In this case the industry is the oil and gas industry. The Obama Administration, and unfortunately many in Congress and the American people, have been led to believe that the oil and gas industry is an untapped gold mine. They seem to think they can reap Billions of dollars of revenue from the industry by simply raising taxes. This kind of thinking has dire unintended consequences which need to be addressed.
One obvious consequence is these taxes, these added costs to the industry, will be passed on to consumers, meaning higher prices of oil and gas for you and I. So the tax is essentially an added tax to us taxpayers. Is this really good for our economy?
Also, by increasing taxes on the oil and gas industry, and further hobbling them by limiting areas where they can explore for oil and gas, the consequence is a shortage of oil and gas, leading to higher prices and an even larger dependence on foreign sources of oil and gas. How is this good for the U.S. economy? How will it create jobs? The oil and gas industry should be encouraged, not discouraged.
Few people outside of the oil and gas industry understand the enormous cost and risk involved in exploring for and producing oil and gas. The industry is unique, I think, in that regard. Our government, by failing to understand the basic economic principle of risk vs. reward, does immeasurable harm to the industry, the economy, and American people.
The fact is, the risk (and cost) of exploration and production is so great that if the "reward" is removed, companies and investors will not take the necessary risk. Who suffers, who pays when this happens? Everyone, consumers, taxpayers, and ultimately the government itself. The following article in the Fort Worth (Texas) Star Telegram summarized the situation.
Peter
Obama's proposed tax increase would stifle drilling, energy executive says
By JACK Z. SMITHjzsmith@star-telegram.com (source)
President Barack Obama’s proposed tax increases of more than $80 billion on the U.S. oil and gas industry over 10 years would crimp drilling activity and lead to higher energy prices for consumers, the CEO of the largest operator in the Barnett Shale said Tuesday.
Larry Nichols, head of Devon Energy and chairman of the American Petroleum Institute, said the higher taxes would reduce oil and gas companies’ cash flow, resulting in less money to drill wells. That would tighten supplies and raise prices, he said at a Fort Worth Chamber of Commerce luncheon.
"The strange thing is, they don’t realize the consequences," Nichols said, referring to Obama administration officials pushing for the increased taxes, which the petroleum institute estimates would cost the industry $84.4 billion.
Profits as 'gold bars’
In Washington, Nichols said, energy companies’ profits are considered "gold bars in the back room that we don’t know what to do with," rather than as a vital source of cash for drilling wells and creating jobs.
Supporters of the proposed tax increases counter, however, that they are equivalent to only a small part of energy companies’ revenue and profit. They stress that a single company, Irving-based Exxon Mobil, made a record after-tax profit of about $45 billion last year, an amount totaling more than half the proposed tax increases over a decade.
But energy companies’ fortunes have plunged this year as a result of a huge drop in oil and gas prices.
As a result, Nichols said, there has been an exceptionally rapid decline in drilling activity in recent months. Natural gas drilling in the Barnett Shale, while still substantial, has diminished to less than half its peak level. That’s setting the stage for a decline in production and a doubling of gas prices, Nichols said.
Offshore drilling
Nichols lamented the prohibition of offshore drilling off most of the U.S. coast, which he said have "really awesome oil and gas reserves." Soaring energy consumption in fast-growing developing nations such as China and India means that the world is "going to need more oil, and we’re doing to need more natural gas," he said.
More immediately, however, the industry is absorbed in staving off the proposed tax increases, Nichols said, putting the industry’s chances at "50-50."
Showing posts with label Devon Energy. Show all posts
Showing posts with label Devon Energy. Show all posts
Thursday, April 2, 2009
Friday, March 13, 2009
There Is Light At The End Of The Tunnel
Gas prices and drilling and production of natural gas will continue to increase. Now is the time to prepare. So says a VP for Devon Energy Corp. and reported in the following article from the Oil & Gas Journal. This is good news for the shale gas plays and horizontal drilling and interpretation.
Peter
GPA09: Gas recovery coming sooner, not later
Warren R. True
Chief Technology Editor-LNG/Gas Processing
SAN ANTONIO, Mar. 10 -- Rapidly declining US natural gas rig counts and prices are setting the stage for a recovery in both sooner rather than later. That was the message today of Gregory A. Dodd, vice-president for natural gas marketing and supply at Devon Energy Corp. in remarks to the 88th Annual Convention of the Gas Processors Association in San Antonio.
Dodd sees signs of this eventuality in the rapid pace that gas rigs are being laid down or otherwise pulled away from US gas plays, especially shale areas. He also said many wells are being completed but not yet tied into gathering and transmission infrastructure.
Today's fuel
The coming recovery is evident in the accelerating rate of production decline, the increased use of natural gas in electric power generation as falling prices make it more of the fuel of choice, and the inevitable US economic recovery. Devon, said Dodd, is "getting ready for a turnaround" by, in part, increasing its 2009 capital budget over 2008.
Natural gas, Dodd said, is "not the fuel of the future but the fuel of today." Companies need to be prepared for recovery by reducing debt and reorganizing management structures to speed decision making.
They also need to shorten response times for rig mobilization once recovery begins and be actively influencing policy making, especially at the federal level. Currently, said Dodd, the story of natural gas is not getting told in Washington, DC.
LNG will play a critical role, he said, in meeting demand in the recovery, as it will take US production companies 6 months from the time rigs are called back to work and increased production from that new work.
Contact Warren R. True at warrent@ogjonline.com.
Peter
GPA09: Gas recovery coming sooner, not later
Warren R. True
Chief Technology Editor-LNG/Gas Processing
SAN ANTONIO, Mar. 10 -- Rapidly declining US natural gas rig counts and prices are setting the stage for a recovery in both sooner rather than later. That was the message today of Gregory A. Dodd, vice-president for natural gas marketing and supply at Devon Energy Corp. in remarks to the 88th Annual Convention of the Gas Processors Association in San Antonio.
Dodd sees signs of this eventuality in the rapid pace that gas rigs are being laid down or otherwise pulled away from US gas plays, especially shale areas. He also said many wells are being completed but not yet tied into gathering and transmission infrastructure.
Today's fuel
The coming recovery is evident in the accelerating rate of production decline, the increased use of natural gas in electric power generation as falling prices make it more of the fuel of choice, and the inevitable US economic recovery. Devon, said Dodd, is "getting ready for a turnaround" by, in part, increasing its 2009 capital budget over 2008.
Natural gas, Dodd said, is "not the fuel of the future but the fuel of today." Companies need to be prepared for recovery by reducing debt and reorganizing management structures to speed decision making.
They also need to shorten response times for rig mobilization once recovery begins and be actively influencing policy making, especially at the federal level. Currently, said Dodd, the story of natural gas is not getting told in Washington, DC.
LNG will play a critical role, he said, in meeting demand in the recovery, as it will take US production companies 6 months from the time rigs are called back to work and increased production from that new work.
Contact Warren R. True at warrent@ogjonline.com.
Saturday, February 21, 2009
An Excellent Summary Of Unconventional Gas (and oil) Plays In The US
The following is a well-written and fairly detailed summary of the status of so-called unconventional shale gas, (and some oil) plays taking place in the United States as of August, 2008. It seems the economic benefits of this activity is going relatively unnoticed, compared to all the emphasis on "green" energy. Green meaning solar, wind and geothermal energy. It does make one wonder who is controlling or influencing what the mainstream media reports.
Note, one of the keys to the success of these new plays is horizontal drilling, and of course, the interpretation of these horizontal wells. This kind of interpretation presents a totally new challenge to geologists and engineers, something that can not be taken lightly.
Peter
ARCHIVE August 2008
Vol. 229 No. 8
SPECIAL FOCUS: NORTH AMERICAN OUTLOOK- UNCONVENTIONAL RESOURCES
Unconventional plays grow in number after Barnett Shale blazed the way
The Haynesville and Marcellus are becoming exciting new gas plays, while activity in the Woodford and Fayetteville continues.
Katrina Boughal , Technical Editor (source)
Unconventional gas plays in the US have been booming since technological advances increased production in the now-famous Barnett Shale. Horizontal drilling and fracture stimulation in the shale source rock, as opposed to the sandstone/limestone/dolomite reservoir rock, have proved to be successful not only in gas plays like the Barnett, Fayetteville and Woodford, but also in the Bakken-a primarily oil-rich formation.
Resources that were previously thought to be unrecoverable are now being reassessed and, in some cases, rediscovered. Many shale plays have been producing a small amount of gas for years (the Indiana and Kentucky New Albany Shale since the late 1880s), but with the Barnett example, they are becoming more successful. Hot plays in the industry include the Louisiana/Texas Haynesville and Bossier Shales, and the Marcellus of Pennsylvania/Appalachia. The Williston Basin Bakken Formation has also gained popularity after a recent reassessment by the USGS.
