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Tuscaloosa Shale Drilling Revs Up In Louisiana And Mississippi

This article is revealed in “The Louisiana Weekly” in the Sept. 16, 2013 version.)
Many northwest Louisiana residents were enriched by Haynesville, the nation’s prime shale play earlier than its wells started producing less. Farther south, activity in the Tuscaloosa Marine Shale or TMS deposit–thought to include 7 billion barrels of recoverable oil–is accelerating now. Extending across central Louisiana, the TMS play gets as near New Orleans as St. Tammany Parish. It includes the state’s Florida parishes and several Mississippi counties located above the foot of Louisiana’s boot.

The japanese swathe of the TMS is close to 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 us crude oil companies wells, boring down about 11,000 toes after which drilling horizontally, are expensive. “The principle, added expense for these wells over most others drilled in South Louisiana is their lengthy horizontal laterals,” Patrick Courreges, Louisiana Dept. of Natural Resources spokesman, mentioned last week.

Drillers fracture the Tuscaloosa formation in phases, forcing water, mixed with sand or ceramic material and chemicals to crack the shale. The cracks open, releasing oil. Tuscaloosa rock is softer and more clay-like than many other shales, nonetheless. Reasonably than cracking as meant, it can 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 many years. However corporations saved trying new strategies. “Sixteen wells have been completed in Louisiana in the past couple of years and are currently producing, whereas two extra had been drilled and are awaiting completion,” Courreges said. Most of Louisiana’s manufacturing so far has been from wells drilled in St. Helena Parish, he said.

St. Helena, two parishes away from Orleans, is east of the Mississippi River at the highest of the foot of boot. Simply north of it are Wilkinson and Amite Counties in Mississippi–each lively, drilling spots now, mainly due to that state’s shale-pleasant policies.

“Encana has eleven wells total within the Tuscaloosa play and all of them are at present on production,” Doug Hock, spokesman for Encana Oil & Fuel USA in Denver, mentioned final week. Encana Corp. is a pure fuel 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-3, 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 effectively was drilled in Amite County in 2011.

Hock stated the corporate’s three, newest Tuscaloosa wells price about $sixteen million every to drill, full and bring into production. The corporate continues to be within the exploration or design-of-experiment part, and hopes to cut back its prices.

Encana’s Haynesville wells have been only slightly cheaper to drill than its Tuscaloosa units. Estimates for its Haynesville wells have been within the $14 million vary in Encana’s second-quarter 2013 conference name on July 24, Hock stated. The company’s goal is to scale back its Tuscaloosa value tag to $12.Eight million per well. “Our costs have steadily declined as we’ve drilled these wells,” making Encana extra assured that it may possibly profitably operate in the TMS, he said.

“As soon as we’ve discovered the perfect well design, providing the most economic and environment friendly useful resource recovery, we can drill a number of wells on a pad in a repeatable vogue and create a really business play,” Hock stated.

Encana does not release manufacturing knowledge. However analyst Patrica Wells with Louisiana’s DNR mentioned as of Could–the last, required reporting time–Encana’s top St. Helena effectively, Weyerhaeuser 60 H No. 001, produced 976 barrels of oil each day. Certainly one of the biggest landowners within the TMS is timber giant Weyerhaeuser, headquartered in Washington state.

As for oil and fuel distribution from that site, “we do not have gathering traces and infrastructure at the moment from wells in St. Helena Parish,” Hock stated. “We sell on the lease to our buyer, and they have multiple options as to where they take the crude. Trucks come to the lease and decide up the product.”

Tuscaloosa wells mostly produce Mild Louisiana Sweet crude, which fetched $108 to $109 a barrel early last 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.

Meanwhile, different corporations that have drilled the TMS embrace Goodrich, Devon Vitality, Indigo Minerals, EOG, Halcon, Denbury Onshore and Justiss Oil. Houston-primarily based Goodrich controls 320,000 acres, the biggest area within the play, after it acquired Devon’s two-thirds share of 277,000 leased acres for $26.7 million this 12 months.

“We have been operating one rig full time for a lot of the 12 months in Mississippi,” Robert Turnham, Jr. president of Goodrich Petroleum, stated final week. “That will develop to 2 in Mississippi in October because we’re finishing our Foster Creek well there now.”

A second rig will drill the corporate’s Weyerhaeuser site in St. Helena in October, and then it can head to Tangipahoa Parish, Turnham stated. “We’ll seemingly run two and a half rigs in 2014, spread between Louisiana and Mississippi, with the locations not but finalized,” he stated. A half rig operates six months of the yr. 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 gas firms have dealt instantly with landowners, Randal Cooper of Cooper Real Estate in Greensburg said last week. “To this point, we solely have a couple of wells here within the northern part of the parish,” he stated. Landmen, or mineral consultants, aren’t swarming the way they did round Shreveport, La. because of Haynesville and have done in Wilkinson and Amite Counties in Mississippi. “We have heard about drilling curiosity in St. Helena for not less than two years now however individuals aren’t leaping up and down and hollering about it,” he mentioned.

Whereas rural St. Helena does not have any purple lights and traffic isn’t an issue, Amite and Wilkinson County officials are questioning how to pay for road maintenance as drilling there attracts big trucks and heavy equipment.

As for lease rates, most of the promising TMS acreage was lapped up by late last yr, Dan S. Collins, minerals guide and landman in Baton Rouge, mentioned final week. In 2010, charges had been around $a hundred and fifty an acre for 3-yr leases but they grew to $300 to $450 an acre last yr, he mentioned. Leases within the TMS are us crude oil companies unlikely to ever attain the tens of 1000’s of dollars per acre seen for awhile in Haynesville.

“Haynesville leases peaked at over $30,000 an acre but that was during oil-and-gasoline price escalation,” Collins mentioned. “Folks thought oil and gasoline would keep rising however they did not.” WTI costs dropped after reaching $134 a barrel in June 2008.

Collins discussed the latest flurry of curiosity in Mississippi. “Mississippi passed a severance-tax reduction law this 12 months that is just a little higher than Louisiana’s,” he said. “It trumped Louisiana.” A severance tax is a levy on the elimination of nonrenewable resources, including oil and pure fuel. Effective in July, Mississippi’s tax rate on hydrocarbons from horizontal wells was lower to 1.Three percent from 6 % for the primary 30 months of production or until the well pays out. During the first 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 % after two years.

Another cause operators are gravitating to Mississippi is its “compelled pooling” if a landowner would not want to signal a lease, Collins mentioned. In Mississippi, if Tuscaloosa operators can lease a third of the mineral rights in an space, they can “force-combine” holdouts by giving them the terms of the very best lease they gave to the first third.

Also in Mississippi, the State Oil and Gasoline Board has permitted very giant drilling units, exceeding Louisiana’s–which range from 640 to 1,520 acres, Collins mentioned. With larger models, companies can hold onto their leases but drill fewer wells. “I anticipate Louisiana will follow Mississippi in the future so I look for much bigger items in Louisiana as well,” Collins stated.

Meanwhile, the U.S. Environmental Safety Company is assessing doable impacts of hydraulic fracking on drinking water resources at the request of Congress. A draft report from that research needs to be launched next 12 months for public remark.

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