New players, technology advances driving activity in Piceance-Uinta basins
The US Geological Survey has established the Uinta-Piceance province in Utah and Colorado as a "priority province" because of its potential for providing "significant natural gas resources" to the country. At present, both the Uinta Basin in northeastern Utah and the Piceance Basin in northwestern Colorado remain relatively under-developed in view of the enormous potential of their source rock. However, that may be changing as several oil majors and large independents recently have joined the regional independents that have traditionally pursued opportunities in the two adjacent hydrocarbon basins.
Major players in the two basins include Chevron Corp., ExxonMobil, Encana, Noble Energy, Bill Barrett Corp., Antero Resources, Delta Petroleum, Laramie Energy, and Newfield Exploration.
The Piceance Basin has come to increasing public attention in recent years because of the success of natural gas drilling. The primary target of gas development has been the Cretaceous Williams Fork formation, which is a several-thousand-foot thick section of shale, sandstone, and coal deposited in a coastal plain environment. The formation has long been known to contain natural gas. The sandstone reservoirs have low permeability and limited areal extent, however, which in the past made gas uneconomic to produce. Advances in hydraulic fracturing technology in the past decade have made gas wells broadly economic in the area. In 2007, the basin contained five of the top 50 US gas fields in proved reserves.
The Piceance Basin also contains one of the thickest and richest oil shale deposits in the world and has been the focus of continuing research and development. Oil shale is not to be confused with shale oil, such as that found in the Bakken Shale play in North Dakota, Montana, and Saskatchewan. Oil shale does not contain crude oil but instead contains kerogen, which is an organic precursor to oil that must be heated to very high temperatures (530 to 930 degrees Fahrenheit) for production. There are significant technical and environment challenges to achieving commercial production from oil shale (kerogen), and no economic extraction method is currently available in the United States. It is not known exactly how much oil shale is recoverable.
The first commercial gas well in the Uinta Basin was drilled at Ashley Valley in 1925, so this is not a new petroleum province by any means. As with many basins, oil seeps originally led to the drilling and development of shallow structures that eventually led to the discovery of deeper reservoirs. In the past few years, deeper drilling in Red Wash and Natural buttes has found major new gas reserves in the Cretaceous Mesa Verde, Blackhawk, and Mancos intervals.
In addition, new technologies are now being applied to old fields. New formation evaluation tools, cores, image logs, detailed outcrop studies, and comprehensive reservoir characterization studies have helped operators better understand the impact of fractures, reservoir architecture, and permeability anisotropy for in-fill drilling and enhanced oil recovery in mature existing fields. Acquisition and interpretation of 3D seismic has improved success and economics in structurally complex areas. In areas where thin, but widespread sandstone reservoirs occur, operators are drilling horizontal wells.
Recent news from Piceance-Uinta basins
On May 11, Bill Barrett Corp. signed an agreement to acquire the owner and operator of a Uinta Basin property that includes an estimated 5 MMboe of net proved reserves, an estimated 25 MMboe of net risked proved, probable, and possible reserves, and approximately 750 boe/day of production, associated gathering and transportation infrastructure, and 20,155 net acres of mineral leasehold. The purchase price was $120 million.
The properties are located near Bill Barrett's Blacktail Ridge-Lake Canyon project and are prospective in the Green River and Wasatch formations. The proximity of the assets to existing Bill Barrett operations is expected to allow for drilling and operating efficiencies at both the new and existing programs.
On May 17, Harvest Natural Resources completed the sale of its oil and gas assets in the Uinta Basin to an affiliate of Houston-based Newfield Exploration Co. for $215 million. The sale has an effective date of March 1, 2011. Newfield now serves as operator of the assets.
The transaction is one of two separate agreements to acquire Uinta Basin assets made by Newfield in the first half of 2011. The second deal, with an unnamed private company, is estimated to have cost Newfield about $93 million. Together, the transactions are expected to add about 70,000 net acres in the Uinta Basin to Newfield's portfolio. The acreage is largely undeveloped and located adjacent to and north of Monument Butte.
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