HAYNESVILLE
The fairly recent Haynesville gas play, having garnered attention over the past few months, is an Upper Jurassic formation overlain by the Cotton Valley Group, and lies over the Smackover Formation. The Haynesville is an ultra-low permeability shale, and is focused in northwest Louisiana and East Texas, particularly in Caddo, Bossier and DeSoto Parishes, but also to a lesser extent in Red River and Sabine Parishes, and Harrison and Panola Counties, Fig. 1. The Haynesville Shale underlies the Bossier Shale (part of the Cotton Valley Group), and they are sometimes referred to as the same unit or related units. 2 Deeper than most shale gas plays, the Haynesville is located at depths ranging between 11,000 and 13,000 ft. 3
Fig. 1 . Map of the Haynesville Shale play (shaded). 1
Chesapeake is a large participant in the Haynesville play, holding about 550,000 acres as of late June 2008, with plans to acquire more acreage. Chesapeake entered a joint venture with Plains Exploration and Production, and the companies plan to drill about 600 wells in the Haynesville in the next three years. Chesapeake is estimating a mid-point estimated ultimate reserve of 6.5 Bcf, and their initial horizontal production rates are encouraging for the play.
“The initial production rates on the eight horizontal wells we have completed have ranged from 5 to 15 MMcfd on restricted chokes at flowing casing pressures of up to 6,500 psi,” said Chesapeake CEO Aubrey K. McClendon. 4
Petrohawk is also an active participant with about 275,000 acres, and completed their first horizontal well in the Haynesville in late June 2008. The Elm Grove Plantation #63, drilled in Bossier Parish, encountered about 212 ft of Haynesville Shale, and produced at a rate of 16.8 MMcfd. Completion of Elm Grove Plantation #63 included 11 stages of fracture stimulation. Petrohawk is drilling three horizontal wells, and expects to be operating six rigs in the Haynesville by mid-September 2008. 5
Companies are scrambling to lease plots in the Haynesville, with Forest Oil announcing in late June 2008 a net holding of 90,000 acres in the area. 6 GMX Resources added 7,300 net acres in early July, bringing its total acreage to 27,500. 7 EnCana has about 325,000 acres in the Haynesville, and completed a horizontal well in February with an initial production rate of 8 MMcfd. 8
FAYETTEVILLE
A few years ago the Fayetteville Shale experienced an upswing in interest somewhat akin to what the Haynesville is experiencing now. The Fayetteville of Arkansas is a Mississippian formation on the eastern end of the Arkoma Basin, with thicknesses varying between 50 and 300 ft and drilled at depths ranging from 2,000 to 6,000 ft. Thickness in the Fayetteville differs from east to west, at about 50 to 75 ft thick in western Arkansas to about 300 ft at the eastern edge of the Arkoma Basin. The formation is productive from its middle to base because the lower section is rich in organic material, with chert and siliceous interbedding. 9 The unit is thermally mature, and is differentiated from surrounding units by high radioactivity and resistivity signatures. 10
The Fayetteville is found in multiple eastern and central Arkansas counties, including Cleburne, Conway, Faulkner, Franklin, Jackson, St. Francis, Pope, Prairie, Van Buren, White and Woodruff Counties. The Fayetteville is about the same age and is seen as a geologic equivalent to the Barnett Shale near Fort Worth.
The Fayetteville followed the Barnett in production technology. As with other shale gas plays, the Fayetteville was previously known to be a gas-bearing formation, but only produced when horizontal drilling and fracture stimulation were introduced. 8 Some 460 of the over 500 producing wells in the Fayetteville are horizontal, and total production from the shale has reached, and likely exceeded, 52 Bcf. 11
Rig counts in the Arkansas Arkoma Basin have increased dramatically in the past two years. In August 2006, the rig count hovered at slightly over 20. In early July 2008, the count was at 59 operating rigs, with most located in Van Buren, White and Conway Counties. Southwestern Energy was operating 18 of the 59 rigs (about 31%) in the Arkansas Arkoma Basin during the first week of July 2008. 12 Southwestern, one of the most dominant players in the region, owns about 851,100 acres in the Fayetteville area, and has completed 557 wells in the play as of March 2008, of which about 88% were horizontal. During the company’s first quarter 2008, estimated 2007 production from the Fayetteville was 53.5 Bcf. 13
Chesapeake holds the largest land area in the play with 1.1 million acres, and in March 2008, had a net production of 130 MMcfd from the Fayetteville. Chesapeake had 12 rigs operating in March 2008, and plans to escalate drilling activity to 25 rigs in the play by early 2009. 14
MARCELLUS
In 2002, the USGS released an assessment of the undiscovered oil and gas in the Appalachian Basin Province. The Marcellus Shale was characterized as an individual assessment unit in the Appalachian Basin region that contained gas resources of about 1.9 Tcf. 15
The Marcellus had been fairly quiet until recently, when in late 2007 Range Resources announced horizontal well test rates from 1.4 MMcfd to 4.7 MMcfd. Shortly after, in January 2008, Pennsylvania State University and the University of New York at Fredonia released a report estimating recoverable reserves at 50 Tcf. Since then, The New York Times and USA Today have run stories on the Marcellus and the formation’s producing potential.
The Marcellus Shale is part of a large suite of rocks known as the Devonian shales, and stretches NE-SW about 600 mi across several Appalachian states, including New York, Pennsylvania and West Virginia, Fig. 2. 16 The naturally fractured, dry gas-producing Marcellus covers an area of about 54,000 square mi, 17 and ranges in thickness from 50 to 200 ft. Like the Fayetteville, the Marcellus thins from east to west, with 200-ft sections in northeastern Pennsylvania and 50-ft sections in northern West Virginia, Ohio, Pennsylvania and western New York. The formation depth ranges from 5,000 to 8,000 ft below sea level. 18
Fig. 2 . Map of the Marcellus and Devonian Shales. 16
The organic richness of the Marcellus, however, decreases generally from north in New York to south in West Virginia. The thermal maturity of the shale is an estimated 1.5 to 3% vitrinite reflectance (Ro). 18
As of April 2008, Range Resources held about 1.15 million acres of the Marcellus play, and had drilled 10 successful horizontal wells with initial production rates ranging from 2.6 to 5.8 MMcfd. 19 Other players in the Marcellus include Atlas Energy Resources and Chesapeake (largest lease holder with 1.2 million acres). Atlas, whose drilling plan is focused primarily in southwestern Pennsylvania, announced in February that it had 21 producing vertical wells, with 6 more due to be completed and producing shortly. 20
Marcellus players face the problem of minimal public information on the area, and have to resort to academic papers and regional geologic information due to the lack of log data. Oilfield services and equipment in the area are also somewhat scarce, with only four or six Appalachian rigs capable of drilling horizontal wells. 16
WOODFORD
Activity in the Woodford Shale began in 2003-2004 as a vertical play, but quickly transitioned to horizontal wells after the Barnett became horizontally driven. 21
The Woodford Shale is located in Oklahoma on the western end of the Arkoma Basin, and ranges in age from Middle Devonian to Early Mississippian. The stratigraphic equivalent to the Bakken and Antrim Shales, the Woodford shows a wide range of thermal maturities from 0.7 to 4.89% Ro?. Although known to be a gas-producing formation, the Woodford may have the potential to produce oil as well, 22 and the silica-rich shale has provided a good environment for fracturing due to its brittle nature. 21
The Woodford has seen many players in the area including Newfield Exploration, Devon, Chesapeake and XTO Energy. Newfield has about 165,000 net acres in the Woodford, is looking to drill about 100 horizontal wells this year and had a gross production of 165 MMcfd as of February 2008.23 Drilling depths for Newfield have ranged from 6,000 to 13,000 ft, with lateral lengths to about 5,000 ft. 21
For a more in-depth discussion on the characteristics and production potential of the Woodford Shale, please see page 83.
BARNETT
No unconventional play article would be complete without a mention of the Barnett. The very well-known Barnett Shale is the gas play that introduced horizontal drilling and fracture stimulation techniques to the unconventional shale gas field, allowing other plays’ production potential to be realized. Indeed, every time a new shale gas play is discovered, it is compared to the Barnett, or is called the “next Barnett” or a “baby Barnett.”
