Caprica Analysis

Caprica case summary (due week #3): What would you do if you were in Jane Barrow’s position? Explain why. We will discuss your answers in class. Write one-half page, double spaced, print and bring to class on paper.

3 potential projects

1. Tight sands

1. Least operating cost
2. Produce .1 Tcf per 10 wells
3. Foresee netting $1-$2 per Tcf
4. Remote area <40 people live in the area

1. Gas Shale Site

1. Popular site for drilling due to estimated 500 Tcf
2. Need water to frack each well 2.1 mil to 8mil gallons
3. Opportunity 25 Bcf
4. Most expensive operating costs (shale depth, need 5 wells to produce natural gas, low permeability of the share)
5. Net $.80 Tcf

1. Coal Bed Methane

1. Produced at moderate cost
2. 300-500 feet from the ground
3. Require 800,000 gallons of water
4. 75 Bcf opportunity
5. Net $.5-1.5 per Tcf

Fracking works

1. Tight Sands Gas

1. Largest unconventional gas production
2. Trapped in sandstone or carbonate
3. Located in Texas and the west

1. Coal Bed Methane gas

1. 2nd largest source of unconventional gas production
2. Formed in coal deposits
3. Requires less fluid during hydraulic fracturing versus Tight sands and shale gas
4. Closer to the surface = easily drillable
5. Located in the west

1. Shale Gas

1. Absorbed by clay particles
2. Located in Appalachian region

Although this helps with less dependence on foreign oil but concerns about the safety of the chemicals used in the extraction process

Conversation w/ Doug Brown & Milo Peterson

• Doug enthusiastic about hydraulic fracturing

• Acknowledge minor safety issues but not enough of a concern
• No environment concerns with water contamination
• Suggested safest fracking for Caprica would be the farthest from people and aquifers

• No hard and fast data to back up until EPA does the assessment
• Brown suggest some contamination in aquifer is okay; Peterson was against
• Both men agreed that the Pennsylvania site risk of contamination to Delaware River but disagreed on how much (casings)

Public controversy

Process for hydraulic fracturing’s environmental and health risks were greater than previously thought

Primary concerns:

• Potential contamination of underground aquifers
• drinking water from chemicals used in the fracturing fluid
• Large volume of water required in fracturing
• Disposal of water and chemicals after the well was finished

EPA inability to regulate the process had prevented any definitive studies of the risks fracking introduced

Other points to consider:

• Chemicals are considered proprietary information

• Disclosure of fracking fluid makeup is important for EPA to investigate contamination incidents more efficiently, conclusively, and economically
• One study – wastewater NY department

• No hard proof of hydraulic fracturing to water contamination but studies were conducted in Wyoming and found some traces
• More data might be coming in 2 years
• A number of recent accidents occurred (look at prompt)

Based on the case study and if given the opportunity to consult with Jane Barrow on what she should prepare for her recommendation in front of the Caprica Energy’s board of directors then I would direct her to put resources to getting the natural gas out at the tight sands gas site in West Texas while keeping an eye for the EPA report in 2012.  

Here are the following reasons why she should go this route: