Thursday, September 26, 2013

Shell Fracks and Announces It's Pulling Out (or vice-versa)

Shell fracked the Freeman 3-24 well Tuesday August 13, 2013, its first frack in Huerfano County.  The production results should be made available publicly on the COGCC web site in February after the 6 month confidentiality period on this "wild cat" well expires.  The initial results of the logs from the drilling of the well in December 2012 are already currently available on the site.  You can contact the COGCC for help finding/viewing them.   Our analysis of the logs confirmed Shell drilled directly through dikes with their horizontal well bore.

Shell also announced it is pulling out of the region, and selling its assets, but meanwhile continuing business as usual.  The Huerfano World Journal ran a front page article on August 15 titled "Shell Oil Pulling Out of Region".  Based on the timing,  the decision to pull out was made before the Freeman well was fracked.

Huerfano is not the only location Shell has announced it is divesting from.  Quoting from an article in the Denver Business Journal August 23rd:

"The company on Aug. 1 reported a 60 percent drop in second quarter results — largely due to a $2 billion write-down of its North American shale assets due to 'the latest insights from exploration and appraisal drilling results and production information.'

The company said it planned to sell some of its North American assets.

A week later, a company spokeswoman confirmed that its assets in Routt and Moffat counties in northwestern Colorado, were on the market.

And now, so are Shell’s operations on southeastern Colorado, where it’s drilled a well in Huerfano County, Shell spokeswoman Deb Sawyer told me.

'We’ve drilled one well and fracked it, and we’ll continue with our program while the assets are marketed,' she said.

In an emailed statement, Sawyer explained the company’s decision this way:

'As part of ongoing activities to strengthen our onshore tight/shale oil and gas portfolio, Shell will market certain assets in the United States. This includes our exploration project in Southeast Colorado.'

'While this area has potential, other projects within Shell’s portfolio provide more growth opportunities. Our team will continue to focus on safe operations activities while the asset is marketed and will complete our previously planned 2013 drilling program,' she said."

Net-net it is clear that Shell has decided that Huerfano County has, relative to its other oil and gas projects and opportunities, LOW POTENTIAL.

Perhaps there are also increased costs due to the high risk geology, and an educated, aware, and vigilant populace, e.g. lawsuits, increased COAs/BMPs, increased PR requirements.

Huerfano County 'assets' being for sale by Shell opens the leases up to other/smaller operators which will likely come in more ignorant of the risks here. We will need to inform them about the problems that have already occurred and ask they explain how they will mitigate the same risks.

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