South Louisiana on Forefront of New Energy Frontier

Louisiana Department of Natural Resources (DNR) Secretary Scott Angelle said today that McMoran Exploration’s recent announcement of a planned 30,000-foot onshore well project in South Louisiana could be the start of a wider trend in exploration for oil and natural gas at depths greater than 22,000 feet – which could bring the promise of new investments, new energy resources and new jobs.

McMoran has also announced that it will be testing the flow rate of its first well in the Davy Jones natural gas prospect, drilled to a depth of more than 30,000 feet in a water depth of about 20 feet in federal Outer Continental Shelf (OCS) waters about 10 miles south of Vermilion Parish, next week. The Davy Jones project has been ongoing for approximately three years – and been the subject of interest throughout the energy industry for the potential it may hold to provide energy from an area that had been considered to be mostly played out.

In regard to the South Louisiana onshore project, McMoran leadership recently stated that the company has acquired approximately 70,000 acres in mineral leases in area where the borders of Iberia, St. Martin and Iberville parishes meet for what the company terms the “Highlander” prospect, with drilling on the planned 30,000-foot well to commence by the end of 2012.

McMoran is also partnered with Chevron on an already ongoing Lineham Creek ultra-deep well in eastern Cameron Parish, that is currently drilling past 19,000 feet, with a target depth of 29,000 feet. Both projects would beat the previous record depth in the state by nearly a mile. McMoran has indicated that the company estimates that the Highlander, Lineham Creek and other ultra-deep potential prospects it has identified onshore in South Louisiana in an area from Cameron Parish to Lafourche Parish potentially hold the equivalent of 30 trillion cubic feet of natural gas.

“McMoran has established itself as one of the pioneers in the new frontier of energy exploration in South Louisiana in the past several years, finding oil and natural gas at depths that were not considered feasible for energy production until that company found a way to do it,” Angelle said. “Attempting projects such as this require not only a substantial investment by exploration companies, but substantial confidence that the regulatory framework they will be working within includes efficient permitting processes that preserve safety and the environment while encouraging development that attracts investment and brings job creation.”

Angelle said that the potential to draw new investment and activity in ultra-deep energy exploration, bringing with it new energy industry spending that can support job creation both in the industry and in the communities surrounding new activity, was a primary driver in DNR having recommended new law in the recent legislative session that specifically addressed the Office of Conservation’s regulation of ultra-deep oil and natural gas wells. The law, as passed by the Legislature, defines “ultra-deep” wells as those drilled to tap into reservoirs at 22,000 feet or deeper below surface and includes provisions outlining rules for how drilling units can be established at that depth and determining the size of those units. The process of establishing a drilling unit for a well can be critical in establishing the rights of operators to explore for oil and natural gas and the rights of landowners to share in the proceeds of oil and natural gas production.

“The industry expressed its faith in Louisiana’s energy potential and governmental leaders by investing in a handful of ultradeep prospects in recent years without those rules in place, to prove their science was sound,” Angelle said. “Companies are now seeing that faith being rewarded in both new energy prospects and the state’s action to ensure fair and effective regulation, and Louisiana’s businesses and workers could be reaping the benefits for years to come if McMoran and other companies continue to expand their activity and investment.”

Angelle said that a strong success in the planned test of the Davy Jones prospect in federal waters next week could also be a signal to energy companies and investors that the science driving McMoran’s ultradeep exploration in both South Louisiana and the shallow coastal waters is sound.

“Ultradeep prospects both directly within the state and in the federal waters just off our shores bring with them the potential to strengthen our economy, because exploration companies will be looking to Louisiana’s ports, supply companies, support industries and workers to develop and produce the energy resources they discover,” Angelle said. “That potential growth within the industry can mean new opportunities for other businesses to expand as they gain customers with new jobs or better paying jobs who have more money to spend on everything from homes and cars to movies and restaurants.”