The Mississippian Barnett in the Fort Worth Basin of Texas is about 6,500 to 8,000 ft deep, and thickens toward the northeast-from about 30 to 50 ft thick in the south to about 1,000 ft thick in the northeast. 24
At the end of 2007, the total number of Barnett producing wells over time was at about 8,960, with cumulative production of 3.69 Tcf and 11.6 million bbl of oil. The rate of production from 8,435 active Barnett wells in December 2007 was 3.524 Bcfd plus 7,477 bpd. From 2003 to 2007, horizontal wells have become the dominant well orientation. In 2003, about 21% of wells completed in the Barnett were horizontal; in 2007, about 94% were horizontal. 25
The Barnett continues as the giant that it has become in the past five years. The players list in the Barnett is exhaustive, with Devon, Chesapeake, XTO, Encana, EOG and others. Devon has drilled more than 1,300 wells in the Barnett since 2002, and produces nearly 600 MMcfd. 26
BAKKEN
The April 2008 USGS assessment of the Bakken Formation in the Williston Basin has caused a flurry of activity in the area, particularly because of the undiscovered, technically recoverable oil resource estimation-between 3.0 and 4.3 billion bbl. The large increase in the Bakken’s recoverable resources (formerly estimated by the USGS at 151 million bbl in 1995) is due to the same factor that has lead to expanding shale gas plays: advances in horizontal drilling and hydraulic fracturing.
The Upper Devonian-Early Mississippian Bakken is a continuous, 200,000-sq mi formation composed of sandstone, siltstone and dolomite bounded by two shale layers. Average porosity in the Bakken is between 8% and 12%, and permeability ranges from 0.05 mD to 0.5 mD. The Bakken is about 2-mi deep, and has a net thickness of about 6 ft to 15 ft. Key players in the region include EOG Resources, Whiting Petroleum, Brigham Exploration, Hess, Newfield Exploration, XTO and Marathon. 27 For a more comprehensive view on the Bakken assessment, please see World Oil June 2008, page 83.
OTHER PLAYS
There are a multitude of unconventional shale plays being assessed, and the following are a few from various parts of the US.
Utica. Located in New York, northern Pennsylvania, Quebec and Ontario, the Utica Shale is an Upper Ordovician reservoir with typical low permeability, high organic content and varying thickness-the formation ranges from 150 to 1,000 ft across New York. The Utica’s close proximity to the Marcellus makes it interesting, but recently drilled Utica wells have “not responded well to the normal shale fracturing practices.” 28 Forest Oil has acquired 269,000 net acres of the Quebec Utica, and in April 2008, reported 1 MMcfd production rates from two 4,800-ft vertical wells. 29
Chattanooga.
This Devonian shale formation extends across a large part of the US, although the gas play is centered in southern Kentucky, eastern Tennessee and northern Alabama, Fig. 3. Sources cite the Chattanooga as being an equivalent to both the Marcellus and the Woodford Shales, all of which are Devonian formations. 30,31
Fig. 3 . Map of the Chattanooga Shale play (shaded). 30
The USGS reported in 2007 on the petroleum system of the Black Warrior Basin in Alabama and Mississippi that encompasses part of the Chattanooga Shale. The USGS report focused on the carbonates and sandstones, and discussed the Floyd and Chattanooga Shales as source rocks alone-no unconventional shale gas assessment was released. The Chattanooga is a Devonian-age shale that is separated from the Mississippian-age Floyd Shale by a thin layer of chert and limestone, and they are often referred in relation to each other. The Alabama Chattanooga play lies in the eastern Black Warrior Basin, and is a thin unit with a Total Organic Carbon (TOC) weight percent range of 2.4-12.7. 32 The Tennessee Chattanooga play is relatively shallow compared to other gas plays with depths ranging from 1,500 to 2,000 ft. 33
In 2007, CNX Gas Corp. drilled a horizontal well in Tennessee with an initial production rate of 3.9 MMcfd. 34 Atlas Energy Resources announced in June 2008 the successful drilling of four horizontal wells in the formation. 35
Floyd. In close contact with the Chattanooga Shale, the Floyd play is situated in the Black Warrior Basin of Mississippi and Alabama. The formation is primarily shale, but also contains clay, sandstone and limestone beds, with chert and large siderite modules. 32 Found at depths from about 4,000 ft to 9,000 ft below surface level, 36 the Floyd thickens toward the northeast, with a maximum thickness of about 600 ft, and has a TOC percent weight of about 1.8. The Floyd is believed to be the source rock for the conventional reservoirs in the area. 32 Carrizo Oil and Gas drilled a horizontal well in the Floyd in July 2007,37 and Murphy Oil drilled several wells in 2006. 38 With minimal news concerning the Floyd in 2008, play activity seems to have slowed down.
New Albany.
Found in the Illinois Basin, the New Albany Shale is a mostly Devonian-aged formation (the top few feet of the unit are Mississippian) that spans Kentucky, Indiana and, to a smaller extent, Illinois. The New Albany can be correlated with the Antrim Shale of Michigan and Indiana, and the Chattanooga Shale of Tennessee. 39 The New Albany gas play has been focused in Kentucky and southeastern Indiana. Formation thickness varies-the shale is about 100 to 140 ft thick in southeastern Indiana and almost 340 ft thick farther southwest in the Illinois Basin. 40 The USGS released a report in 2007 on the Illinois Basin that assessed the undiscovered, technically recoverable gas resources of the New Albany Shale at 3.79 Tcf. 41 Aurora Oil and Gas reported an average production of 424 Mcfd from their New Albany holdings in the first quarter 2008. 42 CNX Gas drilled six wells in the New Albany in 2007 to determine reservoir information and future drilling locations. 34
As the Barnett proves to be continually successful, shale plays, oil and gas, are looking to be important in the future.
There are already whispers of the Haynesville being the next Barnett, and although those rumors have been heard before about other plays, expect to hear about the Haynesville, and the Bakken and Marcellus, in the months to come.
LITERATURE CITED
1 “Core leasing area: Haynesville Shale map,” Haynesville Shale Map, http://haynesvilleshalemap.com/, accessed July 7, 2008.
2 Welborn, V., “What is the Haynesville Shale?” Shreveport Times , July 7, 2008.
3 “Shale gas fever drives land drilling in US,” Platts Oilgram News , July 4, 2008, pg. 6.
4 “Chesapeake and PXP announce Haynesville Shale joint venture,” Yahoo Financial News, July 1, 2008, http://bix.yahoo.com/bw/080701/20080701006524.html, accessed July 8, 2007.
5 “Petrohawk Energy Corporation reports Haynesville Shale result and leasehold update,” Fox Business, June 30, 2008, http://www.foxbusiness.com/story/markets/industries/energy/petrohawk-energy-corporation-reports-haynesville-shale-result-leasehold-update/, accessed July 8, 2008.
6 “Forest Oil increases holdings in E. Texas, N. La,” Forbes.com, June 30, 2008, http://www.forbes.com/feeds/ap/2008/06/30/ap5169765.html, accessed July 10, 2008.
7 “GMX Resources Inc. announces Haynesville/Bossier Shale drilling to begin 3Q08,” Prime Newswire, July 7, 2008, http://www.primenewswire.com/newsroom/news.html?d=145868, accessed July 10, 2008.
8 Fuquay, J., “Chesapeake, EnCana, boost activity in Louisiana gas shale,” Star-Telegram , June 16, 2008.
9 Brown, D., “Barnett may have Arkansas cousin,” AAPG Explorer , Feb. 2006.
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11 Shelby, P., “Fayetteville Shale play of North-Central Arkansas: A project update,” presented at the AAPG Annual Convention, San Antonio, Texas, April 20-23, 2008.
12 “Baker Hughes US rig count- Summary report,” Baker Hughes- Investor relations- Rig counts, http://164.109.37.157/Reports/StandardReport.aspx, accessed July 11, 2008.
13 “Fayetteville Shale play,” Southwestern Energy Company, http://www.swn.com/operations/fayetteville.shale.asp, accessed July 8, 2008.
14 “Chesapeake reports Haynesville Shale discovery in Louisiana and announces CapEx increase,” OilVoice, March 24, 2008, http://www.oilvoice.com/n/Chesapeake_Reports_Haynesville_Shale_Discovery_in_Louisiana_and_Announces_CapEx_Increase/92f01da5.aspx, accessed July 11, 2008.
15 US Department of the Interior, US Geological Society, “Assessment of undiscovered oil and gas resources of the Appalachian Basin Province, 2002,” USGS Fact Sheet FS-009-03, February 2003.
16 Durham, L. S., “Another shale making seismic waves,” AAPG Explorer, March 2008.
17 Mayhood, K., “Low down, rich and stingy,” The Columbus Dispatch , March 11, 2008.
18 Milici, R. C. and C. S. Swezey, “Assessment of Appalachian Basin oil and gas resources: Devonian Shale- Middle and Upper Paleozoic total petroleum system,” Open file report series 2006-1237, USGS Reston, Virginia, 2006, pp.38-39.
