This text is published in “The Louisiana Weekly” in the Sept. Sixteen, 2013 edition.)
Many northwest Louisiana residents had been enriched by Haynesville, the nation’s top shale play before its wells started producing much less. Farther south, activity within the Tuscaloosa Marine Shale or TMS deposit–thought to include 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 positioned above the foot of Louisiana’s boot.
The eastern swathe of the TMS is near oil infrastructure, together with the St. James petroleum reserve terminal and main 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 toes and then drilling horizontally, are expensive. “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 Resources spokesman, mentioned last week.
Drillers fracture the Tuscaloosa formation in phases, forcing water, combined with sand or ceramic materials and chemicals to crack the shale. The cracks open, releasing oil. Tuscaloosa rock is softer and more clay-like than many different shales, however. Slightly than cracking as intended, it may possibly absorb injected fluids. What’s extra, the clayish rock sometimes closes the opened cracks.
The Tuscaloosa play was sporadically drilled with out a lot success for decades. But firms stored making an attempt new strategies. “Sixteen wells have been completed in Louisiana up to now couple of years and are presently producing, while two extra have been drilled and are awaiting completion,” Courreges stated. Most of Louisiana’s manufacturing thus far 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 top 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-friendly insurance policies.
“Encana has eleven wells total within the Tuscaloosa play and all of them are presently on manufacturing,” Doug Hock, spokesman for Encana Oil & Gasoline USA in Denver, said final week. Encana Corp. is a natural gasoline and oil producer based mostly in Canada. “Eight of our wells are in Mississippi and three are in Louisiana,” he mentioned. All three of Encana’s Louisiana wells are in St. Helena Parish.
Two other Encana wells in Mississippi, the Anderson 17H-2 and the Anderson 17H-three, will enter production in the following few weeks, Hock mentioned. Most of Encana’s Tuscaloosa acreage is in Mississippi, the place the company’s first Tuscaloosa properly was drilled in Amite County in 2011.
Hock mentioned the company’s three, latest Tuscaloosa wells value about $sixteen million each to drill, complete and produce 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 have been within the $14 million range in Encana’s second-quarter 2013 convention name on July 24, Hock said. The corporate’s goal is to scale back its Tuscaloosa worth tag to $12.Eight million per effectively. “Our costs have steadily declined as we’ve drilled these wells,” making Encana more assured that it might probably profitably function within the TMS, he mentioned.
“Once we’ve discovered the most effective properly design, providing the most economic and environment friendly resource recovery, we are able to drill multiple wells on a pad in a repeatable fashion and create a truly commercial play,” Hock stated.
Encana would not launch production data. But analyst Patrica Wells with Louisiana’s DNR mentioned as of May–the last, required reporting time–Encana’s top St. Helena well, Weyerhaeuser 60 H No. 001, produced 976 barrels of oil every day. One of the biggest landowners in the TMS is timber large Weyerhaeuser, headquartered in Washington state.
As for oil and gas distribution from that site, “we don’t have gathering traces and infrastructure at present from wells in St. Helena Parish,” Hock mentioned. “We promote at the lease to our purchaser, and they have a number of choices as to where they take the crude. Trucks come to the lease and choose up the product.”
Tuscaloosa wells mostly produce Mild Louisiana Sweet crude, which fetched $108 to $109 a barrel early final week. Assuming 976 barrels of crude at $108 a barrel, gross revenue 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 is easier to refine.
In the meantime, other firms which have drilled the TMS embody Goodrich, Devon Power, Indigo Minerals, EOG, Halcon, Denbury Onshore and Justiss Oil. Houston-based Goodrich controls 320,000 acres, the most important space in the play, after it acquired Devon’s two-thirds share of 277,000 leased acres for $26.7 million this year.
“We have been working one rig full time for most of the 12 months in Mississippi,” Robert Turnham, Jr., president of Goodrich Petroleum, stated final week. “That will develop to two in Mississippi in October as a result of we’re completing our Foster Creek properly there now.”
A second rig will drill the corporate’s Weyerhaeuser site in St. Helena in October, and then it’ll head to Tangipahoa Parish, Turnham mentioned. “We’ll likely run two and a half rigs in 2014, spread between Louisiana and Mississippi, with the places not but finalized,” he said. A half rig operates six months of the year. The company’s Weyerhaeuser site is a former Devon property.
Along with St. Helena, different Louisiana parishes where TMS drilling has occurred embody East Feliciana, West Feliciana, Tangipahoa, Rapides and Vernon.
In St. Helena, oil and fuel corporations have dealt immediately with landowners, Randal Cooper of Cooper Real Estate in Greensburg mentioned final week. “To date, we solely have a number of wells here in the northern part of the parish,” he mentioned. Landmen, or mineral consultants, aren’t swarming the way in which they did around Shreveport, La. because of Haynesville and have completed in Wilkinson and Amite Counties in Mississippi. “We have heard about drilling curiosity in St. Helena for a minimum of two years now but individuals aren’t leaping up and down and hollering about it,” he mentioned.
While rural St. Helena doesn’t have any red lights and visitors is not a difficulty, Amite and Wilkinson County officials are questioning the right way to pay for street maintenance as drilling there attracts big trucks and heavy equipment.
As for lease rates, a lot of the promising TMS acreage was lapped up by late last yr, Dan S. Collins, minerals consultant and landman in Baton Rouge, said final week. In 2010, charges were round $one hundred fifty an acre for three-year leases however they grew to $300 to $450 an acre last year, he said. Leases within 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-gas value escalation,” Collins mentioned. “Folks thought oil and fuel would keep rising but they didn’t.” WTI costs dropped after reaching $134 a barrel in June 2008.
Collins discussed the latest flurry of interest in Mississippi. “Mississippi passed a severance-tax reduction legislation this year that’s slightly 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 natural fuel. Efficient in July, Mississippi’s tax rate on hydrocarbons from horizontal wells was lower to 1.3 p.c from 6 p.c for the primary 30 months of production or until the well pays out. During the primary two years of drilling in Louisiana, the state has no severance tax on sales of oil produced. However Louisiana’s tax jumps to 12 percent after two years.
One other purpose operators are gravitating to Mississippi is its “compelled pooling” if a landowner does not need to sign a lease, Collins stated. In Mississippi, if Tuscaloosa operators can lease a 3rd of the mineral rights in an space, they will “force-combine” holdouts by giving them the phrases of the perfect lease they gave to the primary third.
Also in Mississippi, the State Oil and Fuel Board has permitted very giant drilling items, exceeding Louisiana’s–which vary from 640 to 1,520 acres, Collins mentioned. With bigger units, corporations can hold onto their leases however drill fewer wells. “I anticipate Louisiana will follow Mississippi in the future so I look for much larger items in Louisiana as nicely,” Collins mentioned.
In the meantime, the U.S. Environmental Safety Company is assessing possible impacts of hydraulic fracking on drinking water resources at the request of Congress. A draft report from that study should be released next year for public comment.