eagleford & niobrara quinella, page-29

I saw this on the SSN THREAD...



Geologists toast 'Energy on the Rocks'
By Dennis E. Curran

July 1, 2011 --
CHEYENNE - The Rocky Mountain Section of the American Association of Petroleum Geologists has been meeting annually in the region for the past 60 years, but its latest meeting in June was its first in Cheyenne.
Their interest this year was sparked by one of the hottest potential new oil plays in the nation - in the Niobrara shale beneath the plains of southeast Wyoming, northern Colorado and western Nebraska.
After a variety of tours and technical presentations on the Niobrara, the geologists concluded their five-day "Energy on the Rocks" gathering June 29 with a public forum designed to explore some of the issues raised by the Niobrara play and the increasing level of exploratory drilling in the region.
Geologist Bob Coskey of Rose Exploration in Denver told forum participants that while the exploratory drilling is still far from complete, initial results look promising by utilizing the relatively new combination of deep horizontal drilling with staged hydraulic fracturing - or "fracking" - to release long-trapped oil from the deep shale.
"If it works, the Niobrara can be a billion-barrel play," he said, calling it one of 20 to 25 major oil and gas plays in the country today.
Coskey noted that the Niobrara Formation has been drilled for many years, with limited success. Geologists knew there was oil there, but couldn't get to it economically.
"It's the same rock; it hasn't changed, but the technology has," he said. "The Niobrara section that is not productive in the old school can be productive if we approach it with horizontal drilling and stage fracking, so we can access those little tiny fractures."

No Bakken comparison
But Coskey emphasized that comparisons to the large Bakken Formation play in northwestern North Dakota and northeastern Montana are not likely because the Bakken shales contain far more oil than likely will be found in the Niobrara shales.
"This is not the Bakken Formation," he emphasized.
Coskey also said there are some risks to the Niobrara play, including geological risk that all rocks are not equal, regulatory risk from a lack of "predictable federal policy," environmental obstructionism, and economics, including the cost of drilling and the price of oil.
"The overriding risk is the price of oil," he said. "Right now, we need between $50 and $60 (per barrel of) oil to make this work; the Niobrara (is) more like $60."
But Coskey remains optimistic that it will work. "We've got a tremendous resource that can be released into the economy, if the government will let it happen."
A look at the major players in the Niobrara - names like Noble, Encana, Anadarko, Chesapeake, EOG and Bill Barrett - suggests there is plenty of interest in the Niobrara play.
Coskey said oil producers with major stakes in the Niobrara are investing hundreds of millions of dollars to explore the formation. With a single well costing $4 million, a typical oil producer can expect to invest up to $158 million to explore a 640-acre section with 30-plus wells, he noted.
The return, however, could be high. With oil at $85 a barrel, a single productive well could gross $5.5 million in a year, or about $166 million for that section during the first year of production, Coskey calculated.

Water concerns addressed
One of the primary concerns voiced by southeastern Wyoming residents is about damage to the area's sparse water resources.
Coskey said the chances of hydraulic fracturing affecting ground water are very improbable, since the fracturing will be occurring at 7,000 to 9,000 feet below the surface. That depth is far below the ground water wells that typically reach only 500 feet below the surface.
But he and former State Engineer Jeff Fassett, now a private water consultant, said there could be competition between drillers and farmers and ranchers for available water.
Fassett explained that most surface and underground water in southeastern Wyoming already has been appropriated and allocated to existing users, so the oil producers will have to either find new water or buy existing water.
"You have to understand your place in line," he said, adding that the "method d'jour" will be an increase in temporary change allocations for use of water during the period of active drilling.
"And there's clearly going to be a push for greater reuse and recycling," Fassett said.
Lynne Boomgaarden, the former director of the State Lands Department, urged southeast Wyoming residents to make sure they are getting good information and that they understand Wyoming's new split estate law and how it affects landowners who own surface rights but not mineral rights.
She also advised landowners to participate in opportunities to meet with oil developers and be fully informed. "This is an exciting area," Boomgaarden said.

Meeting energy needs
The final speaker at the forum was Rob Hurless, who was Gov. Dave Freudenthal's chief energy adviser. Hurless said growing demand for energy in developing countries like China ensures a future for Wyoming as an energy-producing state.
"The demand for energy is going to grow," he said. "We're in the energy business; we're going to stay in the energy business."
He noted that Wyoming is the largest energy-exporting state in the nation, exporting almost all of the 10 quadrillion Btus of energy it produces each year. Texas produces 12 quadrillion Btus a year, but consumes more than it produces, he said.
The RMS-AAPG annual meeting was sponsored by Jonah Bank, and the public session was offered in partnership with the High Plains Economic Development District.

Wyoming Business Report Editor Emeritus Dennis E. Curran can be reached at [email protected].

Source: http://www.wyomingbusinessreport.com/article.asp?id=58576