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20 “Atlas Energy Resources, LLC increases estimated reserve potential from Marcellus Shale to between 4 and 6 Tcf,” Reuters, Feb. 21, 2008, http://www.reuters.com/article/pressRelease/idUS127932+21-Feb-2008+MW20080221, accessed July 14, 2008.
21 Brown, D., “Big potential boost the Woodford,” AAPG Explorer , July 2008.
22 Comer, J. B., “Reservoir characteristics and production potential of the Woodford Shale,” World Oil , August 2008, pp. 83.
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24 Hayden, J. and D. Pursell, “The Barnett Shale: Visitors guide to the hottest gas play in the US,” Tudor Pickering, Oct. 2005, http://www.tudorpickering.com/pdfs/TheBarnettShaleReport.pdf, accessed July 10, 2008.
25 “Number of vertical and horizontal producer wells in the Barnett Shale as of Jan. 1, 2008,” Powell Barnett Shale Newsletter , March 27, 2008, http://www.barnetshalenews.com/documents/VHchart%201-1-08.pdf, accessed July 10, 2008. 26 “Operations- Barnett Shale,” Devon Energy, http://www.devonenergy.com/Operation/FeatuerStories/Pages/barnett_shale.aspx, accessed July 10, 2008.
27 Cohen, D. M., “USGS names Bakken play the largest oil accumulation in the Lower 48,” World Oil , June 2008, pp. 83-84.
28 Paktinat, J., Pinkhouse, J., Fontaine, J., Lash, G. and G. Penny, “Investigation of methods to improve Utica Shale hydraulic fracturing in the Appalachian Basin,” presented at the AAPG Annual Convention, San Antonio, Texas, April 20-23, 2008.
29 “Forest Oil announces significant gas discovery in Utica Shale…” Reuters, April 1, 2008, http://www.reuters.com/article/pressRelease/idUS134787+01-Apr-2008+BW20080401, accessed July 11, 2008.
30 “Chattanooga Shale natural gas field,” Oil Shale Gas, http://www.oilshalegas.com/chattanoogashale.com, accessed July 9, 2008.
31 “AMI Project,” Irvine Energy PLC, http://www.irvineenergy.com/projects/index.htm, accessed July 9, 2008.
32 USGS Black Warrior Basin Province assessment team, “Geologic assessment of undiscovered oil and gas resources of the Black Warrior Basin Province, Alabama and Mississippi,” Hatch, J. R. and M. J. Pawlewicz, compilers, USGS Digital Data Series DDS-69-I, 2007, 76 p.
33 “Domestic Energy announces Appalachian Shale plan,” Reuters, April 28, 2008, http://www.reuters.com/article/preeRelease/idUS139048+28-Apr-2008+MW20080428, accessed July 9, 2008.
34 “CNX Gas reports fourth quarter and full year 2007 results,” Reuters, Jan. 29, 2008, http://www.reuters.com/article/pressRelease/idUS140410+29-Jan-2008+PRN20080129, accessed July 11, 2008.
35 “Atlas Energy announces four successful horizontal wells in Tennessee’s Chattanooga Shale, and a net acreage position of 105,000 acres in the play,” OilVoice, June 21, 2008, http://www.oilvoice.com/n/Atlas_Energy_Announces_Four_Successful_Horizontal_Wells_in_Tennessees_Chattanooga_Shale/9fc6bbe0.aspx, accessed July 9, 2008.
36 “Floyd Shale potential of the Black Warrior Basin: Executive summary,” Mississippi Geological Society eBulletin , Vol. 55, No. 7, March 2007.
37 “Carrizo Oil & Gas, Inc. announces record production and third quarter 2007 financial results,” Carrizo Oil & Gas, Nov. 8, 2007, http://carrizo.mediaroom.com/index.php?s=43&iten=154, accessed July 10, 2008.
38 Edmonds, C., “New shales may be ready to deliver,” The Street, Feb. 22, 2007, http://www.thestreet.com/story/10340267/1/new-shales-may-be-ready-to-deliver.html, accessed July 10, 2008.
39 “New Albany Shale,” Indiana Geological Survey, http://igs.indiana.edu/Geology/structure/compendium/html/comp82hw.cfm, accessed July 9, 2008.
40 Comer, J. B., Hasenmueller, N. R., Mastalerz, M. D., Rupp, J. A., Shaffer, N. R. and C. W. Zuppann, “The New Albany Shale gas play in southern Indiana,” presented at AAPG Eastern Section Meeting, Buffalo, N.Y., Oct. 8-11, 2006.
41 US Department of the Interior, US Geological Survey, “Assessment of undiscovered oil and gas resources of the Illinois Basin, 2007,” USGS Fact Sheet 2007-3058, August 2007.
42 “Aurora Oil & Gas Corp. announces first quarter 2008 results,” Reuters, May 9, 2008, http://www.reuters.com/article/pressRelease/idUS248894+09-May-2008+PRN20080509, accessed July 11, 2008.
Note, one of the keys to the success of these new plays is horizontal drilling, and of course, the interpretation of these horizontal wells. This kind of interpretation presents a totally new challenge to geologists and engineers, something that can not be taken lightly.
Peter
ARCHIVE August 2008
Vol. 229 No. 8
SPECIAL FOCUS: NORTH AMERICAN OUTLOOK- UNCONVENTIONAL RESOURCES
Unconventional plays grow in number after Barnett Shale blazed the way
The Haynesville and Marcellus are becoming exciting new gas plays, while activity in the Woodford and Fayetteville continues.
Katrina Boughal , Technical Editor (source)
Unconventional gas plays in the US have been booming since technological advances increased production in the now-famous Barnett Shale. Horizontal drilling and fracture stimulation in the shale source rock, as opposed to the sandstone/limestone/dolomite reservoir rock, have proved to be successful not only in gas plays like the Barnett, Fayetteville and Woodford, but also in the Bakken-a primarily oil-rich formation.
Resources that were previously thought to be unrecoverable are now being reassessed and, in some cases, rediscovered. Many shale plays have been producing a small amount of gas for years (the Indiana and Kentucky New Albany Shale since the late 1880s), but with the Barnett example, they are becoming more successful. Hot plays in the industry include the Louisiana/Texas Haynesville and Bossier Shales, and the Marcellus of Pennsylvania/Appalachia. The Williston Basin Bakken Formation has also gained popularity after a recent reassessment by the USGS.
HAYNESVILLE
The fairly recent Haynesville gas play, having garnered attention over the past few months, is an Upper Jurassic formation overlain by the Cotton Valley Group, and lies over the Smackover Formation. The Haynesville is an ultra-low permeability shale, and is focused in northwest Louisiana and East Texas, particularly in Caddo, Bossier and DeSoto Parishes, but also to a lesser extent in Red River and Sabine Parishes, and Harrison and Panola Counties, Fig. 1. The Haynesville Shale underlies the Bossier Shale (part of the Cotton Valley Group), and they are sometimes referred to as the same unit or related units. 2 Deeper than most shale gas plays, the Haynesville is located at depths ranging between 11,000 and 13,000 ft. 3
Fig. 1 . Map of the Haynesville Shale play (shaded). 1Chesapeake is a large participant in the Haynesville play, holding about 550,000 acres as of late June 2008, with plans to acquire more acreage. Chesapeake entered a joint venture with Plains Exploration and Production, and the companies plan to drill about 600 wells in the Haynesville in the next three years. Chesapeake is estimating a mid-point estimated ultimate reserve of 6.5 Bcf, and their initial horizontal production rates are encouraging for the play.
“The initial production rates on the eight horizontal wells we have completed have ranged from 5 to 15 MMcfd on restricted chokes at flowing casing pressures of up to 6,500 psi,” said Chesapeake CEO Aubrey K. McClendon. 4
Petrohawk is also an active participant with about 275,000 acres, and completed their first horizontal well in the Haynesville in late June 2008. The Elm Grove Plantation #63, drilled in Bossier Parish, encountered about 212 ft of Haynesville Shale, and produced at a rate of 16.8 MMcfd. Completion of Elm Grove Plantation #63 included 11 stages of fracture stimulation. Petrohawk is drilling three horizontal wells, and expects to be operating six rigs in the Haynesville by mid-September 2008. 5
Companies are scrambling to lease plots in the Haynesville, with Forest Oil announcing in late June 2008 a net holding of 90,000 acres in the area. 6 GMX Resources added 7,300 net acres in early July, bringing its total acreage to 27,500. 7 EnCana has about 325,000 acres in the Haynesville, and completed a horizontal well in February with an initial production rate of 8 MMcfd. 8
FAYETTEVILLE
A few years ago the Fayetteville Shale experienced an upswing in interest somewhat akin to what the Haynesville is experiencing now. The Fayetteville of Arkansas is a Mississippian formation on the eastern end of the Arkoma Basin, with thicknesses varying between 50 and 300 ft and drilled at depths ranging from 2,000 to 6,000 ft. Thickness in the Fayetteville differs from east to west, at about 50 to 75 ft thick in western Arkansas to about 300 ft at the eastern edge of the Arkoma Basin. The formation is productive from its middle to base because the lower section is rich in organic material, with chert and siliceous interbedding. 9 The unit is thermally mature, and is differentiated from surrounding units by high radioactivity and resistivity signatures. 10
The Fayetteville is found in multiple eastern and central Arkansas counties, including Cleburne, Conway, Faulkner, Franklin, Jackson, St. Francis, Pope, Prairie, Van Buren, White and Woodruff Counties. The Fayetteville is about the same age and is seen as a geologic equivalent to the Barnett Shale near Fort Worth.
