This text is printed in “The Louisiana Weekly” within the Sept. Sixteen, 2013 version.)
Many northwest Louisiana residents were enriched by Haynesville, the nation’s prime shale play before its wells started producing less. Farther south, activity in the Tuscaloosa Marine Shale or TMS deposit–thought to comprise 7 billion barrels of recoverable oil–is accelerating now. Extending throughout central Louisiana, the TMS play will get as close to New Orleans as St. Tammany Parish. It contains the state’s Florida parishes and several Mississippi counties located above the foot of Louisiana’s boot.
The jap swathe of the TMS is near oil infrastructure, including the St. James petroleum reserve terminal and major refineries between Baton Rouge and New Orleans.
Tuscaloosa drilling dates to the 1970s and earlier. But the play’s wells, boring down about eleven,000 feet after which drilling horizontally, are pricey. “The main, added expense for these wells over most others drilled in South Louisiana is their long horizontal laterals,” Patrick Courreges, Louisiana Dept. of Pure Sources spokesman, stated final week.
Drillers fracture the Tuscaloosa formation in stages, forcing water, mixed with sand or ceramic material and chemicals to crack the shale. The cracks open, releasing oil. Tuscaloosa rock is softer and extra clay-like than many other shales, nonetheless. Slightly than cracking as intended, it could possibly absorb injected fluids. What’s more, the clayish rock sometimes closes the opened cracks.
The Tuscaloosa play was sporadically drilled without a lot success for decades. However firms kept making an attempt new techniques. “Sixteen wells have been accomplished in Louisiana previously couple of years and are currently producing, whereas two more had been drilled and are awaiting completion,” Courreges mentioned. Most of Louisiana’s manufacturing up to now has been from wells drilled in St. Helena Parish, he stated.
St. Helena, two parishes away from Orleans, is east of the Mississippi River at the highest of the foot of boot. Just north of it are Wilkinson and Amite Counties in Mississippi–each lively, drilling spots now, primarily due to that state’s shale-pleasant insurance policies.
“Encana has eleven wells whole in the Tuscaloosa play and all of them are currently on production,” Doug Hock, spokesman for Encana Oil & Gasoline USA in Denver, said last week. Encana Corp. is a natural gas and oil producer based mostly in Canada. “Eight of our wells are in Mississippi and three are in Louisiana,” he said. All three of Encana’s Louisiana wells are in St. Helena Parish.
Two different Encana wells in Mississippi, the Anderson 17H-2 and the Anderson 17H-3, will enter production in the next few weeks, Hock stated. Most of Encana’s Tuscaloosa acreage is in Mississippi, where the corporate’s first Tuscaloosa effectively was drilled in Amite County in 2011.
Hock said the corporate’s three, newest Tuscaloosa wells price about $sixteen million each to drill, full and bring into manufacturing. The corporate continues to be within the exploration or design-of-experiment phase, and hopes to cut back its prices.
Encana’s Haynesville wells have been solely slightly cheaper to drill than its Tuscaloosa models. Estimates for its Haynesville wells had been in the $14 million range in Encana’s second-quarter 2013 convention name on July 24, Hock stated. The company’s aim is to cut back its Tuscaloosa value tag to $12.Eight million per effectively. “Our costs have steadily declined as we’ve drilled these wells,” making Encana extra confident that it can profitably function within the TMS, he stated.
“Once we’ve discovered the best nicely design, providing probably the most economic and efficient useful resource restoration, we will drill multiple wells on a pad in a repeatable trend and create a actually business play,” Hock said.
Encana would not release production information. However analyst Patrica Wells with Louisiana’s DNR mentioned as of Might–the final, required reporting time–Encana’s prime St. Helena well, Weyerhaeuser 60 H No. 001, produced 976 barrels of oil each day. One in every of the biggest landowners in the TMS is timber large Weyerhaeuser, headquartered in Washington state.
As for oil and gasoline distribution from that site, “we do not have gathering lines and infrastructure currently from wells in St. Helena Parish,” Hock said. “We promote on the lease to our purchaser, and they’ve a number of options as to where they take the crude. Trucks come to the lease and choose up the product.”
