New Oil Play In Denver Basin, Eastern Colorado

The Oil and Gas Journal just reported that Southwestern Energy is planning on testing what is to me, a new play in the Eastern Colorado's Denver Basin.  I interpret this as being notable for at least several reasons that probably will not be discussed much outside of boardrooms, conference rooms, and maybe bar-rooms.

First, the stratigraphic zones to be targeted  are not prolific, (if at all) producers in the Denver Basin, meaning the "carbonates and shales of middle and late Pennsylvanian to Permian age."  Importantly, Southwestern says these rocks are in the "oil window", meaning the organic matter in the rocks is at the right time and temperature environment for creating and containing oil. 

Other important factors are that Southwestern is first going to drill a vertical hole, called a "pilot hole", probably core it and log it in detail to get a handle on the petrophysical characteristics of the rocks and their hydrocarbon content.  Then they will probably back up the hole and drill a "horizontal lateral" hole a few thousand feet long into the best reservoir zone.  Then they will probably hydraulically fracture it and finally test it.  That all sounds very abitious and expensive.  It is, and that is why this interests the explorationist in me.  In addition, I think Southwestern knows what they are doing.  I'm just reading between the lines of course and have no real insider's knowledge.

Southwestern is very experienced in drilling and geosteering horizontal wells, fracing and then producing them in the Fayetteville Shale in northern  Arkansas.  Now they are drilling for oil in the Smackover of southern Arkansas and northern Louisiana.  As I said, I am very sure Southwestern knows what they're doing, they have a large acreage position in this part of the Denver Basin and they are making a fairly large commitment there.  I think this is a new play very much worth watching.  I think there are many more plays like this in sedimentary rocks passed over during previous exploration eras becasue of low permeability, not a lack of hydrocarbons.

The following is the article from the Oil and Gas Journal.  Good hunting.
Peter

Source: http://www.ogj.com/articles/2012/02/southwestern-eyes-eastern-denver-basin-unconventionals.html?cmpid=EnlEDMarch12012

Sponsored by:

HOUSTON, Feb. 28

02/28/2012

By OGJ editors

Southwestern Energy Co., Houston, said it has leased 238,057 net acres in the Denver-Julesburg basin in eastern Colorado where the company will begin testing a new unconventional oil play targeting carbonates and shales of middle and late Pennsylvanian to Permian age.

Common strata names include the Atoka, Desmoinesian-Cherokee-Excello-Tebo-Marmaton, Missourian, Virgilian, and Wolfcamp, Southwestern Energy said.
The play objectives range in vertical depth from 8,000 to 10,500 feet and are within the oil window. The combined Wolfcamp-Atoka interval is more than 1,500 ft thick.

The primary objectives are alternating low-permeability, 20-100 ft thick carbonates separated by 10-75 ft thick organic-rich, carbonate mudstones with total organic carbon estimates ranging from 2% to 27%. Total thickness of the objective section is 300-750 ft.

Southwestern Energy obtained the acreage for $42 million, and its leases currently have an 85% average net revenue interest and an average 5-year primary lease term that may be extended 3 years.

The company submitted a drilling plan to the Colorado Oil & Gas Conservation Commission earlier this month for approval to spud its first well in the second quarter. This well will be drilled vertically to 9,500 ft and cored and then drilled 2,000 ft laterally.

Southwestern Energy said it could greatly increase activity in the area in the next few years if results are positive.

Surface geologic map of Colorado.  The Denver Basin is just north and east of the Rocky Mountain Front, depicted as the north-south trending purple colored outcrops on the map.

Do We Have Much Oil And Gas Left In The United States?

Just look at this map.  And this is just the lower 48 for Obama's sake!  Someone tell him or his advisors (handlers).  Didn't he say something like "we can't drill our way" out of this energy crisis?  Sometimes I wonder what he is really smoking.  Look at this map closely.  There is oil and gs all over the place, not all of it easy to recover, but give us a chance Mr. Obama, please?  I? know it's there, I didn't create this map , but I know it's there, I've studied all these places.  Please, let us help you pay your bills and get out of debt.  Please Mr. President, before it is too late.
Peter

Is America Committing Economic Suicide?

I wonder how much of the information in the following article is true. Is America committing economic suicide by chasing "alternative energy" (solar, wind, biofuels, etc.) while demonizing the oil and gas industry? This is where the radical environmentalists and global warming alarmists have led us. It is way past time to turn this "ship of state" around, because we're headed in the wrong direction.
Peter

A rush for black gold in the Gulf

Examiner Editorial

August 20, 2009

Major new offshore drilling for oil and natural gas in the Gulf of Mexico will soon be a reality. The big question is whether Americans will be part of it. Brazil, China, India, Norway, Spain and Russia have all signed agreements with Cuba and the Bahamas to initiate exploration and production in the Gulf of Mexico within the next two years. So the prospect of seeing Russian oil rigs 45 miles off the Florida Keys -- where American oil companies are now forbidden to drill -- is a very real possibility.