The Fayetteville followed the Barnett in production technology. As with other shale gas plays, the Fayetteville was previously known to be a gas-bearing formation, but only produced when horizontal drilling and fracture stimulation were introduced. 8 Some 460 of the over 500 producing wells in the Fayetteville are horizontal, and total production from the shale has reached, and likely exceeded, 52 Bcf. 11
Rig counts in the Arkansas Arkoma Basin have increased dramatically in the past two years. In August 2006, the rig count hovered at slightly over 20. In early July 2008, the count was at 59 operating rigs, with most located in Van Buren, White and Conway Counties. Southwestern Energy was operating 18 of the 59 rigs (about 31%) in the Arkansas Arkoma Basin during the first week of July 2008. 12 Southwestern, one of the most dominant players in the region, owns about 851,100 acres in the Fayetteville area, and has completed 557 wells in the play as of March 2008, of which about 88% were horizontal. During the company’s first quarter 2008, estimated 2007 production from the Fayetteville was 53.5 Bcf. 13
Chesapeake holds the largest land area in the play with 1.1 million acres, and in March 2008, had a net production of 130 MMcfd from the Fayetteville. Chesapeake had 12 rigs operating in March 2008, and plans to escalate drilling activity to 25 rigs in the play by early 2009. 14
MARCELLUS
In 2002, the USGS released an assessment of the undiscovered oil and gas in the Appalachian Basin Province. The Marcellus Shale was characterized as an individual assessment unit in the Appalachian Basin region that contained gas resources of about 1.9 Tcf. 15
The Marcellus had been fairly quiet until recently, when in late 2007 Range Resources announced horizontal well test rates from 1.4 MMcfd to 4.7 MMcfd. Shortly after, in January 2008, Pennsylvania State University and the University of New York at Fredonia released a report estimating recoverable reserves at 50 Tcf. Since then, The New York Times and USA Today have run stories on the Marcellus and the formation’s producing potential.
The Marcellus Shale is part of a large suite of rocks known as the Devonian shales, and stretches NE-SW about 600 mi across several Appalachian states, including New York, Pennsylvania and West Virginia, Fig. 2. 16 The naturally fractured, dry gas-producing Marcellus covers an area of about 54,000 square mi, 17 and ranges in thickness from 50 to 200 ft. Like the Fayetteville, the Marcellus thins from east to west, with 200-ft sections in northeastern Pennsylvania and 50-ft sections in northern West Virginia, Ohio, Pennsylvania and western New York. The formation depth ranges from 5,000 to 8,000 ft below sea level. 18
Fig. 2 . Map of the Marcellus and Devonian Shales. 16The organic richness of the Marcellus, however, decreases generally from north in New York to south in West Virginia. The thermal maturity of the shale is an estimated 1.5 to 3% vitrinite reflectance (Ro). 18
As of April 2008, Range Resources held about 1.15 million acres of the Marcellus play, and had drilled 10 successful horizontal wells with initial production rates ranging from 2.6 to 5.8 MMcfd. 19 Other players in the Marcellus include Atlas Energy Resources and Chesapeake (largest lease holder with 1.2 million acres). Atlas, whose drilling plan is focused primarily in southwestern Pennsylvania, announced in February that it had 21 producing vertical wells, with 6 more due to be completed and producing shortly. 20
Marcellus players face the problem of minimal public information on the area, and have to resort to academic papers and regional geologic information due to the lack of log data. Oilfield services and equipment in the area are also somewhat scarce, with only four or six Appalachian rigs capable of drilling horizontal wells. 16
WOODFORD
Activity in the Woodford Shale began in 2003-2004 as a vertical play, but quickly transitioned to horizontal wells after the Barnett became horizontally driven. 21
The Woodford Shale is located in Oklahoma on the western end of the Arkoma Basin, and ranges in age from Middle Devonian to Early Mississippian. The stratigraphic equivalent to the Bakken and Antrim Shales, the Woodford shows a wide range of thermal maturities from 0.7 to 4.89% Ro?. Although known to be a gas-producing formation, the Woodford may have the potential to produce oil as well, 22 and the silica-rich shale has provided a good environment for fracturing due to its brittle nature. 21
The Woodford has seen many players in the area including Newfield Exploration, Devon, Chesapeake and XTO Energy. Newfield has about 165,000 net acres in the Woodford, is looking to drill about 100 horizontal wells this year and had a gross production of 165 MMcfd as of February 2008.23 Drilling depths for Newfield have ranged from 6,000 to 13,000 ft, with lateral lengths to about 5,000 ft. 21
For a more in-depth discussion on the characteristics and production potential of the Woodford Shale, please see page 83.
BARNETT
No unconventional play article would be complete without a mention of the Barnett. The very well-known Barnett Shale is the gas play that introduced horizontal drilling and fracture stimulation techniques to the unconventional shale gas field, allowing other plays’ production potential to be realized. Indeed, every time a new shale gas play is discovered, it is compared to the Barnett, or is called the “next Barnett” or a “baby Barnett.”
The Mississippian Barnett in the Fort Worth Basin of Texas is about 6,500 to 8,000 ft deep, and thickens toward the northeast-from about 30 to 50 ft thick in the south to about 1,000 ft thick in the northeast. 24
At the end of 2007, the total number of Barnett producing wells over time was at about 8,960, with cumulative production of 3.69 Tcf and 11.6 million bbl of oil. The rate of production from 8,435 active Barnett wells in December 2007 was 3.524 Bcfd plus 7,477 bpd. From 2003 to 2007, horizontal wells have become the dominant well orientation. In 2003, about 21% of wells completed in the Barnett were horizontal; in 2007, about 94% were horizontal. 25
The Barnett continues as the giant that it has become in the past five years. The players list in the Barnett is exhaustive, with Devon, Chesapeake, XTO, Encana, EOG and others. Devon has drilled more than 1,300 wells in the Barnett since 2002, and produces nearly 600 MMcfd. 26
BAKKEN
The April 2008 USGS assessment of the Bakken Formation in the Williston Basin has caused a flurry of activity in the area, particularly because of the undiscovered, technically recoverable oil resource estimation-between 3.0 and 4.3 billion bbl. The large increase in the Bakken’s recoverable resources (formerly estimated by the USGS at 151 million bbl in 1995) is due to the same factor that has lead to expanding shale gas plays: advances in horizontal drilling and hydraulic fracturing.
The Upper Devonian-Early Mississippian Bakken is a continuous, 200,000-sq mi formation composed of sandstone, siltstone and dolomite bounded by two shale layers. Average porosity in the Bakken is between 8% and 12%, and permeability ranges from 0.05 mD to 0.5 mD. The Bakken is about 2-mi deep, and has a net thickness of about 6 ft to 15 ft. Key players in the region include EOG Resources, Whiting Petroleum, Brigham Exploration, Hess, Newfield Exploration, XTO and Marathon. 27 For a more comprehensive view on the Bakken assessment, please see World Oil June 2008, page 83.
OTHER PLAYS
There are a multitude of unconventional shale plays being assessed, and the following are a few from various parts of the US.
Utica. Located in New York, northern Pennsylvania, Quebec and Ontario, the Utica Shale is an Upper Ordovician reservoir with typical low permeability, high organic content and varying thickness-the formation ranges from 150 to 1,000 ft across New York. The Utica’s close proximity to the Marcellus makes it interesting, but recently drilled Utica wells have “not responded well to the normal shale fracturing practices.” 28 Forest Oil has acquired 269,000 net acres of the Quebec Utica, and in April 2008, reported 1 MMcfd production rates from two 4,800-ft vertical wells. 29
Chattanooga.
