Discoveries

I’ve been spending some time lately looking at the Horn River Basin, in far northeastern British Columbia. The Horn River lies between the Liard Basin and the Slave Point platform, in the Western Canada Sedimentary Basin.

Shales in the Horn River basin appear to be prime exploration targets. The Muskwa and Horn River formations form a 600-foot-thick package of organic rich, siliceous shales found at reasonable depths of some 6,500 feet. 

This wedge of sediment is thermally mature, loaded with total organic carbon, and contains high percentages of silica.

Additionally, areal extent of the play is vast: researchers have pinpointed an area of 2,404 square miles where all the elements needed for commercial shale-gas production appear to coincide. 

Total gas-in-place estimates in this piece of the Horn River Basin range to as high as 600 trillion cubic feet.

For more on this fast-developing play, check out British Columbia’s oil and gas division website by clicking here.

by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

Contact me at pwilliams@hartenergy.com

Last week I attended the AAPG convention in San Antonio. I’ve been a member of the organization for more than 30 years, and this is the first time I’ve ever had to fight for a seat at a technical session. The talks on shales, subsalt provinces and tight sands were absolutely mobbed. Typically, I look over the schedule and hop between sessions to hear selected talks. This year, if I got up and left a session my seat was immediately taken, and then I couldn’t even get into the talk I wanted to hear.

The solution was to arrive early and commit to an entire session. I spent most of my time on shales, as I’m working on several shale articles at the moment. My background is in clastics, so the intricacies of shales are new to me.

Knowledge about shales has exploded during the past five years. Although shales have been long recognized as prolific reservoirs in Appalachia, operators in the Barnett play in North Texas have ushered in a host of fresh ideas and technologies that seem poised to break open a multitude of new shale plays.

In talk after talk, speakers presented papers that underlined the complex nature of shales. These are diverse and complicated rocks, and they hold many secrets. The term “shale:” is loosely applied to rocks that range from true shales, which by definition are fissile, through mudstones, claystones and siltstones. Indeed, it seems that the famous Barnett is not shale at all; rather, it’s siliceous mudstone.

The heterogeneity in shales is astounding. They can be high- or low-pressured, clay-rich or silica-rich, and if the latter, loaded with detrital or biogenic quartz. Shales can be soft and difficult to fracture, or shatter as easily as glass. Reservoir temperatures cross the spectrum from cold to hot; thermal maturities are all over the map. Almost anything goes, and geologists are trying to figure out just what combinations of which characteristics will make a particular shale a promising producer.

by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

Contact me at pwilliams@hartenergy.com

The U. S. Geological Survey has released details of its most recent study on the Bakken formation in the Williston Basin of Montana and North Dakota. The Survey says the formation contains mean undiscovered volumes of 3.65 billion barrels of oil, 1.85 trillion cubic feet of gas and 148 million barrels of natural gas liquids.

It assessed the geologic elements of the Bakken petroleum system, including distribution of the source rock, its thickness, organic richness, maturation, petroleum generation capabilities and migration. It also looked at the type of reservoir rocks, their distribution and quality and the character of traps and time of their formation.

The estimate represents undiscovered, technically recoverable oil and associated gas resources; it contains no calculations about the volumes of oil that could be economically recovered from the Bakken. Instead, it lays out the scale of the formation’s potential.  

In general, they concluded that undiscovered resources in the Bakken are in a continuous reservoir that includes all three members and that’s present throughout the entire oil-generation window, an area that covers roughly 20,000 square miles in northeastern Montana and northwestern North Dakota.

Notably, in 1995 the Survey estimated that the Bakken contained only 150 million barrels of recoverable oil. The dramatic change in the resource base is due to horizontal drilling. Today, operators access Bakken oil through long-reach multi-lateral horizontal wells. EOG Resources, an operator very active in the play, has reported that its horizontal Bakken wells in North Dakota have averge lateral lengths of 5,000 feet and cost $5.25 million completed. Up to 10 stages are fractured in a lateral.

To read the U.S.G.S. fact sheet on its Bakken assessment, click here.

by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor Contact me at pwilliams@hartenergy.com

Last night, I had the pleasure of attending a birthday party to celebrate the 100th anniversary of St. Mary Land & Exploration Co. The Denver-based firm held its soiree in the stylish Brown Palace Hotel’s Grand Ballroom in downtown Denver. St. Mary had a lovely spread of hors d’oeuvres and cocktails; various dignitaries, including Tony Best and Mark Hellerstein, talked about the history of the company. More than 400 people attended, from St. Mary employees and their families to vendors, oil industry peers, friends and acquaintances.  

One of the themes the speakers emphasized was how St. Mary has continually reinvented itself as business conditions changed over its long life span. The company has been nimble, most recently moving from a successful acquire-and-exploit operator to a resource-play specialist. At the same time, it has been fiscally conservative enough to ride out the tumultuous ups and downs of our cyclical business.

The appreciative audience was also treated to a slide show of wonderful photographs and historic documents that traced the 100 years of the company’s existence.  St. Mary has a number of regional offices, and it is having parties during the coming week at its Billings, Shreveport, Tulsa, Midland and Houston locales. Finally, it will close out its centennial celebration by ringing the bell at the New York Stock Exchange.   

Happy birthday to an upstanding firm! 

–by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor.

Contact me at pwilliams@hartenergy.com

The shale party is swelling. The latest shale play to cross my desk is Pioneer Natural Resources’ Pierre play in the Raton Basin. Pioneer bought Denver’s Evergreen Resources a few years back, and Evergreen had developed a very nice coalbed-methane business in the Raton Basin, mainly in the Vermejo and Raton coals.

Now, Pioneer says the the Cretaceous Pierre Shale, which occurs at depths of 4,000 to 6,000 feet in the Raton Basin, is a viable shale-gas target. So far, the Dallas-based operator has five producing wells in the fairway of the play that together make 2 million cubic feet of gas per day from one of several prospective zones; and another five wells that are being completed and tested. The first group are in the main portion of the play, and the second batch are attempts to define its boundaries.

It appears that Pioneer’s Pierre shale play covers 134,000 acres, on held-by-production leases. That’s the beauty of these new shale plays: they are often in established producing areas, and on leases that companies already own. It’s like getting presents when it’s not even your birthday!

To date, Pioneer has deployed vertical wells in the Pierre. It says such wells cost $1 million, and each fracture treatment adds $200,000.  It says OGIP is 21 trillion cubic feet beneath its acreage, which calculates out to a very respectable 100 billion cubic feet per section, if I did my math correctly. Naturally, the company is checking out the efficacy of horizontal wells.

To read Pioneer’s news release on the play, click here. 

by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

Contact me at pwilliams@hartenergy.com

Shale plays are popping up everywhere this spring, like the crocuses in my front yard.  One of the latest is in Quebec, Canada, in the Utica Shale. Denver-based Forest Oil talked about the Utica in a recent analyst meeting.

The Utica shale is 500 feet thick and occurs at depths between 2,300 and 6,000 feet in Forest’s area, which stretches from Montreal to Quebec City. The play offers several attractive features: excellent rock properties, low acreage costs, and proximity to premium gas markets. According to Forest, net resource potential on its 339,000 gross acres totals 4.1 trillion cubic feet of gas. That’s because the average gas-in-place is 93 billion cubic feet per section.  

To date, the company has drilled two vertical wells that tested at rates up to 1 million cubic feet per day. The gas is 88% to 97% methane, and between 1,027 and 1,136 BTU. This year, the company plans three horizontal wells with 2,000-foot laterals. Four stimulations per well are expected. The horizontals are budgeted at up to $4 million each.

If the concept works, Forest will kick off full-scale development in 2010.

-by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor

Contact me at pwilliams@hartenergy.com

When I visited Calgary last fall, the signs of a dramatic decline in Alberta’s new natural-gas activity were strongly in evidence. Now that full-year statistics are being published, it’s clear that operators throughout Canada were buffeted by the same forces.

