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Tuesday, July 19, 2011

Niobrara's Slow Start Not Cause for Worry

- Niobrara's Slow Start Not Cause for Worry

Tuesday, July 19, 2011
Knight Ridder/Tribune Business News
by Trevor Brown, Wyoming Tribune-Eagle, Cheyenne

The Niobrara oil play is off to a slow start, but state and industry officials say that is not unexpected or a reason for concern.

No oil rigs were operating in southeast Wyoming as of last Wednesday. This is down from about six in the area two months ago.

Wyoming Oil and Gas Conservation Commission Supervisor Tom Doll said many oil companies are waiting for updated seismic maps that show the underground Niobrara formation before they commit to expensive drilling operations.

"You want to get as much data as possible so you don't drill a $3 million to $4 million dry hole," he said. "My expectation is (the companies) want to have another tool of using that additional science to have a better opportunity to drill a productive well."

Texas-based Global Geophysical Services spent much of the spring using trucks and other seismic equipment to map areas beneath the surface of 831 square miles of land in Laramie County.

John Robitaille, vice president of the Petroleum Association of Wyoming, said it can take some time before the 3-D seismic maps are analyzed and sold to the oil companies.

"I can tell you it is some pretty technical data that they receive back," he said. "It then needs to be plotted and made into a format that is readable for the various geologists so they can get their plans made and know where they want to drill.

"And, of course, getting everything in place and lining up a rig takes all sorts of time as well."

Robitaille said he expects the activity to pick up in the fourth quarter of this year. In addition, up to three rigs are expected to return to Laramie County later this month.

According to the Oil and Gas Conservation Commission, 21 wells have been drilled to date in southeast Wyoming for the oil play -- 18 in Laramie County, two in Goshen County and one in Platte County.

Doll said although the companies are currently hesitant to drill, they are moving forward with other preparations, including obtaining drilling permits.

The Oil and Gas Conservation Commission issued 73 permits for drilling in Laramie County for the first quarter of 2011 and 60 in the second quarter.

In the second, third and fourth quarters of 2010, a combined 64 permits were issued here. Data from the first quarter of 2010 are not available.

Laramie County planner Gary Kranse said he estimates 1,500 drilling permits will be issued during the next five years here.

Both Doll and Robitaille said the relatively low number of wells that have been drilled so far is not a sign the oil play is a bust -- at least not yet.

"I wouldn't be too concerned because this is a slow-moving play," Robitaille said. "It is still very much in the exploratory phase of knowing where to drill."

A representative for Chesapeake Energy, which has announced a large stake in the oil play, would not comment on the specifics of why there has not been more drilling.

But John Dill, director of corporate development and government affairs for the company, agreed this exploratory phase can take some time before increased activity begins.

"It is also a very complex geology, and Chesapeake is only just beginning the process of exploring this vast, complicated play," Dill said in an email. "What may appear to be slow development of this extraordinary resource is primarily due to its size, complexity and the early stages of this effort."

Doll said there is too little information yet to determine how successful the play will be in the end.

This is because of the low number of commercial wells and rules that allow companies to keep their results confidential for up to six months.

"We just haven't seen enough drilling rigs and enough activity to really know if there is a play yet," he said.

Another reason for the oil play's slowdown could be because of increased activity in North Dakota, Doll said.

He said the Bakken oil play is gearing up to have 170 active drilling rigs and up to 290 by the end of the year. That could leave a shortage of equipment and workers for activity here.

"They claim that they are using many new rigs, so that may not be a problem," Doll said. "But my concern is: Where are you going to get the drillers, roughnecks and (fracking) crews who are trained to do the sophisticated work?"

Kranse added that companies could be taking time to develop the right formula for fracking the Niobrara shale.

Hydraulic fracturing, known as fracking, involves injecting a mixture chemicals and water into the earth to extract oil.

Copyright (c) 2011, Wyoming Tribune-Eagle, Cheyenne

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