Don Warlick
WarlickEnergy
Houston
At present there are 13 oil and gas shales of consequence in the US. Nine of them are liquids-rich and the other four essentially produce natural gas only. The liquids-rich plays are the busiest while development and drilling in the dry gas shales continue to remain flat.
As a consequence, produced oil and gas volumes are growing such that by 2020 it is anticipated that the US will be close to energy self-sufficiency. The principal driver here is oil which is ramping up quickly. As an example, oil production in the Bakken Shale has quadrupled such that North Dakota ranks fourth among oil-producing states after Texas, Alaska, and California.
The nine liquids-rich US shales are obviously the big drivers for energy resurgence in this country and consume a large share of oilfield services and products for drilling, completion, and production.
Accordingly we've taken a snapshot approach to characterize the liquids-rich plays into three groups or tiers in order of importance of their impact on current and future development. A brief description follows.
Tier 1 shales
Bakken - The Bakken and the associated Three Forks formation together help to create one of the largest contiguous deposits of oil in the US. It's estimated that the Bakken will soon be producing more than a million barrels per day. Bakken wells are huge investments that can cost up to $9 million or more to drill and complete.
Eagle Ford – Drilling here is taking place in 16 busy counties. It has three large "windows" or areas whose geological characteristics focus individually on crude oil, oil and liquids with the southernmost window mostly dry gas. In late 2007 and early 2008 drilling took off quickly from low levels such that today the Eagle Ford is the fastest-growing shale in the US.
Permian - A huge legacy play where drilling began in the 1920s completely concentrating on crude oil. This is a collection of Devonian-era formations separating sandstone deposits. The new shales in the Permian offer great opportunity for leading Permian operators to drill into conventional and unconventional formations in stacked-play programs.
Tier 2 shales
Anadarko Woodford – This has become a busy horizontal play at depths ranging from 11,400 to 14,500 ft and horizontal laterals up to 7,800 ft. As a result average drilling and completion here can cost up to $8 million. A busy area with attractive economics.
Granite Wash – Located in the Texas and Oklahoma panhandles it covers an area that is about 160 miles long and 30 miles wide. It largely consists of somewhat complicated, stacked plays with most wells at depths from 11,000 to 15,000 feet.
Marcellus – The most active part of this play is in Pennsylvania with longstanding gas production from conventional wells. In fact, around 40% of wells drilled here in recent years were conventional. Liquids development in southwestern Pennsylvania is busy, with the possibility of Shell's tentatively-planned $2 billion ethane cracker.
Niobrara – Here, the Denver-Julesburg Basin is the most important part of the Niobrara with the largest share of development. Drilling costs are moderate with vertical wells at $1 million to $2 million and $4 million to $6 million for horizontals. Noble Energy is the leading driller, investing huge sums for development, drilling, and infrastructure.
Tier 3 shales
Mississippian – An area with a long history of drilling (but considered by some as early-stage due to new horizontal development). A carbonate reservoir, it is mostly active in northern Oklahoma and is the shallowest of all the liquids-rich shales. It has a challenge in the significant volumes of water produced along with hydrocarbons.
Utica – This play lies below the Marcellus and may be encountered below 6,500 feet. With fewer than 145 producing horizontal wells, the Utica appears to need more active drilling and development to move up in the ranks of other liquids-rich plays.
Summary
It's obvious that Tier 1 shales are the leaders among liquids-rich plays in the US with attractive potential for continued success. Tier 2 areas are also important to shale growth and also for consumption of oilfield services and equipment. Finally, time will tell us just how the Tier 3 shales can develop into attractive development opportunities.
About the author
Don Warlick is president of WarlickEnergy in Houston, a Houston-based energy intelligence firm. The company publishes a series of special reports on each of the leading US unconventional shales and also provides market research services addressing North American and International oil and gas markets. Warlick is a contributing editor to Oil & Gas Financial Journal.
