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A band of entrepreneurial oilmen have found an economic way to extract oil from shale rock, fuelling a frenzy for prospects that has pushed up lease prices and lifted hopes of the first rise in onshore US oil production in decades.

Mineral leases in shale oil territory that would have sold for $10 an acre in the Niobrara Shale – which runs under parts of Colorado, Kansas, Nebraska and Wyoming – just two years ago are going for $5,900 an acre, according to Wood Mackenzie, the consultancy.

These small independent oilmen had used hydraulic fracturing and horizontal drilling to triple estimates of US natural gas supplies and are now applying that same technology to get oil from shale rock.

“Oil shale is booming,” says Raoul LeBlanc, senior director at PFC Energy, the consultancy.

The process, used by EOG Resources, Continental Resources and Brigham Exploration, among others, involves drilling 10,000 feet down and then 10,000 feet across and pumping in water, in up to 40 stages, at high pressures to fracture the rock and let the oil escape.

The method could add 1m barrels of oil a day to US supplies in five to eight years, says Pete Stark, vice-president of industry relations for IHS Cera, the consultancy.

After decades of falling onshore oil production, Mr Stark says this marks the first time the US could see a “significant increase” in onshore oil production: “It’s a very big plus for the US economy and energy security. It’s new jobs, and it could offset 1m barrels per day of imports.”

The US imports about 10m barrels a day of oil, so that would be replacing 10 per cent of imports.

The growth estimates lead Jeremy Boak, director of the Center for Oil Shale Technology and Research at the Colorado School of Mines, to cast doubt on claims that the US had reached its peak in oil discoveries: “There is oil to be found in the United States.”

The predicted 1m barrels a day would add to a base of about 3m a day from the Bakken shale, which covers most of North Dakota and part of Montana.

The US Geological Survey estimated in 2008 that the area has from 3bn to 4.3bn barrels of undiscovered oil technically recoverable with the new technology. That is a 25-fold increase over its 1995 estimate of 151m barrels of oil and now represents the US’s biggest oilfield outside Alaska.

This year, the North Dakota Geological Survey estimated almost 2bn barrels of recoverable oil from the nearby Three Forks-Sanish zone of the Bakken, increasing total resource potential to more than 6bn barrels.

Harold Hamm, chief executive of Continental Resources, notes only one-third of US oil has been considered recoverable, given technology limitations. Success in the Bakken underlines the potential to recover more of those “unrecoverable resources”.

“We’re using all the technology available to us today,” he says. “Will there be further advancements? Absolutely.”

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Too Much Gas: Producers consider cutting production

Natural gas producers are teetering on the fourth consecutive winter of low demand and prices, but relief could be at hand, analysts said Monday.

Even though North American storage inventories are marginally lower than they were at this time last year, ConocoPhillips CEO Jim Mulva told an oil and gas conference in Houston that his company is shutting onshore natural gas production in Canada and the United States while it awaits higher prices.

“We’ve had a small amount of production that we’ve shut in because we feel it’s not that economic to produce,” Mulva told reporters at a conference. “And so we’d rather keep it in the ground for when we can produce it at a later date.”

Conoco didn’t disclose how much gas it shut in, but the move was seen as the latest sign producers in the U.S. might finally be getting ready to cut production and drilling in the face of low prices, following the cue of Canadian producers that have dramatically slashed drilling since the third quarter of 2006.

According to the U.S. government’s Energy Information Administration, natural gas in storage is about five per cent lower than this time last year but still more than six per cent above the five-year average.

Speaking in Calgary last week, Texas oilman T. Boone Pickens said natural gas producers ought to quit drilling new gas wells as long as prices remain below $4 US.

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