Shale! Shale! The Gang's All Here!
Big Bucks and Challenges at Haynesville and along the Tuscaloosa Trend
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New Oil Play
Operators sank considerable investment into northwestern Louisiana before new economic realities began to set in. According to the Louisiana Department of Natural Resources, three-dozen companies drilled more than 2,000 wells in the region during the past four years in pursuit of a portion of the potential 200 trillion cubic feet of natural gas that lies there.
“The Haynesville Shale is now the largest-producing natural gas field in the country, and the economic impact on that part of the state has been unprecedented,” says Don Briggs, president of the Louisiana Oil and Gas Association.
Recently, though, that wealth-generating engine has slowed as worldwide prices for natural gas have declined and remained low. With prices dipping as low as $2 per million British thermal units – the common unit of measure – many operators retreated from Haynesville, at least temporarily. Briggs says that whereas around 140 drilling rigs were in place in the region at the peak of activity, only about 35 continue to operate today.
“Prices are going to have to get to $4.50 or so to make drilling affordable again,” he says. It could take a couple of years for the glut of cheap gas to be consumed so that prices can begin to rise, he adds.
Meanwhile, though, commodity stalkers are not sitting still. A few have turned their attention to another part of the state where techniques honed in the Haynesville Shale are again coming into play.
The Tuscaloosa Marine Shale lies beneath a six-million-acre sweep of land that stretches across central Louisiana, from Vernon and Beauregard parishes in the west to Washington and St. Tammany in the east. The organic-rich rock is hundreds of feet thick, roughly 90 million years old and lies two to three miles below the earth’s surface. Part of the larger Tuscaloosa Trend Formation that enriched many Louisiana landowners with natural gas royalties in the 1970s, the shale now being explored appears to hold a substantial amount of oil.
“A lot of people say this is similar to the Eagle Ford Shale in Texas, which is producing both oil and gas,” says Chacko John, director of the Louisiana Geological Survey.
John, who authored an extensive analysis of the Tuscaloosa Marine Shale 15 years ago, says he concluded at the time that the deposit may hold 7 billion barrels of oil. “It could be even more; we just have to wait and see what the drilling turns up,” he says.
With oil prices bobbing around the $100-per-barrel mark, potential returns on investments in petroleum-bearing rock look better at the moment than those in natural gas-laden shale. Devon Energy Corp. is among a handful of operators that have drilled in the Tuscaloosa play.
Still, shale exploration is expensive no matter what the commodity. “It costs $10 million to $20 million to drill a well,” depending on the depth and conditions, John says. Even if the well is successful, it could take a long time to return profits. “It could also be a totally dry hole,” he points out.
Department of Natural Resources Secretary Scott Angelle said recently that drillers are “beginning to see a very real opportunity” in the Tuscaloosa Marine Shale, but he acknowledged that exploration is at an early stage and operators have much to learn.
Among other things that further drilling will help show is whether holes that are punched in the shale will remain open and allow for long-term production or will have a tendency to reseal, causing production to taper off.
“We know that this formation has vast potential to provide domestic energy for the nation, and jobs and economic growth for this state,” Angelle said. “But it will take time to perfect the most effective means of drawing out the oil and natural gas locked within that shale.”
The ongoing exploration of the Tuscaloosa, Haynesville and other plays must inevitably include scrutiny of dangers associated with shale-drilling and fracking. Among other issues, environmental advocates have criticized the use of certain chemicals in the fracking process that they say can seep into groundwater. Two years ago, 19 cattle died after ingesting fracking fluid while grazing near a north Louisiana site being fracked by Chesapeake Energy Corp.
In an incident involving shale-fracking in Pennsylvania, Cabot Oil and Gas Corp. was ordered to pay compensation to property owners after gas leaked into groundwater.
Wilma Subra, a chemist who runs a lab and environmental consulting firm in New Iberia, says the dangers not only from fracking but “the whole drilling and production process” need to be more thoroughly investigated before shale exploration is allowed to continue.
“When you drill, stimulate, fracture or produce in these areas, huge amounts of toxic chemicals are released into the air and groundwater,” she says.
Subra has conducted evaluations of how shale exploration has affected human health in Haynesville and other shale regions in Texas, Arkansas and Wyoming. She says she has seen impacts ranging from respiratory problems and skin rashes to chronic neurological impairment.
“The technology is being developed quicker than the state agencies are able to deal with it,” she says. “We don’t have what we need in place to be sure that it is adequately monitored.”
Subra also points to another issue that could eventually bring drillers into conflict with landowners. Fracking, she says, consumes millions of gallons of water that, so far, operators have taken freely from local areas. In the Haynesville region, she says, operators tapped the ground water, and later they turned to the Red River and the Toledo Bend Reservoir to fulfill their needs.
With water supplies becoming an increasingly sensitive political issue in some parts of the country, meeting the need for water in future projects could turn into one of the next big challenges in shale exploration.
Briggs, for one, says the industry ultimately will find ways to continue bringing oil and gas to the surface of the earth. New and existing shale plays, he says, are the latest frontier in the quest to give the United States a greater measure of energy independence.
“The impact,” he says, “of all this is that we truly have the opportunity to become less dependent on foreign oil, and that’s a very good thing for our country.”