Addressing Challenges in the Eagle Ford Shale

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Oil and gas booms like the ones under way in the South Texas Eagle Ford and North Dakota Bakken shales bring significant economic activity and jobs to communities and entire regions. They can also lead to social challenges associated with rapid population growth and increased industrial activity that can place strains on public services, infrastructure and the environment.

The Eagle Ford and Bakken shales, along with the Oklahoma Resource Basins, form the core of Marathon Oil’s growth assets. We expect these assets to account for more than 36 percent of our total global production by 2016, up from 21 percent in 2013. In the Eagle Ford alone, the Company plans to spend more than $1.8 billion per year for the next five years developing these resources.

With our significant stake in these unconventional resources, Marathon Oil is addressing challenges while growing production. Being a responsible operator and steward of safety, resources and the environment helps us maintain our license to operate and aligns with our values.

Applying Lessons Learned

When we first acquired assets in the Eagle Ford in 2011, we benefited from lessons learned since entering the Bakken Shale in 2006. Marathon Oil began building relationships with stakeholders to collaboratively address issues such as road safety, public safety and job creation. We took the lead in forming the South Texas Energy and Economic Roundtable (STEER) that brings together the 11 largest Eagle Ford operators to tackle issues facing the region. Our regional vice president responsible for our South Texas operations participated on the Railroad Commission of Texas Eagle Ford Shale Task Force that released a report in March 2013. We also hosted the Texas House of Representatives Energy Caucus on a tour of our Eagle Ford operations, including a hydraulic fracturing site.

We knew from our experience in the Bakken Shale that oilfield truck traffic can cause congestion and increase the risk of traffic accidents, and that distracted driving can exacerbate these issues. In response to road safety concerns in South Texas, in 2012 we contributed to a public service campaign encouraging drivers to sign a national pledge to prevent distracted driving.

As a result of the influx of people into South Texas, county judges requested additional state law enforcement presence to patrol roadways and help to prevent crime. With hotel rooms in high demand, visiting troopers were forced to book rooms in San Antonio and make long commutes to the Eagle Ford that reduced their time available to patrol. Marathon Oil donated to the Karnes County Department of Public Safety Trooper Hotel Fund to offset hotel expenses, giving troopers more time on the ground in communities.

Marathon Oil’s employment in the region has gone from zero to approximately 200 employees and more than 2,200 contractors since our entry. We provide targeted training and competency development for field operators to ensure they have the skills to operate our assets safely. In addition, our $60,000 grant to Coastal Bend Community College’s Petroleum Industries Training Program is preparing individuals for jobs in oil and gas operations and providing continuing education for those already employed in the industry.

As a long-time supporter of education, Marathon Oil is exploring innovative programs to strengthen elementary math and science education. We are working with Eagle Ford school districts and community colleges to pilot an innovative Integrated Education Funding Model. The Eagle Ford Shale’s dynamic environment will help us test our concept that social conditions and public health affect academic performance and that we need to look at these factors holistically to ensure that the projects we fund give students the best chance of success.

Minimizing Our Footprint

One of our challenges in the Eagle Ford is to reduce our environmental footprint, particularly the amount of water we use in our operations. Hydraulic fracturing operations (fracking) that make it possible to produce oil and gas from shale involve pumping a mixture of water, sand and chemicals into the formation. We have reduced the amount of water we use by changing to a polymer gel mix fracking fluid and making simple process changes. We use fresh water only when there is not enough non-potable water available, and as a result, approximately 85 percent of the water we used during 2012 was categorized as non-fresh.

Through water recycling, Marathon Oil is cutting fresh water and total water use further, which also reduces the number of truck trips needed to move wastewater away from well sites for disposal. In 2013, we are piloting a recycling program that we expect will take 2,600 trucks off the road over six months. The Company is investing $10 million in 2013 to build infrastructure so we can transport and manage water more effectively.

In addition, we are building midstream infrastructure to support production growth across the area. As a result, we currently transport approximately 60 percent of our production by pipeline, which removes large tanker trucks from highways, in turn reducing air emissions. By strategically siting disposal locations and distribution and collection facilities, we hope to ease congestion even more. Marathon Oil also continues to minimize our operational footprint. By improving processes, we are using fewer rigs even as we drill and recover more oil and gas.

The Eagle Ford Shale is the centerpiece of Marathon Oil’s growth portfolio. We are expanding our operations while staying true to our values of health and safety, environmental stewardship, honesty and integrity, corporate citizenship and a high performance team culture. We are mindful of the challenges that accompany growth and will remain active in developing meaningful solutions in partnership with other operators, local communities, regulators and elected officials.

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