This Devonian shale formation extends across a large part of the US, although the gas play is centered in southern Kentucky, eastern Tennessee and northern Alabama, Fig. 3. Sources cite the Chattanooga as being an equivalent to both the Marcellus and the Woodford Shales, all of which are Devonian formations. 30,31
Fig. 3 . Map of the Chattanooga Shale play (shaded). 30
The USGS reported in 2007 on the petroleum system of the Black Warrior Basin in Alabama and Mississippi that encompasses part of the Chattanooga Shale. The USGS report focused on the carbonates and sandstones, and discussed the Floyd and Chattanooga Shales as source rocks alone-no unconventional shale gas assessment was released. The Chattanooga is a Devonian-age shale that is separated from the Mississippian-age Floyd Shale by a thin layer of chert and limestone, and they are often referred in relation to each other. The Alabama Chattanooga play lies in the eastern Black Warrior Basin, and is a thin unit with a Total Organic Carbon (TOC) weight percent range of 2.4-12.7. 32 The Tennessee Chattanooga play is relatively shallow compared to other gas plays with depths ranging from 1,500 to 2,000 ft. 33
In 2007, CNX Gas Corp. drilled a horizontal well in Tennessee with an initial production rate of 3.9 MMcfd. 34 Atlas Energy Resources announced in June 2008 the successful drilling of four horizontal wells in the formation. 35
Floyd. In close contact with the Chattanooga Shale, the Floyd play is situated in the Black Warrior Basin of Mississippi and Alabama. The formation is primarily shale, but also contains clay, sandstone and limestone beds, with chert and large siderite modules. 32 Found at depths from about 4,000 ft to 9,000 ft below surface level, 36 the Floyd thickens toward the northeast, with a maximum thickness of about 600 ft, and has a TOC percent weight of about 1.8. The Floyd is believed to be the source rock for the conventional reservoirs in the area. 32 Carrizo Oil and Gas drilled a horizontal well in the Floyd in July 2007,37 and Murphy Oil drilled several wells in 2006. 38 With minimal news concerning the Floyd in 2008, play activity seems to have slowed down.
New Albany.
Found in the Illinois Basin, the New Albany Shale is a mostly Devonian-aged formation (the top few feet of the unit are Mississippian) that spans Kentucky, Indiana and, to a smaller extent, Illinois. The New Albany can be correlated with the Antrim Shale of Michigan and Indiana, and the Chattanooga Shale of Tennessee. 39 The New Albany gas play has been focused in Kentucky and southeastern Indiana. Formation thickness varies-the shale is about 100 to 140 ft thick in southeastern Indiana and almost 340 ft thick farther southwest in the Illinois Basin. 40 The USGS released a report in 2007 on the Illinois Basin that assessed the undiscovered, technically recoverable gas resources of the New Albany Shale at 3.79 Tcf. 41 Aurora Oil and Gas reported an average production of 424 Mcfd from their New Albany holdings in the first quarter 2008. 42 CNX Gas drilled six wells in the New Albany in 2007 to determine reservoir information and future drilling locations. 34
As the Barnett proves to be continually successful, shale plays, oil and gas, are looking to be important in the future.
There are already whispers of the Haynesville being the next Barnett, and although those rumors have been heard before about other plays, expect to hear about the Haynesville, and the Bakken and Marcellus, in the months to come.
LITERATURE CITED
1 “Core leasing area: Haynesville Shale map,” Haynesville Shale Map, http://haynesvilleshalemap.com/, accessed July 7, 2008.
2 Welborn, V., “What is the Haynesville Shale?” Shreveport Times , July 7, 2008.
3 “Shale gas fever drives land drilling in US,” Platts Oilgram News , July 4, 2008, pg. 6.
4 “Chesapeake and PXP announce Haynesville Shale joint venture,” Yahoo Financial News, July 1, 2008, http://bix.yahoo.com/bw/080701/20080701006524.html, accessed July 8, 2007.
5 “Petrohawk Energy Corporation reports Haynesville Shale result and leasehold update,” Fox Business, June 30, 2008, http://www.foxbusiness.com/story/markets/industries/energy/petrohawk-energy-corporation-reports-haynesville-shale-result-leasehold-update/, accessed July 8, 2008.
6 “Forest Oil increases holdings in E. Texas, N. La,” Forbes.com, June 30, 2008, http://www.forbes.com/feeds/ap/2008/06/30/ap5169765.html, accessed July 10, 2008.
7 “GMX Resources Inc. announces Haynesville/Bossier Shale drilling to begin 3Q08,” Prime Newswire, July 7, 2008, http://www.primenewswire.com/newsroom/news.html?d=145868, accessed July 10, 2008.
8 Fuquay, J., “Chesapeake, EnCana, boost activity in Louisiana gas shale,” Star-Telegram , June 16, 2008.
9 Brown, D., “Barnett may have Arkansas cousin,” AAPG Explorer , Feb. 2006.
10 “The Fayetteville Shale play: A geologic overview,” Arkansas Business.com, Aug. 27, 2007, http://www.arkansasbusiness.com/article.aspx?aID=99154, accessed July 8, 2008.
11 Shelby, P., “Fayetteville Shale play of North-Central Arkansas: A project update,” presented at the AAPG Annual Convention, San Antonio, Texas, April 20-23, 2008.
12 “Baker Hughes US rig count- Summary report,” Baker Hughes- Investor relations- Rig counts, http://164.109.37.157/Reports/StandardReport.aspx, accessed July 11, 2008.
13 “Fayetteville Shale play,” Southwestern Energy Company, http://www.swn.com/operations/fayetteville.shale.asp, accessed July 8, 2008.
14 “Chesapeake reports Haynesville Shale discovery in Louisiana and announces CapEx increase,” OilVoice, March 24, 2008, http://www.oilvoice.com/n/Chesapeake_Reports_Haynesville_Shale_Discovery_in_Louisiana_and_Announces_CapEx_Increase/92f01da5.aspx, accessed July 11, 2008.
15 US Department of the Interior, US Geological Society, “Assessment of undiscovered oil and gas resources of the Appalachian Basin Province, 2002,” USGS Fact Sheet FS-009-03, February 2003.
16 Durham, L. S., “Another shale making seismic waves,” AAPG Explorer, March 2008.
17 Mayhood, K., “Low down, rich and stingy,” The Columbus Dispatch , March 11, 2008.
18 Milici, R. C. and C. S. Swezey, “Assessment of Appalachian Basin oil and gas resources: Devonian Shale- Middle and Upper Paleozoic total petroleum system,” Open file report series 2006-1237, USGS Reston, Virginia, 2006, pp.38-39.
19 “Range announces record first quarter results,” OilVoice, April 24, 2008, http://www.oilvoice.com/n/Range_Announces_Record_First_Quarter_Results/4c59a7ac.aspx, accessed July 11, 2008.
20 “Atlas Energy Resources, LLC increases estimated reserve potential from Marcellus Shale to between 4 and 6 Tcf,” Reuters, Feb. 21, 2008, http://www.reuters.com/article/pressRelease/idUS127932+21-Feb-2008+MW20080221, accessed July 14, 2008.
21 Brown, D., “Big potential boost the Woodford,” AAPG Explorer , July 2008.
22 Comer, J. B., “Reservoir characteristics and production potential of the Woodford Shale,” World Oil , August 2008, pp. 83.
23 “Newfield Exploration announces 2008 capital program,” Reuters, Feb. 4, 2008, http://www.reuters.com/article/pressRelease/idUS139442+04-Feb-2008+PRN20080204, accessed July 11, 2008.
24 Hayden, J. and D. Pursell, “The Barnett Shale: Visitors guide to the hottest gas play in the US,” Tudor Pickering, Oct. 2005, http://www.tudorpickering.com/pdfs/TheBarnettShaleReport.pdf, accessed July 10, 2008.
25 “Number of vertical and horizontal producer wells in the Barnett Shale as of Jan. 1, 2008,” Powell Barnett Shale Newsletter , March 27, 2008, http://www.barnetshalenews.com/documents/VHchart%201-1-08.pdf, accessed July 10, 2008. 26 “Operations- Barnett Shale,” Devon Energy, http://www.devonenergy.com/Operation/FeatuerStories/Pages/barnett_shale.aspx, accessed July 10, 2008.
27 Cohen, D. M., “USGS names Bakken play the largest oil accumulation in the Lower 48,” World Oil , June 2008, pp. 83-84.
28 Paktinat, J., Pinkhouse, J., Fontaine, J., Lash, G. and G. Penny, “Investigation of methods to improve Utica Shale hydraulic fracturing in the Appalachian Basin,” presented at the AAPG Annual Convention, San Antonio, Texas, April 20-23, 2008.
