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The Monitor: Shell Oil looks at South Texas for natural gas

By Matt Whittaker

McALLEN — Shell Oil Co. wants more natural gas and it’s looking at deep South Texas to get it.

Royal Dutch Shell Group subsidiary Shell Western Exploration & Production Co. expects to drill two or three exploratory wells a year in Hidalgo, Starr, Zapata, Brooks and Duval counties, said Annell R. Bay, vice president of exploration for Shell’s Americas division.

The company is already drilling one of the exploratory wells in Starr County, she said. She did not know how long the drilling would continue.

“I think there will be opportunities here for a while,” Bay said.

With the exploratory wells, Shell will drill deeper and use new techniques to look for new pockets of natural gas. The company is seeking to expand its North American onshore reserves while demand for natural gas is up worldwide, and the exploratory wells could lead to other, more permanent wells if new fields are discovered.

Bay visited Shell’s McAllen office Thursday to speak to employees, local officials and business leaders as the company marks the 50th year it has had an office in South Texas. Company officials also used Thursday’s event to emphasize what they say is Shell’s commitment to safety for people and the environment.

The company has 80 employees in South Texas assigned to its production team, in addition to contractors and other Shell employees who work from the Valley periodically.

Frank A. Glaviano Sr., vice president of production for Shell’s Americas group, who also spoke Thursday, said the company will “continue to hire new people” for its Valley operations.

“It’s all about communities,” he said. “We’re not here to shut South Texas down. We’re here to grow South Texas.”

During Glaviano’s speech, he held up a graph of the company’s deep South Texas production over the years, showing a big dip in the mid-1980s. Around that time Shell considered phasing out local activity because of low production, he said.

The company now produces roughly 9 billion cubic feet of natural gas each month from 25 natural gas fields across Hidalgo, Starr, Zapata, Brooks and Duval counties.

In December, Zapata was the state’s No. 1 natural gas producing county, and Hidalgo was the state’s fourth leading natural gas producing county, according to the latest data from the Railroad Commission of Texas, which regulates the state’s oil and gas industry.

Zapata County produced more than 25 billion cubic feet of natural gas that month, based on preliminary production numbers. Hidalgo County produced more than 18 billion cubic feet.

With about 480 producing wells and about 600 miles of pipeline in the area, Shell says it is one of the largest producers in the 15-county Deep South Texas Railroad Commission district that includes the Valley.

Shell drilled its first South Texas natural gas wells in three fields west of McAllen in 1953. The company opened an office west of McAllen in 1957 and a McCook office in 1961.

In January 2006, Shell expanded its Valley presence by trading an interest in a deepwater Gulf of Mexico field for natural gas assets in South Texas controlled by Total E&P USA, which included natural gas wells in Pharr and McAllen.

Matt Whittaker covers regional business, economics, finance and social issues for Valley Freedom Newspapers. He is based in McAllen and can be reached at (956) 683-4422.

March 16, 2007 – 5:22PM

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