-core assets and focusing development in leading US unconventional plays like the Eagle Ford Shale in South Texas. “Now it’s time to reshape the way we run the business – and we are very excited about this bold step forward,” he said.”

BP will own the new business, but it will be led by a separate management team. The new company will also be structured differently, and operate in way that is more conducive to the competitive U.S. onshore environment. The company's primary goals with the creation of this new group are to speed innovation, foster faster decision making and generate shorter cycle times. The new business will be housed at a new Houston, Texas location, separate from BP's Westlake campus.

BP's New Company Highlights

•  BP announces in March 2014 the creation of new company to focus on U.S. Lower 48 unconventional oil and gas resources
• The new company will have control of ~5.5 million acres in assets and over 21 wells. Approximately ~450,000 gross acres are in the Eagle Ford
• The creation of the new company is intended to spur decision making time, generate shorter cycle times and speed innovation
• BP has been divesting non-core assets to focus attention on the development of unconventional plays like the Eagle Ford Shale in recent years

Read more at bp.com

BP Review of World Energy Trends - Highlights Video

BP has published its annual statistical review of world energy trends for over 60 years. This year's report is as interesting as ever. A short video presentation and our takeaways are included below.

• Global energy consumption growth slowed to just 1.8% in 2012
• Energy efficiency improved at rates not seen in 30 years
• Energy consumption in developed countries has fallen for 5 straight years
• Saudi Arabia, UAE, and Qatar produced record levels of oil in 2012
• US saw the largest increase in oil production in the country's history
• China consumed the majority of the world's coal for the first time
• Nuclear power declined by more than 6% in 2012 (largest drop ever)
• China increased hydroelectric power generation by more than 22%
• Biofuels output declined globally
• Solar output grew by more than 50%, but renewables only county for 2% of energy

P.S. The Eagle Ford played a big part in helping grow U.S. oil production. Oil production reported to the Texas Railroad Commission has increased from ~200,000 b/d at the beginning of 2012 to estimates of almost 600,000 b/d in June of 2013.

If you are a stats junky, you might enjoy the "in depth" interview. It is a little longer - 9 minutes.

Kinder Morgan Plans Second Condensate Facility at Galena Park

Kinder Morgan Galena Park Terminal Photo

Kinder Morgan has reached an expanded agreement with BP that will support the development of an additional 50,000 b/d condensate processing facility at Galena Park.

Kinder Morgan will invest an additional $170 million to add a second processing unit and add 700,000 barrels of storage at the site along the Houston Ship Channel. Total condensate processing capacity at the site will increase to 100,000 b/d.

“We are pleased to secure long-term contracts for all of the throughput capacity at our facility, and provide BP with the processing needed for Eagle Ford Shale production and other condensates,” said KMP Products Pipelines President Ron McClain. “Combined with our recently completed Kinder Morgan Crude Condensate (KMCC) pipeline, we are able to provide unparalleled connectivity to crude oil and clean products markets on the Texas Gulf Coast.”

“As production continues to grow, this might not be the last condensate processing facility we see announced. ”

Condensate processing facilities split the liquid into its various components - light and heavy naptha, kerosene, diesel, and gas oil. The individual components are more easily marketed.

As of the first quarter of 2013, the Eagle Ford is estimated to be producing more than 800,000 b/d of liquids, but only a little more than 400,000 b/d is considered oil. The remaining balance is attributable to condensates and NGLs. The amount of condensate production varies by well across the play, but as much as 50% of liquids production is potentially viewed as condensate by midstream companies.

Paul Reed, Chief Executive of BP’s integrated supply and trading business, said, “BP is proud to build upon our strategic partnership with Kinder Morgan through an increased footprint in Galena Park. We believe that by accessing this additional throughput capacity we will be better placed to provide U.S. producers a full suite of services including access to the best homes for their crude and condensates. It will also enable BP to service our customers better and more efficiently manage their feedstock and product needs. BP remains committed to helping unlock additional U.S. domestic energy production.”

This announcement comes in addition to the company's previous commitment to build a $200 million processing facility at Galena Park. BP committed to supply 40,000 b/d of condensate and agreed to a long-term lease of 750,000 barrels of storage at the facility in the summer of 2012. You can read more in the article BP - Kinder Morgan Ink Long-Term Eagle Ford Processing Agreement. The first phase is expected to be in service by the first quarter of 2014.

Read the latest press release at kindermorgan.com

BP's Bob Dudley Shares His Energy Thoughts - IHS CERAWeek

BP's Bob Dudley addressed the crowd at IHS CERAWeek to share the company's view of the industry industry. Mr. Dudley described the global energy journey and his view of the role of the US & Russia in the energy future. [ic-l]The global energy journey includes demand growth that is driven by Asian countries through 2030. Non-fossil fuels that will account for 1/5th of energy in 2030 and global oil demand is expected to rise by 16 mmbbls/d. The projected increase in oil demand is more than Canada, Russia, and the UAE produced in 2011.

Mr. Dudley stated "Turning to supply, many in the industry used to worry about whether demand on this scale could be met......but there hasn't been much talk of "peak oil" lately."

Shale and deepwater plays have driven oil and gas production higher to a point where we believe we have 54 years of proved oil reserves and 64 years of proved gas reserves.

“North Dakota is only second to Texas in terms of production and has surpassed OPEC member Ecuador over the past few months.”

Russia and the US are two energy giants who are driving supply. The US produced 5 mmbbl/d in 2008 and has recently eclipsed 7 mmbbls/d. The deepwater accounts for 18% of US daily production and plays like the Bakken and Eagle Ford has supported onshore production. Along with growing production, the country's import dependency is declining significantly.

Oilfield jobs are open across South Texas and much of the US. High paying oil and gas jobs have helped pull the economy out of the recession. BP is now positioning itself to invest significantly in downstream expansions. The Whiting refinery is expadning to handle growing volumes of Canadian crude. The expansion will be the largest economic investment in the history of Indiana. That will be followed by a $400 million reformer that is being added to the company's Toledo Refinery.

Mr Dudley ended his speech noting that recoverable reserves have grown considerably over the decades:

"...the world's energy companies have produced more oil in the last 40 years than was thought to exist on the entire globe in 1979."

You can follow @EagleFord_Shale on twitter for live updates from the conference.

Eagle Ford Development is a Win for the U.S.

Eagle Ford development is a big win for the U.S. Most foreign countries are sitting on opportunity without acting. Al Holcomb of Lewis Energy Group shared his thoughts on the Eagle Ford and U.S. shale development yesterday at the Plaza Club in San Antonio. In speaking about the Eagle Ford and shale gas in general, Holcomb said:

“This play is huge, South Texas is emerging as one of the hottest oil and gas regions in this country.”

“The rest of the world is still sitting, it’s given us an unbeatable edge. The big winner will be our country.

Read more about the meeting at fuelfix.com

Lewis Energy is a legacy operator in South Texas who was well positioned with several hundred thousand acres prospective for the Eagle Ford before 2008. The company is now partnered with BP and expects to drill over 2,000 wells in the next 10-15 years. Lewis was very early in testing the Eagle Ford. The company drilled its first well targeting the play in 2002.