29 “Forest Oil announces significant gas discovery in Utica Shale…” Reuters, April 1, 2008, http://www.reuters.com/article/pressRelease/idUS134787+01-Apr-2008+BW20080401, accessed July 11, 2008.
30 “Chattanooga Shale natural gas field,” Oil Shale Gas, http://www.oilshalegas.com/chattanoogashale.com, accessed July 9, 2008.
31 “AMI Project,” Irvine Energy PLC, http://www.irvineenergy.com/projects/index.htm, accessed July 9, 2008.
32 USGS Black Warrior Basin Province assessment team, “Geologic assessment of undiscovered oil and gas resources of the Black Warrior Basin Province, Alabama and Mississippi,” Hatch, J. R. and M. J. Pawlewicz, compilers, USGS Digital Data Series DDS-69-I, 2007, 76 p.
33 “Domestic Energy announces Appalachian Shale plan,” Reuters, April 28, 2008, http://www.reuters.com/article/preeRelease/idUS139048+28-Apr-2008+MW20080428, accessed July 9, 2008.
34 “CNX Gas reports fourth quarter and full year 2007 results,” Reuters, Jan. 29, 2008, http://www.reuters.com/article/pressRelease/idUS140410+29-Jan-2008+PRN20080129, accessed July 11, 2008.
35 “Atlas Energy announces four successful horizontal wells in Tennessee’s Chattanooga Shale, and a net acreage position of 105,000 acres in the play,” OilVoice, June 21, 2008, http://www.oilvoice.com/n/Atlas_Energy_Announces_Four_Successful_Horizontal_Wells_in_Tennessees_Chattanooga_Shale/9fc6bbe0.aspx, accessed July 9, 2008.
36 “Floyd Shale potential of the Black Warrior Basin: Executive summary,” Mississippi Geological Society eBulletin , Vol. 55, No. 7, March 2007.
37 “Carrizo Oil & Gas, Inc. announces record production and third quarter 2007 financial results,” Carrizo Oil & Gas, Nov. 8, 2007, http://carrizo.mediaroom.com/index.php?s=43&iten=154, accessed July 10, 2008.
38 Edmonds, C., “New shales may be ready to deliver,” The Street, Feb. 22, 2007, http://www.thestreet.com/story/10340267/1/new-shales-may-be-ready-to-deliver.html, accessed July 10, 2008.
39 “New Albany Shale,” Indiana Geological Survey, http://igs.indiana.edu/Geology/structure/compendium/html/comp82hw.cfm, accessed July 9, 2008.
40 Comer, J. B., Hasenmueller, N. R., Mastalerz, M. D., Rupp, J. A., Shaffer, N. R. and C. W. Zuppann, “The New Albany Shale gas play in southern Indiana,” presented at AAPG Eastern Section Meeting, Buffalo, N.Y., Oct. 8-11, 2006.
41 US Department of the Interior, US Geological Survey, “Assessment of undiscovered oil and gas resources of the Illinois Basin, 2007,” USGS Fact Sheet 2007-3058, August 2007.
42 “Aurora Oil & Gas Corp. announces first quarter 2008 results,” Reuters, May 9, 2008, http://www.reuters.com/article/pressRelease/idUS248894+09-May-2008+PRN20080509, accessed July 11, 2008.
Friday, February 6, 2009
More On The Barnett Shale Gas Play, Devon Energy
Very interesting. New technology, horizontal drilling, geology, high stakes, big money, Texas. Stay tuned. Note: This article was written "way back" in 2005.
Peter
Devon Energy Marks Milestone in Barnett Shale Play
Aug. 8--OKLAHOMA CITY -- In the third week of July, Devon Energy of Oklahoma City lifted its one-trillionth cubic foot of natural gas from the Barnett Shale field near Fort Worth.
A "T," as energy people call it, is a milestone under any condition and more so in this case because it represents almost 70 percent of the 1.45 trillion cubic feet of natural gas taken from the Barnett Shale field since 1993. It puts Devon on track to repeat as the biggest gas producer in the Barnett Shale, Texas' largest gas field, and as the top natural gas producer in Texas.
It was also a payoff for Devon, the acquisitive company that has become both the pioneer and biggest player in drilling and production in the Barnett Shale field.
Today, the company has 18 rigs working in the Barnett Shale. Most significantly, five of them are in Johnson County, south of Fort Worth. For Devon, the expansion beyond its original base in Wise, Denton and northern Tarrant counties marks a significant turn in the investment it made in 2002 when it bought Mitchell Energy and its pioneering base in the Barnett Shale for $3.5 billion.
Since 2002, Devon has drilled almost 2,000 wells in the Barnett Shale, more than doubling Mitchell's 2002 production to the current 560 million cubic feet a day. Up to 1,000 more wells could be drilled on the company's leased acreage in western Wise County, as well as Johnson, Parker and Hood counties.
The Barnett Shale is merely the highest-profile field in which Devon operates. The company, through its 2002 purchase of Ocean Energy of Houston, was already a player in the Carthage Field in East Texas, the state's second-most productive field. Devon also has significant acreage in the Permian Basin in West Texas and in the old South Texas gas fields near the Mexican border, much of it acquired when it bought Pennzoil's exploration and production unit in 1999 (a purchase that had eluded Fort Worth-based Union Pacific Resources two years earlier).
In addition to the 20 offshore Gulf of Mexico wells Devon plans to drill this year, the company is a big player in Canada and the Caspian Sea region. It is also making inroads in China. Still, 88 percent of its production is in North America.
This year, Devon received permission from the Texas Railroad Commission to reduce the spacing between gas wells from 40 acres to 20. Although that hardly brings back the early 20th Century practice of drillers putting derricks literally against one another, Devon hopes that the closer spacing will add production.
Devon, too, is going back to some of its older wells and refracturing them. Fracturing involves injecting water mixed with fine sand at high pressure to create hairline cracks in the tight shale. More than any other technology, it has made the difficult Barnett Shale play possible.
A "frac" is done after the well is first drilled, and Devon thinks that it can reverse the inevitable production decline (of up to 50 percent) that sets in over the first two or three years of a well's life.
"We've done some refracs in Wise and Denton counties, and we find that we can take a well that originally produced 1.5 million cubic feet a day and had declined over a few years to about a third of that, and then bring the production back to the original level," said Brad Foster, who heads Devon's North Texas operations.
Devon has kept its head down in Texas, putting its Barnett Shale field offices in Bridgeport and Cleburne rather than in a higher-profile setting in Fort Worth. The company reflects the low-key style of Chairman Larry Nichols.
Nichols, 63, is not the kind of Oklahoman to throw his hat into the air and start singing about the wind whipping down the plain at the thought of a Sooner State company being Texas' biggest gas producer.
Nichols, who has a geology degree from Princeton University and a law degree from the University of Michigan, once clerked for the late Chief Justice Earl Warren. Nichols was working at the Justice Department as an assistant to William Rehnquist, who is now chief justice, when he returned home to join his father, John, in the family's energy-investment firm.
Nichols may come from a pioneering Oklahoma family, but he isn't one to proclaim an Oklahoman dominance over Texas, at least in gas production.
"It's a nice thing to be Texas' biggest producer because it means we're doing good work," he said. "But it doesn't go any farther than that."
Independent energy analyst Kurt Wolff is among Devon's boosters. He describes the firm as "an independent that is still being run by the chief executive who has built its great long-term record."
At the time Larry Nichols joined the family firm, John Nichols, an accountant by training, had run it for two decades.
"Dad thought this was a great time to begin raising money in Europe for energy investment in the U.S.," Larry Nichols said.
The newly named Devon Energy ("We didn't want to call it 'Nichols Energy,' " Larry Nichols recalled), did a nice -- although quiet -- business investing in various drilling and production projects, mostly in the Southwest, but also in West Virginia gas fields. The energy boom of the late '70s and early '80s benefited Devon Energy nicely. Along the way, John Nichols, 91, who remains a venerable presence in Oklahoma City, turned over the company reins to Larry.
The younger Nichols proved to be an aggressive acquirer of properties, but it was a decision to not do something that saved Devon. In 1982, the company was poised to join the so-called "Deep Anadarko" play in southwestern Oklahoma. The industry was abuzz about the play, which was 25,000 feet deep, and its supporters said it was going to be the next big thing.
But the Deep Anadarko didn't feel right to John and Larry Nichols. The industry bore all the signs of a boom about to go sour: overproduction, flagging demand and a vast oversupply of drillers. So the Nicholses decided to sell instead of going deep in the Anadarko.
The sale saved Devon when the price of a barrel of oil plunged from $34 to $10 over the next three years, taking three-quarters of the U.S. domestic energy industry with it. Devon Energy was still standing and able to go public in the late 1980s in order to make its mark as a pioneer in the coal-bed methane gas play in the San Juan Basin of New Mexico.
