He was born in Galveston, Texas, in 1919, the son of Greek immigrants, and he died there in July 2013 at age 94, a billionaire. But through the years in between, oh what a life!
George P. Mitchell has been highly praised since his passing. Tributes have stacked up from oil and gas industry executives who owe so much to the so-called “father of fracing.” Others have mentioned his lifelong love of science, especially of astronomy and physics, and his study of sustainability – the greatest example of which is The Woodlands, Texas, a master-planned community north of Houston that has been emulated by urban planners around the world.
Mitchell could see far and connect the dots. Source after source cites his visionary nature, always looking out 30 years. To him, the environment, sustainable development of oil and gas fields, and real estate communities all fit into one philosophy.
In August 2012 Mitchell and coauthor New York Mayor Michael Bloomberg published an op ed in the Washington Post and other major papers defending the safety and efficacy of hydraulic fracturing. But true to his own environmental activism, at the same time Mitchell urged the industry to adopt and adhere to best practices.
Mitchell and Bloomberg wrote, “Fracing for natural gas can be as good for our environment as it is for our economy and our wallets, but only if done responsibly. The rapid expansion of fracing has invited legitimate concerns about its impact on water, air, and climate – concerns that industry has attempted to gloss over. With so much at stake for the environment, jobs, and energy security, it is critical that we make reasoned decisions about how to manage the use of hydraulic fracturing technology.
“We can frac safely if we frac sensibly. That may not make for a great bumper sticker. It does make for good environmental and economic policy.”
It was Mitchell’s E&P company, Mitchell Energy & Development Corp., that experimented doggedly for 17 years to create the “overnight success” of the Barnett shale of North Texas. Its eventual success led the oil and gas industry into a leasing and drilling frenzy from roughly 2004 to today as shale plays in other basins were developed.
Today the industry is in a tremendous harvest mode, with thousands of wells yet to be drilled in each shale play, and the US economy is benefiting. Domestic oil and gas production has steadily risen since that time. There is serious talk of energy independence, exporting natural gas in the form of LNG, and exporting refined petroleum products.
“George Mitchell dramatically changed America’s energy position,” said Daniel Yergin, vice chairman of IHS CERA and founder of Cambridge Energy Research Associates, upon learning of Mitchell’s passing. In 2012 Yergin and some others had proposed that Mitchell receive the Presidential Medal of Freedom for his contributions to science and the energy industry.
Throughout his career, Mitchell participated in drilling some 10,000 wells, including more than 1,000 wildcats. Mitchell Energy was credited with more than 200 oil and 350 natural gas discoveries. The firm spent nearly two decades developing hydraulic fracturing, finally finding success in North Texas’ Barnett shale formation in the 1990s.
It is not often that one man makes such an indelible mark on an industry or community. It is rare indeed that Mitchell did this in many different spheres, from energy technology to environmentalism to sustainable urban development to astrophysics. He co-funded some of the mirrors on the giant Magellan telescope, for example.
He was known for his keen intellect, graduating from Texas A&M University in 1940 first in his class and captain of the tennis team. Years later, he started and endowed the Houston Advanced Research Center (HARC), aiming to create a “Silicon Valley” hotbed of innovation in Texas. Late in life, he counted the famed physicist Stephen Hawking as a friend. Mitchell wanted Texas A&M to compete with elite universities on both coasts of the US, he said, and he declared he’d make it happen. He donated US $52 million for construction of two buildings for the George P. and Cynthia Woods Mitchell Institute for Fundamental Physics and Astronomy.
Mitchell came from modest roots and sold stationery and candy to get through college, yet he always made philanthropy and education keystones of his life after that, especially after he sold his Fortune 500 company, Mitchell Energy, to Devon Energy Corp. in 2002 for $3.5 billion.
To combat poverty, and because he was interested in urban planning and preserving the environment, in 1975 he opened one of the most successful mixed-use “New Towns” in the US with The Woodlands. Rather than a bedroom suburb, he envisioned a full-blown town where people live, work, and play among the trees – all power lines are underground, billboards are prohibited, and trees are preserved in all developments. Today this parklike atmosphere is home to about 120,000 people.
And he spent millions on historic preservation in his home town, Galveston, helping to revive its once-moribund economy and reinstituting Mardi Gras each spring. Earlier this year he attended the annual ball in costume and face paint, as he always did.
Persistence pays off
But for the oil and gas industry, it is Mitchell’s early work to figure out how to drill and produce the Barnett shale in the Fort Worth basin for which he will be remembered, as fracture technology has ended up being the key to unlocking shale formations around the world.
