June 14, 2018 / 6:33 PM / 3 months ago

U.S. oil firms use shale know-how to revitalize old oilfields

    By Ernest Scheyder
    BURTON, Texas, June 14 (Reuters) - Among vineyards and cow
pastures in east Texas last month, roughnecks started to drill
in an oilfield that is 25 years past its production peak.
    Houston-based oil producer Wildhorse Resource Development
Corp         tasked the crew with breathing new life into the
field by using technology developed for fracking shale rock.
    In the limestone and clay Austin Chalk formation, which 
stretches across south Texas into central Louisiana, Wildhorse
is among a growing group of U.S. producers opening a new front
in the nation's energy revolution.   
    "The application of new technology to older plays is a
winning bet," Drew Cozby, Wildhorse's finance chief, said in an
interview.
    After shale producers pushed U.S. oil and gas output to
all-time highs, some are now taking what they have learned to
fields that until recently were considered played out. 
    If they are successful, the U.S. energy boom could find
another gear as producers find profitable ways to extract the
billions of barrels of oil remaining in older fields.
    Production from the Austin Chalk jumped to 57,000 barrels
per day (bpd) last year from 3,000 bpd five years ago and up 50
percent from the previous year, according to consultancy Wood
Mackenzie, which expects rapid production gains to continue. 
    The number of drilling rigs in the Austin Chalk has doubled
in the past six months to 14, according to data from energy
researcher DrillingInfo. 
    Heavyweights ConocoPhillips        , Marathon Oil Corp
        and EOG Resources Inc         have leased land or
drilled here in the past year.
    (For a graphic on Austin Chalk oil production, click here: tmsnrt.rs/2IkpsLL
 )
    Other non-shale plays getting fresh attention include the
Meramec in Oklahoma and the Central Basin Platform in Texas. 
    Devon Energy Corp         is one of the biggest producers in
the Meramec, where it plans to boost output to 140,000 bpd by
the end of the year from 107,000 bpd at the end of 2017. 
    In the Central Basin Platform in the Permian oilfield,
smaller producers such as Ring Energy Inc         have begun
investing heavily, hoping to rejuvenate an area that first
produced nearly a century ago. There is no publicly available
data on Meramec and Central Basin's total production.
    Many of the tools developed to unlock vast shale reserves
are working in these different geological settings - including
longer wells, steerable drilling technology, complex mixtures of
sand and chemicals and the hydraulic fracturing of bedrock.
    "These fringe areas, like the Austin Chalk, could be the
next big thing," said Bernadette Johnson of DrillingInfo. 
    More oil from Austin Chalk and other similar fields could
push U.S. production to fresh records. Shale producers have for
several consecutive years outstripped government forecasts,
taking U.S. output C-OUT-T-EIA to a record 10.5 million bpd in
March.
    Even without innovations such as those under way in the
Austin Chalk, the government predicts nearly 12 million bpd by
late next year.              
    "This is something that people haven't baked into the supply
side yet," said Jeremy Gottlieb, who has helped finance
companies bringing shale technology to inexpensive, older
fields. "This is going to take people by surprise."
    
    NEW TECH, OLD FIELDS
    Wildcatters first pumped oil from the Austin Chalk nearly a
century ago, but output reached its peak in the early 1990s even
though the formation still contains about a billion barrels of
crude, according to U.S. government's Geological Survey.
    That is not unusual. Oil producers have historically
extracted less than half the oil from any particular field
because the rest has not been accessible at a profit.
    That is changing in fields like the Austin Chalk. 
    Based on test wells and modeling techniques, Conoco believes
long, horizontal wells with multiple fracks - a technique used
often in shale fields - will deliver strong results from its
acreage in the Austin Chalk.      
    "What we were seeing with some of the newer technologies
work really well in the Austin Chalk," Conoco Chief Executive
Ryan Lance told Reuters. 
    Some wells they have fracked in the Austin Chalk have
produced more prolifically than shale wells. Wildhorse's newer
Austin Chalk wells produced more than three times the initial
output of wells at the Eagle Ford shale field, the company said
this month. 
    EOG also said an Austin Chalk well it drilled this year in
Texas produced nearly 3,000 bpd in its first month, more than
twice the first month rate of a shale well it had completed in
the Permian during the same period.
    The field's proximity to Gulf Coast refiners and export
ports make it that much more attractive, she said. Rising oil
prices have also increase the number of potentially profitable
plays.
    Some portions of the Austin Chalk also sit on top of the
Eagle Ford shale field, allowing drillers to potential extract
oil from multiple layers and types of rock.
    "It's a stacked play," said Johnson, of DrillingInfo.
      
    LOUISIANA REVIVAL
    Land is still cheap in the formation, which has helped lure
more producers. Conoco leased its land for less than $5,000 an
acre. That compares with as much as $75,000 an acre in the
Permian Basin in West Texas and New Mexico, the center of U.S.
shale drilling and its largest oilfield.             
    About 350 Austin Chalk drilling permits were approved in the
last 16 months, a nearly four-fold increase from the previous
16-month period, according to DrillingInfo. 
    Analysts say they expect more activity to spread to the
Louisiana portion of the play. There are 3,500 Austin Chalk
horizontal wells in Texas, but only 32 in Louisiana, according
to Wood Mackenzie.
    Louisiana is counting on the Austin Chalk developments to
revive the state's declining oil output, which fell 11 percent
last year to 40.4 million barrels, the lowest level since 1945.
    That might stop the drain of oil workers to Texas, said
Gifford Briggs, head of the Louisiana Oil and Gas Association,
an industry trade group.
    Oil industry employment in the state fell 4 percent in the
past year despite a rise in commodity prices, largely due to
workers leaving to develop Texas shale fields, according to U.S.
government data.
    "It's an opportunity for some of our workers to stay in
state," Briggs said.

    
 (Reporting by Ernest Scheyder
Editing by Gary McWilliams, Simon Webb and Brian Thevenot and
Marguerita Choy)
  
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