Technology drives Niobrara development

2011-04-05T18:30:00Z 2011-04-05T22:25:04Z Technology drives Niobrara developmentBy JEREMY FUGLEBERG Casper Star-Tribune The Billings Gazette

CASPER, Wyo. — The oil and natural gas trapped in the Niobrara Shale has been there for a very, very long time.

So why are companies only now trying to break that energy out of the earth?

While oil prices are driving the exploration in eastern Wyoming, it's the use of proven technology that's making it all possible.

For decades, drillers seeking oil and natural gas have been able to drill horizontally and fracture underground formations to let out more oil and gas. But it's only been recently that the industry has perfected its use of horizontal drilling and multistage hydraulic fracturing.

Put simply, the technologies allow drillers to access oil and gas they never could before by drilling down and then to the side, cutting through layers and pockets of gas and oil otherwise kept from flowing to the surface.

Mark Northam, now director of the University of Wyoming School of Energy Resources, is an oil business veteran and said the technology has opened up the Niobrara Shale in ways never before possible.

"We were looking at the Niobrara as a source rock, looking for reservoirs back in the '80s, but we couldn't find a reservoir," he said. "Now with the new technology, you can more or less manufacture a reservoir."

With fracturing — or fracking, as it's commonly known — water, sand and chemical additives are pumped down into the ground through a horizontally drilled well that is plugged to keep the well pressurized. The fracking fluids are pumped into the underground zones at such a pressure the ground literally fractures, allowing the oil and gas to come to the surface.

Fracking is now often done over and over along the horizontal well bore, breaking open new areas.

The complexity of the fracking operation and the precision of the horizontal drilling are what make the technologies game changers.

"Neither is brand-new, although our ability to drill horizontal wells and hit precise targets is fairly new," Northam said.

Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.

It was first thought that the Bakken was unique. Then drillers tapped oil in a shale formation under South Texas called the Eagle Ford. Drilling permits in the region grew 11-fold last year. Now newer fields are showing promise, including the Niobrara; the Leonard, in New Mexico and Texas; and the Monterey, in California.

"It's only been fleshed out over the last 12 months just how consequential this can be," said Mark Papa, chief executive of EOG Resources, the company that first used horizontal drilling to tap shale oil. "And there will be several additional plays that will come about in the next 12 to 18 months. We're not done yet."

The rapidly expanding use of fracking has led to even more complex fracking jobs by drillers. Halliburton — which pioneered the technique and supplies drilling equipment for oil and gas firms — is attempting 40-stage frack jobs as horizontal drilling distances grow larger.

The average number of fracking stages per well has doubled in the last two years, said David Lesar, Halliburton's chief executive, in a January conference call to discuss corporate earnings.

"Well complexity continues to rise within these plays, with lateral lengths that are now reaching beyond a mile," he said. "In fact, one operator has indicated that their future wells in the Eagle Ford will be drilled with an approximately 10,000-foot lateral, an increase from the current average length of 6,000 for that basin."

While the combination of fracking and horizontal drilling is a boon for drillers, it raises concerns for landowner and environmental groups, who fear fracking's effect on the earth, particularly the threat that chemicals used in the fracking process might get into groundwater used for drinking.

But while the EPA continues to study the question, the industry largely dismisses those concerns.

Mapping the resource

For many companies involved in the Niobrara, it's time to get a better idea of what lies underground.

Some of the companies have some data points, or sets of information that detail the geologic makeup of the ground underfoot. Those data points prove crucial when making the expensive decisions about where to drill.

But many of the companies involved in the Niobrara Shale are cooperating to pay for seismic testing results that provide a three-dimensional underground view. Seismic testing is not new technology, but it's a crucial cost-saving measure.

"It's absolutely essential for a play like this, because otherwise you're drilling blind," said Northam, of the University of Wyoming.

That information can help the companies find economical drilling locations and spot natural fractures and formations from which it will be less expensive to extract oil and natural gas.

"The data that comes out of that will help operators refine their drilling site location as they try to find more natural fractures, or if they're looking for a structure in the Niobrara that will provide them a better opportunity," said Tom Doll, superintendent of the Wyoming Oil and Gas Conservation Commission.

Denver-based Recovery Energy Inc., which recently consolidated leases totaling 14,400 acres in the Chugwater area, has applied for four horizontal drilling permits and hopes to start drilling by mid-2011.

Roger Parker, Recovery's chief executive, says his company already has "literally thousands" of data points to assist with the company's plan to drill.

"That, coupled with the new technology, is what has driven all those companies to come into this play at such an early stage, with the Niobrara development, and expect widespread success," he said.

While some of the areas in eastern Wyoming are old fields with a wealth of existing data points, some of the areas require some clarification. That means seismic testing companies like Houston-based Global Geophysical Services Inc. have a job to do.

The company's machines are now testing in Laramie County, and will thump across 738 square miles to gather data for multiple oil companies, said company spokesman Lance Moreland, although he wouldn't disclose which.

"It's a fairly large program," he said.

The gathering of data is particularly useful for small companies that may not have as many leased acres but still want to drill profitable wells.

"You can't tell from the surface where the sweet spots are going to be, and there will be sweet spots," Northam said.

The Associated Press contributed to this report.

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