“There’s no point in mincing words. Some people thought it was stupid,” Dan Steward, a geologist who joined Mitchell Energy in 1981, told The Associated Press in an interview last year.
Steward estimated in the early years, “probably 90% of the people” in the firm didn’t believe shale gas would be profitable and that Mitchell’s company didn’t even cover the cost of fracing on shale tests until the 36th well was drilled. “There’s not a lot of companies that would stay with something this long,” he said. “Most companies would have given up.”
In 1981, Mitchell Energy culminated years of experimentation when it drilled the C.W. Slay No. 1, which became the discovery well for the Newark East (Barnett shale) gas field. It was drilled to about 2,380 m (7,800 ft) in the southeast corner of Wise County, Texas, southeast of the large and established Boonsville (Bend Conglomerate) gas field. Mitchell had been drilling vertical gas wells in this county since the 1950s when he started his company.
“There were many times during its early life that the Barnett play was on the verge of failing, and had it not been for the conviction, commitment, and determination of George P. Mitchell and Mitchell Energy, it would not be what it is today,” wrote Steward in his history, “The Barnett Shale Play: Phoenix of the Fort Worth Basin,” published by the Fort Worth and North Texas geological societies in 2007.
A number of developments contributed to Mitchell’s eventual success. Fracture-stimulation technology was advancing. In 1979 Mitchell performed the nation’s largest hydraulic frac of that era, in Limestone County in East Texas, using gelled water, with 1 MMgal of fluid and 2.8 MMlb of sand. Also, geological thinking kept advancing. He and other geologists had begun to suspect that the Barnett shale underlying the North Texas region was the source rock for the oil that was being produced at the time.
By 1987 Mitchell had drilled 36 wells in the Barnett before it could book commercial reserves, Steward wrote. Starting in 1990 Mitchell and the Gas Research Institute agreed to work together on the Barnett for another 10 years of R&D. With this assistance and funding from the federal government, more wells were drilled. Each time, different frac techniques were tried, and reservoir modeling and mapping were done.
By 1992 Mitchell’s team believed it had 3.6 Bcm/sq km (50 Bcf/sq mile) of gas in place in the Fort Worth basin, so it approached the Texas Railroad Commission to obtain permission for 80-acre spacing in the Newark East field. By 1994 the Barnett had replaced the Bend Conglomerate as the main source of new gas production for Mitchell in North Texas.
Mitchell acquired 1,295 sq km (500 sq miles) of 3-D seismic data in North Texas, and about half of those data were applicable to the Barnett. Foam fracs were changed to light sands fracs; downhole motors were used; other new ideas were tried.
The Devon deal
Through the 1990s, Mitchell’s team continued to expand and experiment with the Barnett shale, spending millions of dollars.
Their success culminated in the $3.5 billion sale of the entire company to Devon Energy Corp. in 2002. The shale really took off after that when Devon applied horizontal drilling to it.
At a tribute dinner for George Mitchell at Hart Energy’s DUG Conference in Fort Worth in 2008, Devon’s then-chairman, Larry Nichols, spoke of the deal.
“We all know who the pioneer was in this play – it was George Mitchell. … He persevered for almost 20 years. In 1999 George tried to sell Mitchell Energy… it was a failed sale. No one bought it. We looked at it and didn’t buy it.
“But then, we looked at it again later. I noticed Mitchell’s gas production kept increasing, and I asked my guys to look into why. Devon bought it in 2002, and Wall Street yawned. One analyst even said we’d blow our brains out on it.
“Our plan was to take the hydraulic fracturing that George had begun and use that technique in the core area. … In 2003 we drilled the first horizontal well in Johnson County. By 2007 we were the first company to drill 1,000 horizontal wells out of a total of 4,000 drilled by the industry there.”
By year-end 2007 some 8,900 wells had been drilled in the Barnett shale, up 36% from the year before. A five-year leasing and drilling frenzy ensued across the US as producers looked for other shale plays and found them in the Haynesville, Woodford, Fayetteville, Eagle Ford, Bakken, Marcellus, and Utica.
Shale production has revolutionized the US gas market and is starting to do so for crude oil as well. The Potential Gas Committee said this year in its latest assessment that the US gas potential resource climbed to 67.5 Tcm (2,384 Tcf), the highest in the study’s 48-year history.
The shale story is still being written, but it was Mitchell and his team who opened the first chapter.
