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Federal Report: Shale Gas Expanding in Ohio, Texas

The Federal Reserve Board took notice of an expanding shale gas industry in parts of the country as the national economy grew at a moderate pace, according to a report released Wednesday.

The latest edition of the "Beige Book" -- published eight times a year with data provided by the 12 Federal Reserve Districts -- also reported modest increases in consumer spending, the service sector, manufacturing and banking activities, but job creation was relatively flat.

The report said shale gas activities were continuing to expand in the Cleveland district, with "good" production from wells drilled in Ohio's portion of the Utica Shale. Meanwhile, conventional oil and natural gas production rose slightly over the past six weeks, but drilling activity was flat. According to the report, analysts were uncertain about future drilling because of falling natural gas prices; however, wellhead prices for oil were stable.

Drilling activity was described as "strong" in the Dallas district, coupled with "high levels" of activity in shale plays. The report said 20 new onshore drilling rigs have come online in Texas since the last Beige Book report on Oct. 19.

"Revenues are growing and backlogs remain solid," the report said. "Activity in the Gulf of Mexico also rose by six [drilling] rigs, with new permits issued for deepwater drilling."

In the Atlanta district, the report found that energy companies were moving forward with plans to increase production capacities.

"New drilling technologies have reduced costs and increased extraction capabilities for both oil and gas," the report said, adding that analysts observed "the cost of unconventional drilling [continuing] to drop, allowing for more efficiencies and the ability to find and extract oil and gas."

Oil and natural gas drilling increased in the Kansas City district, the report said, and analysts were optimistic that the trend would continue in the months ahead because of favorable crude oil prices. Although overall drilling activity was reportedly approaching levels not seen since crude oil prices collapsed in 2008, the report warned that there were some lingering uncertainties.

"Shortages of equipment and labor [are continuing] to constrain the rate of increase in exploration to some degree," the report said, adding that "the delay in the Keystone [XL] Pipeline project was hindering future growth," (see Shale Daily, Nov. 16; Nov. 15).

In the Minneapolis district, oil exploration activity increased in Montana but decreased slightly in North Dakota since the Oct. 19 report. Meanwhile, the San Francisco district said crude oil extraction activity was growing in response to increased foreign demand, but the demand for natural gas was flat.

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