Companies exploring for oil in Southwest Mississippi

Companies are now drilling in the Tuscaloosa Marine Shale play, an “unproven unconventional 7 billion barrel oil resource” spanning central Louisiana and southwestern Mississippi.

The total potential of the play — as estimated by the Basin Research Institute at Louisiana State University — would equal the United States’ oil consumption for a year, which was about 6.9 billion barrels in 2010.

The Tuscaloosa Marine Shale (TMS) play covers central Louisiana and the southwestern Mississippi counties of Amite, Wilkinson, Adams, Franklin, Pike, and Walthall for a total of 2.7 million acres. The term “play” in the oil and gas industry refers to a geographic area targeted for exploration.

Two companies — Devon Energy Corp. and EnCana Corp. — are currently drilling in the shale in an exploratory capacity.

Encana, a leading North American natural gas company currently producing nearly 4 billion cubic feet of gas daily, has purchased 250,000 acres in the TMS and is working on a total of three wells, the first of which is being finished in Amite County.

“People believe (the Tuscaloosa Marine Shale) is high in natural gas liquids and oil,” said Lem Smith, a Mississippi native and director of government and regulatory affairs for EnCana Oil & Gas USA Inc. in Colorado.

“It’s not dry gas, which is a good thing for the state, because, theoretically, it would increase well economics because the price of natural gas has been low over the past couple years, mainly due to prolific discoveries in shale plays nationwide,” Smith continued. “Rigs have tended to move in the last year or so toward more liquid plays. Obviously, Mississippi would be a beneficiary of this trend, if it continues.”

Tuscaloosa Marine Shale play. Source: ameliaresources.com

Devon Energy, a Fortune 500 company headquartered in Oklahoma, has also purchased 250,000 acres in the play and is drilling on the Louisiana side. Devon produces about 2.5 billion cubic feet of gas daily.

A spokesperson for Denbury Resources Inc., an independent company and the largest oil and natural gas operator in Mississippi, told the Mississippi Business Journal the company was “not active enough in the play to comment” for this story.

According to a May company earnings conference call, Denbury has entered into an agreement with a joint venture partner covering approximately 100,000 acres of the TMS in which the partner will complete one well and drill another at no cost to Denbury, who will retain a small interest in future activities.

Fracking and Horizontal Drilling

Industry experts have known for years that the TMS was rich in hydrocarbon resources but lacked the technology to access them.

Companies now exploring the TMS are using a modern drilling technique called hydraulic fracturing, or “fracking,” which uses high-pressure injections of chemicals, water and sand to break apart rock formations and enable trapped gas to flow.

Devon Energy takes credit for pioneering the simultaneous use of fracking and horizontal drilling in shale. Although both technologies have existed for years, they were not used in conjunction until after 2002, when Devon bought Mitchell Energy which had been working to produce natural gas in Texas’ Barnett Shale through hydraulic fracturing and vertical drilling. Devon immediately began to drill horizontally.

“We found that although wells cost two-and-a-half times more to drill, they produced three times more gas. We discovered that horizontal drilling and hydraulic fracturing work well together to create economical production for us. Because of that success, the industry has been able to hone this technology and made it more effective to use on a larger scale,” said Devon spokesman Chip Minty.

While some shale plays predominantly produce oil or natural gas, others produce various types of hydrocarbons. The Cana Woodford Shale in Oklahoma, for instance, produces natural gas, a light form of oil called condensate, and natural gas liquids such as butane and propane. The TMS contains both oil and gas. During the drilling process, hydrocarbons come up simultaneously and are later separated.

Other companies with interests in the TMS include Indigo II Louisiana Operating, LLC with 240,000 acres; Amelia Resources with 110,000 acres; and Goodrich Petroleum with approximately 74,000 net acres, which it purchased for $175 per net acre, according to RIGZONE.com.

Indigo told the New Orleans City Business the company expects to recover 250,000 barrels of oil from its first horizontal well there.

According to the LSU study, “If proved economically, the Tuscaloosa marine shale oil would be a huge addition to the domestic United States oil reserves. It will also lead to the further possibility of opening up exploration and exploitation of similar deep fractured shale resources throughout the country and other areas of the world.”

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