HIGHLIGHTS IN SHALE TIME
1981 Mitchell Energy & Development Corp. drills the C.W. Slay No. 1, the discovery well for the Newark East field (Barnett shale) in the Fort Worth basin.
1989 About 50 Barnett wells have been drilled in the Newark East field.
1991 Mitchell agrees to bring in the US Department of Energy and the Gas Research Institute to help, and the latter sponsor the first horizontal well in the Barnett.
1997 Mitchell does its first slickwater frac in May 1997, thereby cutting costs. Old-style massive fracs using lots of sand give way to smaller amounts of sand injected at higher rates. Microseismic fracture mapping, led by the Gas Research Institute, enables better understanding of the way natural fractures and induced fractures affect production in the shale.
2002 The Newark East field has now become one of the largest in Texas, producing from 900 wells. Devon Energy Corp. buys Mitchell Energy & Development Corp. for $3.5 billion, acquiring 71 Bcm (2.5 Tcf) of proved gas reserves in the play.
2003 Southwestern Energy Corp. launches a major leasing program in Arkansas’ Fayetteville shale.
2004 Range Resources Corp. drills its first Marcellus shale well in Pennsylvania. Southwestern Energy drills its first vertical wells in the Fayetteville.
2005 Range drills its first horizontal Marcellus well in Pennsylvania. Devon announces 56 horizontals and 70 verticals to be drilled in its Barnett core area. EOG Resources reports that a Barnett well tests at 283 Mcm/d (10 MMcf/d), and lease prices and rig counts are rising rapidly. Anadarko Petroleum starts building its Eagle Ford shale acreage position.
2006 Chesapeake Energy Corp. starts drilling the Haynesville shale.
2007 By year-end 2007 some 8,900 wells have been drilled in the Barnett, up 36% from the year before. Devon Energy announces it averaged 28.3 MMcm/d (1 Bcf/d) of Barnett production, the first company to do so, and, it drilled its 1,000th horizontal well in the play.
2008 Between January 2007 and December 2008, North American gas supply grows by 226 MMcm/d (8 Bcf/d), and shale gas reaches 18% of US supply.
Chesapeake Energy tells analysts the Haynesville could be bigger than the Barnett. Other E&Ps such as Petrohawk Energy Corp. and Cabot Oil & Gas begin to reveal their positions in the play. Estimates of 707 MMcm (25 Bcf) per section could be conservative.
Southwestern Energy says it has spent $2.6 billion in the Fayetteville and will drill 475 horizontal wells there this year.
2009 In September the Environmental Protection Agency issues the first of many information requests on the chemical composition of fluids used in fracturing as part of a broad scientific study requested by the US Congress. Requests go to service providers BJ Services, Complete Production Services, Halliburton, Key Energy Services, Patterson-UTI, PRC Inc., Schlumberger, Superior Well Services, and Weatherford.
As of year-end 2009, Newfield Exploration had drilled 30 horizontal Woodford shale wells in Oklahoma’s Arkoma basin, with an estimated internal rate of return of 35% if gas is $4.50/Mcfe.
2010 As oil prices rise and gas prices fall, more producers enter the rush to oily and liquids-rich shales. CNOOC forms a $2.6 billion joint venture (JV) with Chesapeake in the Eagle Ford, one of the highest per-acre valuations for Eagle Ford oil.
2011 The Barnett shale peaks at 170 MMcm/d (6 Bcf/d) in November. Statoil buys Bakken shale-focused Brigham Exploration Co. for $4.7 billion, and Carrizo Oil & Gas inks a JV with India’s GAIL in the Eagle Ford.
2012 Sumitomo Corp. invests $1.4 billion with Devon Energy in the Permian’s Cline and Wolfcamp shales. China announces a tender offer for 17 shale gas blocks. More than 70 companies express interest.
2013 In April the Potential Gas Committee finds, in its latest assessment, that the total US natural gas resource is now 26% higher than in any of its previous findings.
Activist investor Elliott Management offered to buy oil and gas producer QEP Resources in an all-cash deal valued at $2.07 billion, saying that the company is "deeply undervalued."
Saudi Aramco CEO Amin Nasser says his company is looking to acquire natural gas assets in the U.S. and is willing to spend "billions of dollars" there as it aims to become a global gas player.
Here’s a quicklist of oil and gas assets on the market including an operated and nonop position in the Delaware Basin and a package of core Stack, Merge and Scoop assets from Castell Oil.