The U.S. Geological Survey estimates that the eastern Gulf region contains 3 billion barrels of oil and more than 11 trillion cubic feet of natural gas. Last summer, former President George W. Bush lifted the executive branch moratorium his father signed in 1990 on new drilling in 85 percent of America's territorial waters. The Democratic Congress then wisely let the congressional ban expire as well. So the only thing keeping U.S. firms from drilling off our own continental shelf is President Barack Obama and his secretary of the interior, Ken Salazar, who is slow-walking the approval process that must be cleared before the work can begin. Meanwhile, foreign nations are jockeying for the best spots. The Obama administration, incredibly enough, is giving Brazil a $2 billion loan from U.S. taxpayers to finance that nation's development of its own off-shore energy resources in the Atlantic.

According to the American Petroleum Institute, the development of America's coastal oil and gas resources would generate more than $1.3 trillion in new government revenue and 160,000 high-paying jobs over the next two decades. Senators Lisa Murkowski, R-Ark., and Mary Landrieu, D-La., are bipartisan co-sponsors of a bill that provides coastal states such as Florida their fair share of revenues produced by off-shore drilling and production. The same thing should be done for states on the East and West coasts. California Gov. Arnold Schwarzenegger and the state's lawmakers hope to tap deposits off Santa Barbara to generate billions in royalties, and Virginia's front-running gubernatorial candidate Bob McDonnell has made drilling 50 miles off that state's coast a key component of his energy plan.

Many environmental objections to deepwater drilling have been overcome. For example, 4-D seismic surveys provide pinpoint accuracy for well location. New technology also enables one drilling platform to reach deposits 40 miles away in water up to 10,000 feet deep (note the same technology could help other nations drill just outside our coastal limits while tapping into resources inside the boundary). According to the U.S. Minerals Management Service, less than 0.0001 percent of the 1.4 billion barrels of oil pumped offshore since 1980 has been spilled -- a remarkable safety record and a tribute to American energy ingenuity.

Find this article at: http://www.washingtonexaminer.com/opinion/A-rush-for-black-gold-in-the-Gulf-8127872-53705292.html

What Happens When Taxes Are Raised On Industry?

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."

Where Do We Go From Here? Bust, or Boom?

Here is some sobering news about the oil and gas industry in western Colorado. I have great affection for the area as my first job as a geologist was with the U.S. Geological Survey studying the oil shale in Piceance Basin of Colorado and the adjacent Uinta Basin in Utah. Years later I had relatives living in Parachute and I enjoyed my trips there to see them.

It seems there is an over-supply of natural gas coming from these western states, (Colorado, Wyoming, Utah, and New Mexico). One reason for the supply glut is a lack of transportation pipelines to move the gas to eastern and western markets. We're in for some "interesting" and challenging times with the economy in crisis and a new administration in Washington D.C. that is anything but friendly to the oil and gas industry. Yet I do not see solar and wind energy replacing oil, gas, and coal any time soon. Comments?
Peter

IN COLORADO: A natural gas well sits idle. Prices suddenly began to drop in September — natural gas is down 50% from its peak, and oil has plummeted from a high of $136 per barrel to about $40. Towns like tiny Parachute feel the pain.

http://www.latimes.com/news/nationworld/nation/la-na-energy-bust-town7-2009feb07,0,5750036.story
From the Los Angeles Times

An energy boomtown goes bust
Even as the national economy went into a tailspin, resource-rich towns like Parachute, Colo., were doing fine. Then natural gas prices began to plunge, and the pain began to rise.
By Nicholas Riccardi February 7, 2009
Reporting from Parachute, Colo. — Robert Knight was about to install wireless transmitters on eight new drilling rigs joining the thousands that dot the ravines and mesas here when he got the startling news: All but one of the rigs were coming down. Falling natural gas prices had led energy firms to abruptly curtail their work here last month, battering the last sector of the U.S. economy that had prospered despite the recession. "Boy, it was quick," said Knight, who has a business installing communication equipment and who serves as the town manager. "It was like the difference between night and day. "The sky-high oil and natural gas prices that burdened consumers during much of the decade were a blessing to residents of this tiny town and other energy-rich communities from Alaska to Arkansas.

Even as the national economy went into a tailspin in early 2008, home prices in boomtowns like Parachute kept rising and the streets were packed with shiny new pickups. But prices suddenly began to drop in September -- natural gas is down 50% from its peak and oil has plummeted from a high of $136 per barrel to about $40. The plunge brought some relief to recession-racked consumers, but has raised anxieties in Parachute, a town of 1,500 that bears the scars of busts that followed previous energy booms.

In better times, "you couldn't find a hotel room, you couldn't find a campground, you couldn't find a place to rent," said Laura Diaz, the town planning clerk. That's changing fast. "On Christmas Day there were three U-Hauls in my neighborhood," she said. "It is a little frightening for the people who have been here and know the history."

