Firm tries to unlock shale’s oil

04 05, 2012 by The Advocate

Devon Energy and partner Sinopec’s 285,000 acres in the Tuscaloosa Marine Shale that crosses Louisiana’s midsection contain the equivalent of 1.7 million barrels of oil, but more work must be done to unlock the resource, a company official said Wednesday.

“We think this play has incredible potential. The resource is huge, and the prize, once we optimize the drilling completion and costs, is very compelling,” said Dave Hager, executive vice president, exploration and production, during a presentation at Devon’s analyst day in Houston that was available on its website. “We do have some learning curve to go through. But the good news is we’ve been through this learning curve before.”

Devon’s first two wells in East Feliciana and Tangipahoa parishes had an average daily production of 100 barrels and 176 barrels of oil, respectively, during their first 30 days of production.

But those early wells aren’t an indicator for what the Tuscaloosa will produce, Hager said. Devon is still refining its technique for fracturing the formation.

In hydraulic fracturing, drilling companies force hundreds of thousands of gallons of water, sand and chemicals into the formation to crack the shale. The sand props open the cracks in the rock and allows the oil to escape.

Hager said there has been some discussion and concern in the industry that the Tuscaloosa’s shale is ductile, meaning that any fractures would close by themselves. But the formation has intervals of sand and siltstone that add to the formation’s brittleness, making it “frackable,” Hager said.

Hager said the main issue will be reducing the cost of the wells, which he described as relatively expensive.

One reason for that is wells in the Tuscaloosa are drilled to depths of 11,000 to 15,000 feet.

The good thing is that cost reduction is one of Devon’s strengths, Hager said. The company has consistently done this in other formations, particularly the Cana Woodford in Oklahoma where wells are drilled to similar depths.

Kirk Barrell, president of Amelia Resources LLC, said in an interview that with time and experience in each play, the operators get smarter and reduce costs.

Devon is basically saying the company can cut its Tuscaloosa Marine Shale costs by 30 percent to 40 percent, he said.

Devon and Sinopec are partners in five formations, one of which is the Tuscaloosa. Devon is the operator and owns two-thirds of the formations, Sinopec one-third.

Hager said Devon wants its Tuscaloosa wells to average 700 to 900 barrels per day during their first month of production.

The company also hopes to reduce the cost of drilling and completing a well to $12 million to $14 million, he added. Devon is optimistic that it will be able to work through the cost and well completion issues.

There are other reasons for Devon’s optimism, including:

  • Louisiana’s well-established regulatory environment. A major piece of Devon’s strategy includes drilling only in areas that understand and encourage the industry.
  • The formation is under high pressure, which means potentially higher flow rates.