2007 was a brutal year for Canadian gas drillers. High costs and not-so-high commodity prices, coupled with changes in Alberta’s fiscal policies toward the oil and gas industry, and the strength of Canada’s dollar, combined to send well permits off a steep cliff. Last year, just 12,740 licenses for gas wells were issued in Canada, a 5,530-well plummet from 2006 permits.

Conventional oil and bitumen drilling also fell in 2007, but the decline was less severe. A total of 6,486 permits were issued for oil-prone targets, a 10% drop from the prior year. Alberta, British Columbia, Saskatchewan and Manitoba all experienced substantial losses in permits filed. The only increases were in regions with extremely light activity anyway: Northwest Territories, New Brunswick and Prince Edward Island.

–by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor. Contact me at pwilliams@hartenergy.com

Larry Nichols, chairman of Devon Energy Corp., kicked off Hart Energy Publishing’s 3rd annual DUG conference (Developing Unconventional Gas) in Fort Worth this week. Nichols talked to a packed house of more than 700 attendees about Devon’s past accomplishments in the phenomenal Barnett shale play. He said the best was yet to come.

Devon will achieve net production of 1 Bcfe per day from the Barnett shale this year. Nichols said that original gas in place is calculated at 147 billion cubic feet per square mile, a fabulous resource that is far richer than seen in other commercial shale plays.

The company has upped its estimate of potential recoveries from the shale, as a result of improved technologies. It believes that downspacing of horizontal wells, to as close as 20 acres, and refracs of existing horizontal producers, offer it economic development opportunities for years to come. Devon has 7,500 risked Barnett shale locations in inventory, which would last 13 years at its current activity level.

For more details, view Devon’s slide show on its website by clicking here.

by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor
Contact me at pwilliams@hartenergy.com

A fresh chapter has just been published in the saga of Western water issues. A study, funded by the Montana Board of Oil and Gas Conservation (MBOGC), a state agency, showed no negative impacts to crops and soils from water produced from coalbed-methane reservoirs.

CBM production in the Powder River Basin can be accompanied by copious volumes of water, and lots of these shallow, low-volume gas wells have been drilled in the past decade. The study looked at the Tongue River drainage, which is home to some 3,000 CBM wells in northern Wyoming and southern Montana. Most produced water meets one of four fates: it ends up in storage ponds, is used for livestock and crops, is treated and then discharged, or is injected into the subsurface. Less than a quarter of produced CBM water flows untreated into tributaries of the Tongue River. It becomes part of the water used for irrigation along the drainage.

The study found that CBM water had a benign effect on crops that were sampled and analyzed. The study assessed alfalfa, grass, barley, sugar beets and corn for feed quality, mineral and sodium content.

Click here to link to the report on the MBOGC website.

–by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor
Contact me at pwilliams@hartenergy.com

Recently I spent some time thinking about exploration, one of my favorite subjects. The occasion was preparation for a talk on exploration trends.

There’s a wealth of activity in the world right now, and explorers are hunting for resources on every continent except Antarctica. In an attempt to create a neat power-point slide, in keeping with the classic three- to five-item list, I came up with four main areas of focus for global exploration.

My first bullet point is subsalt. Offshore Brazil, offshore West Africa, the Gulf of Mexico, and of course the Persian Gulf, are all enjoying strong attention. And Brazil’s supergiant Tupi discovery is testament to the tremendous potential of these provinces. Next, newly accessible areas are hot. India is a fine example of this category: it has hosted foreign and private-company exploration for less than 10 years and is the home to some major gas discoveries off its eastern coast.

Ultradeep—both waters and depths–are another area of interest. In the past ten years, drilling capabilities have expanded to water depths of 10,000 feet and drilling depths to 32,000 feet, and this has opened whole new geographies to exploration. Finally, I see Arctic regions as crucial exploration grounds. About one-quarter of the world’s remaining undiscovered resources are estimated to lie above the Arctic Circle.

–by Peggy Williams, Senior Exploration Editor, Oil and Gas Investor.
Contact me at pwilliams@hartenergy.com