According to the energy service company Baker Hughes, the number of active oil and gas drilling rigs in the U.S. has dropped 13% since its peak in August. Gary Flaharty, the company's director of investor relations, said the decline matches the industry's response to previous price drops. Energy experts say the state of the economy could prolong this energy downturn. "The boom, absolutely, is over for the moment," said Pete Stark, vice president for industry relations at IHS in Englewood, Colo.

But energy-rich communities still have stronger economies than much of the rest of the nation. The seven states with budget surpluses can thank the energy industry, said Arturo Perez, a budget analyst with the National Conference of State Legislatures. Wyoming posts the nation's lowest unemployment rate, 3.4% -- less than half the national rate. Nonetheless, the reversal has been striking. Last summer, New Mexico held a special legislative session to spend a $200-million surplus fueled partly by energy revenue. Now it is scrambling to close a $400-million deficit. Alaska, which socked away billions in oil revenue over the last decade, warns that unless oil prices rise, it will face a budget deficit.

In Parachute, 200 miles west of Denver, the change has been dramatic. The town straddles I-70 along the Colorado River, in the shadow of massive mesas and buttes. On the slope of one mesa sits a subdivision of about 5,000 people that relies on Parachute businesses. Built to house expected oil and gas workers in the 1980s, the development emptied out when the energy industry killed oil shale exploration in the Grand Valley in 1982. It had filled back up by this decade, as high natural gas prices made exploration in the rugged land of the Piceance Basin economically feasible.

The streets of Parachute and similar towns were clogged with flatbed trucks hauling drilling equipment. Hotels were booked for months in advance. The region barely felt the recession that followed the dot-com bust in 2001, the recovery that followed, or the brutal downturn that began in late 2007. "We've had an economic bubble over us for some time," Knight said. "We've been pretty well sheltered. "Then in December, it all changed. Rumors began circulating about energy companies cutting jobs. "For Rent" notices appeared on homes and in local newspapers. Three hotel projects were put on hold, and the few existing hotels began to post vacancies. "We were known as the only one-stoplight town that had a traffic congestion issue," Knight said. "Compared to that, it's almost like a ghost town."

At VJ's Outlaw Ribbs, the regular flow of customers slowed to a trickle. Some began stopping in to say goodbye -- they'd been laid off and were heading back to their home states of Texas, Louisiana and elsewhere. "People we used to see every day, we just don't see anymore," said waitress Lori Ross. She tried to look on the bright side -- when she rented a house last year there were 50 applications per open rental. Now, she said, "there are rentals everywhere."

Last week, Del Dawson, a local real estate agent, did what had been unthinkable in Parachute for several years: He cut the prices on two homes. Like some other local business leaders, Dawson remains optimistic about the region's long-term prospects. He expects energy firms to redouble their efforts when the price of gas creeps back up -- local expectations are that will happen this summer or spring 2010. And many companies are maintaining a sizable workforce for their already drilled wells.

"We still feel it's a boom," said Hayden Rader, a developer who has two projects underway in Parachute. "People are saying there's not enough work here, but we've still got more than anyone else. "Yet residents are feeling the pain. Amy Beasley and her husband run the Old Mountain Gift & Jewelry store downtown and a neighboring shipping business. Their revenue has fallen this month, and people they know in the energy industry who had talked about an unending boom have abruptly lost their jobs. A fourth-generation Parachute native, Beasley, 35, has been ambivalent about the industry that keeps the town alive but has industrialized the wild lands where her family homesteaded. She and her husband have discussed whether to close their shops given the severity of the downturn. "We're going to stick it out and try to weather the storm," she said. "It may slow down for a few years, but it's going to be back. They're never going to leave us alone."nicholas.riccardi@latimes.com

Welcome To GeoPete's View

Dedicated to the prospector and explorer in all of us. Never say die. Never give up.

Welcome to my blog about the topic of horizontal drilling as it relates to oil and gas exploration. Actually, the term "horizontal drilling" is a bit of a misnomer. In reality, what we are dealing with is controlled directional drilling. The object is to create a well bore in a productive oil or gas pay zone for as long a distance as is possible. This requires navigating or steering the well as it is being drilled. Increased production rates, volumes, and profitability are the ultimate goals.

Since oil and gas is almost always found in sedimentary rocks deposited in layers, the trick is to keep the well in one or more of these preferred layers. These layers of rock can vary considerably in thickness, structure, and many other properties. This is why geological knowledge and experience is so important. However, the geologist can not work alone. Engineers and others are a vital part of the process and we must all work together.

I am an independent, consulting geologist, trained and experienced in exploration and interpretation, so my input here will be from that perspective. However, I will be posting what I consider relevant articles from geologists, engineers, geophysicists and others. I hope to generate input and discussion from those interested in this relatively new technology. Drilling, interpreting and completing these horizontal wells is expensive and challenging. It requires the coordinated effort of a team of experts.

Please add your comments, experience, and questions. If I don't have the answers, I'm sure I can find someone who does. Sharing our knowledge is the name of the game.