Devon's success in the San Juan Basin and other domestic fields gave it the capital to go after some of the goodies that were placed on the table as the energy industry consolidated during the 1990s doldrums: the venerable Kerr-McGee company of Oklahoma in 1996; Northstar Energy in 1998, which gave Devon a major foothold in Canada; Pennzenergy in 1999; Santa Fe Snyder (co-founded by Fort Worth oilman John Snyder) in 2000; and Anderson Exploration in 2001.
The San Juan Basin success also gave Devon the confidence that it could handle a new, unconventional natural gas play. It champed at the bit when Mitchell Energy of Houston began shopping itself in 1999.
"Mitchell was interesting because it had opened the Barnett Shale in North Texas, and we watched it closely," Larry Nichols said. "In 1999, when we first talked with them, we didn't think we were quite ready. Two years later, we were."
When Devon made the $3.5 billion deal to buy Mitchell, the Oklahomans made it clear that the Barnett Shale was, as Nichols said, "the prize of the transaction."
At the time of the purchase, Mitchell's aggressive beginning in Wise and Denton counties had resulted in 400 wells. By mid-2005, Devon had more than 2,000 wells in the Barnett Shale and had produced a trillion cubic feet of gas. Most important, as Wolff, the energy analyst notes, "Devon caused a lot of other producers to look hard at the Barnett Shale, and most of them eventually got into the play. But Devon was there early."
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To see more of the Fort Worth Star-Telegram, or to subscribe to the newspaper, go to http://www.dfw.com.
Copyright (c) 2005, Fort Worth Star-Telegram, Texas
Distributed by Knight Ridder/Tribune Business News.
Peter
Devon Energy Marks Milestone in Barnett Shale Play
Aug. 8--OKLAHOMA CITY -- In the third week of July, Devon Energy of Oklahoma City lifted its one-trillionth cubic foot of natural gas from the Barnett Shale field near Fort Worth.
A "T," as energy people call it, is a milestone under any condition and more so in this case because it represents almost 70 percent of the 1.45 trillion cubic feet of natural gas taken from the Barnett Shale field since 1993. It puts Devon on track to repeat as the biggest gas producer in the Barnett Shale, Texas' largest gas field, and as the top natural gas producer in Texas.
It was also a payoff for Devon, the acquisitive company that has become both the pioneer and biggest player in drilling and production in the Barnett Shale field.
Today, the company has 18 rigs working in the Barnett Shale. Most significantly, five of them are in Johnson County, south of Fort Worth. For Devon, the expansion beyond its original base in Wise, Denton and northern Tarrant counties marks a significant turn in the investment it made in 2002 when it bought Mitchell Energy and its pioneering base in the Barnett Shale for $3.5 billion.
Since 2002, Devon has drilled almost 2,000 wells in the Barnett Shale, more than doubling Mitchell's 2002 production to the current 560 million cubic feet a day. Up to 1,000 more wells could be drilled on the company's leased acreage in western Wise County, as well as Johnson, Parker and Hood counties.
The Barnett Shale is merely the highest-profile field in which Devon operates. The company, through its 2002 purchase of Ocean Energy of Houston, was already a player in the Carthage Field in East Texas, the state's second-most productive field. Devon also has significant acreage in the Permian Basin in West Texas and in the old South Texas gas fields near the Mexican border, much of it acquired when it bought Pennzoil's exploration and production unit in 1999 (a purchase that had eluded Fort Worth-based Union Pacific Resources two years earlier).
In addition to the 20 offshore Gulf of Mexico wells Devon plans to drill this year, the company is a big player in Canada and the Caspian Sea region. It is also making inroads in China. Still, 88 percent of its production is in North America.
This year, Devon received permission from the Texas Railroad Commission to reduce the spacing between gas wells from 40 acres to 20. Although that hardly brings back the early 20th Century practice of drillers putting derricks literally against one another, Devon hopes that the closer spacing will add production.
Devon, too, is going back to some of its older wells and refracturing them. Fracturing involves injecting water mixed with fine sand at high pressure to create hairline cracks in the tight shale. More than any other technology, it has made the difficult Barnett Shale play possible.
A "frac" is done after the well is first drilled, and Devon thinks that it can reverse the inevitable production decline (of up to 50 percent) that sets in over the first two or three years of a well's life.
"We've done some refracs in Wise and Denton counties, and we find that we can take a well that originally produced 1.5 million cubic feet a day and had declined over a few years to about a third of that, and then bring the production back to the original level," said Brad Foster, who heads Devon's North Texas operations.
Devon has kept its head down in Texas, putting its Barnett Shale field offices in Bridgeport and Cleburne rather than in a higher-profile setting in Fort Worth. The company reflects the low-key style of Chairman Larry Nichols.
Nichols, 63, is not the kind of Oklahoman to throw his hat into the air and start singing about the wind whipping down the plain at the thought of a Sooner State company being Texas' biggest gas producer.
Nichols, who has a geology degree from Princeton University and a law degree from the University of Michigan, once clerked for the late Chief Justice Earl Warren. Nichols was working at the Justice Department as an assistant to William Rehnquist, who is now chief justice, when he returned home to join his father, John, in the family's energy-investment firm.
Nichols may come from a pioneering Oklahoma family, but he isn't one to proclaim an Oklahoman dominance over Texas, at least in gas production.
"It's a nice thing to be Texas' biggest producer because it means we're doing good work," he said. "But it doesn't go any farther than that."
Independent energy analyst Kurt Wolff is among Devon's boosters. He describes the firm as "an independent that is still being run by the chief executive who has built its great long-term record."
At the time Larry Nichols joined the family firm, John Nichols, an accountant by training, had run it for two decades.
"Dad thought this was a great time to begin raising money in Europe for energy investment in the U.S.," Larry Nichols said.
The newly named Devon Energy ("We didn't want to call it 'Nichols Energy,' " Larry Nichols recalled), did a nice -- although quiet -- business investing in various drilling and production projects, mostly in the Southwest, but also in West Virginia gas fields. The energy boom of the late '70s and early '80s benefited Devon Energy nicely. Along the way, John Nichols, 91, who remains a venerable presence in Oklahoma City, turned over the company reins to Larry.
The younger Nichols proved to be an aggressive acquirer of properties, but it was a decision to not do something that saved Devon. In 1982, the company was poised to join the so-called "Deep Anadarko" play in southwestern Oklahoma. The industry was abuzz about the play, which was 25,000 feet deep, and its supporters said it was going to be the next big thing.
But the Deep Anadarko didn't feel right to John and Larry Nichols. The industry bore all the signs of a boom about to go sour: overproduction, flagging demand and a vast oversupply of drillers. So the Nicholses decided to sell instead of going deep in the Anadarko.
The sale saved Devon when the price of a barrel of oil plunged from $34 to $10 over the next three years, taking three-quarters of the U.S. domestic energy industry with it. Devon Energy was still standing and able to go public in the late 1980s in order to make its mark as a pioneer in the coal-bed methane gas play in the San Juan Basin of New Mexico.
Devon's success in the San Juan Basin and other domestic fields gave it the capital to go after some of the goodies that were placed on the table as the energy industry consolidated during the 1990s doldrums: the venerable Kerr-McGee company of Oklahoma in 1996; Northstar Energy in 1998, which gave Devon a major foothold in Canada; Pennzenergy in 1999; Santa Fe Snyder (co-founded by Fort Worth oilman John Snyder) in 2000; and Anderson Exploration in 2001.
The San Juan Basin success also gave Devon the confidence that it could handle a new, unconventional natural gas play. It champed at the bit when Mitchell Energy of Houston began shopping itself in 1999.
"Mitchell was interesting because it had opened the Barnett Shale in North Texas, and we watched it closely," Larry Nichols said. "In 1999, when we first talked with them, we didn't think we were quite ready. Two years later, we were."
When Devon made the $3.5 billion deal to buy Mitchell, the Oklahomans made it clear that the Barnett Shale was, as Nichols said, "the prize of the transaction."
At the time of the purchase, Mitchell's aggressive beginning in Wise and Denton counties had resulted in 400 wells. By mid-2005, Devon had more than 2,000 wells in the Barnett Shale and had produced a trillion cubic feet of gas. Most important, as Wolff, the energy analyst notes, "Devon caused a lot of other producers to look hard at the Barnett Shale, and most of them eventually got into the play. But Devon was there early."
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To see more of the Fort Worth Star-Telegram, or to subscribe to the newspaper, go to http://www.dfw.com.
Copyright (c) 2005, Fort Worth Star-Telegram, Texas
Distributed by Knight Ridder/Tribune Business News.
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