Tuscaloosa wells largely produce Gentle Louisiana Sweet crude, which fetched $108 to $109 a barrel early final week. Assuming 976 barrels of crude at $108 a barrel, gross income from Encana’s Weyerhaeuser 60 H totaled $105,408 a day. LLS crude sells at a premium to West Texas Intermediate as a result of it’s easier to refine.
In the meantime, other corporations that have drilled the TMS embrace Goodrich, Devon Power, Indigo Minerals, EOG, Halcon, Denbury Onshore and Justiss Oil. Houston-primarily based Goodrich controls 320,000 acres, the largest space in the play, after it acquired Devon’s two-thirds share of 277,000 leased acres for $26.7 million this yr.
“We’ve been working one rig full time for a lot of the 12 months in Mississippi,” Robert Turnham, Jr., president of Goodrich Petroleum, mentioned final week. “That may grow to two in Mississippi in October as a result of we’re completing our Foster Creek well there now.”
A second rig will drill the company’s Weyerhaeuser site in St. Helena in October, and then it would head to Tangipahoa Parish, Turnham said. “We’ll probably run two and a half rigs in 2014, spread between Louisiana and Mississippi, with the locations not but finalized,” he mentioned. A half rig operates six months of the yr. The company’s Weyerhaeuser site is a former Devon property.
In addition to St. Helena, other Louisiana parishes where TMS drilling has occurred include East Feliciana, West Feliciana, Tangipahoa, Rapides and Vernon.
In St. Helena, oil and gas companies have dealt directly with landowners, Randal Cooper of Cooper Real Property in Greensburg mentioned last week. “Thus far, we solely have just a few wells here in the northern part of the parish,” he mentioned. Landmen, or mineral consultants, aren’t swarming the way they did round Shreveport, La. due to Haynesville and have completed in Wilkinson and Amite Counties in Mississippi. “We’ve heard about drilling curiosity in St. Helena for no less than two years now but folks aren’t jumping up and down and hollering about it,” he stated.
Whereas rural St. Helena does not have any purple lights and visitors is not an issue, Amite and Wilkinson County officials are wondering how to pay for road maintenance as drilling there attracts huge trucks and heavy equipment.
As for lease charges, a lot of the promising TMS acreage was lapped up by late last yr, Dan S. Collins, minerals marketing consultant and landman in Baton Rouge, mentioned final week. In 2010, rates have been around $a hundred and fifty an acre for 3-12 months leases however they grew to $300 to $450 an acre last 12 months, he stated. Leases in the TMS are unlikely to ever reach the tens of 1000’s of dollars per acre seen for awhile in Haynesville.
“Haynesville leases peaked at over $30,000 an acre however that was during oil-and-fuel value escalation,” Collins said. “People thought oil and gasoline would keep rising however they didn’t.” WTI costs dropped after reaching $134 a barrel in June 2008.
Collins mentioned the latest flurry of interest in Mississippi. “Mississippi passed a severance-tax discount legislation this 12 months that’s a little better than Louisiana’s,” he stated. “It trumped Louisiana.” A severance tax is a levy on the removing of nonrenewable assets, together with oil and pure gasoline. Effective in July, Mississippi’s tax price on hydrocarbons from horizontal wells was minimize to 1.3 percent from 6 % for the primary 30 months of production or till the well pays out. Throughout the primary two years of drilling in Louisiana, the state has no severance tax on gross sales of oil produced. But Louisiana’s tax jumps to 12 percent after two years.
One other motive operators are gravitating to Mississippi is its “forced pooling” if a landowner would not wish to sign a lease, Collins said. In Mississippi, if Tuscaloosa operators can lease a 3rd of the mineral rights in an space, they can “power-combine” holdouts by giving them the phrases of the best lease they gave to the first third.
Also in Mississippi, the State Oil and Fuel Board has permitted very giant drilling models, exceeding Louisiana’s–which vary from 640 to 1,520 acres, Collins stated. With larger items, companies can hold onto their leases however drill fewer wells. “I anticipate Louisiana will observe Mississippi in the future so I search for much larger units in Louisiana as effectively,” Collins said.
Meanwhile, the U.S. Environmental Safety Company is assessing doable impacts of hydraulic fracking on drinking water sources on the request of Congress. A draft report from that examine needs to be launched subsequent 12 months for public comment.