Shale! Shale! The Gang's All Here!

It may seem surprising that one of Louisiana’s oldest industries is also one of its most technologically advanced, but oil and gas exploration has experienced a remarkable evolution during the last few centuries. Wave after wave of innovation has transformed the industry since 1821, when the first natural gas well was drilled in Fredonia, N.Y., preceding by decades the country’s first oil well. Since then, it seems that boring holes five miles deep into the earth using equipment that sits on rigs floating two miles above the ocean floor has almost become child’s play.

Throughout this relentless pursuit of petroleum and its byproducts, the question inevitably arises: When will we run out?

Given the world’s insatiable appetite and the quantity of oil and gas already pumped out of the earth, it’s impossible not to wonder when the end will come. Yet so far the industry has staved off the worry by applying creative technologies that provide access to new reservoirs. One of the latest results of these advancements has been the opening of huge underground resources that further solidify the drilling industry’s ties with Louisiana.

Geologists have long-known that thick layers of shale rock lie deep beneath much of the state’s surface. The fact that the shale contains substantial amounts of natural gas was also well-known. What kept the industry from looking more closely at the potential was the difficulty of getting the gas out.

Shale rocks are “tight,” with very low permeability and porosity, says John Curtis, professor of geochemistry at the Colorado School of Mining. The rocks’ sheer hardness makes the prospect of drilling them fraught with risk, he says. Even using today’s advanced technology, costly efforts can go awry if the shale does not contain just-right levels of hydrogen, pore pressure and brittleness.

“You have to drill a lot of wells to get the production you need,” Curtis told an audience during a videotaped seminar at Stanford University.  

But true to form, the petroleum industry is gradually meeting the challenge of shale. During the past several years, drillers, particularly in Louisiana, have honed techniques that opened these ultra-hard rock layers for exploration. But the process is not without controversy.

Rock-hard challenge

Massive layers of shale containing potentially large quantities of natural gas or petroleum underlie several regions of the United States. Some of the most notable deposits are in the Appalachian Basin, the Illinois Basin, portions of Michigan, eastern Texas and New Mexico. In recent years, drillers have tapped into one of the richest fields in the country, the Haynesville Shale, located in northwestern Louisiana.

Named for the town of Haynesville in Claiborne Parish, the formation is a thick, black layer of sedimentary rock that lies nearly two miles below the earth’s surface. It stretches under some 9,000 square miles of land from Shreveport-Bossier City to Natchitoches to Sabine Parish, also reaching into southwestern Arkansas and eastern Texas.

The Haynesville Shale took shape more than 100 million years ago, during the Jurassic Age, and it is rich in organic material – plant or animal remains that collected in shallow sea basins and were buried fast enough to prevent them from oxidizing before they turned into hydrocarbons. Through most of the history of oil and gas exploration, this rich organic matter was seen as off-limits because of the difficulty of accessing it.

What changed the picture was the co-evolution of two production technologies – directional drilling and hydraulic fracturing. While neither process is new, the drilling industry several years ago arrived at improved ways of combining the two to tap into very deep, hard rock.

Often called horizontal drilling, the directional means of boring into the earth enables companies to find and extract hydrocarbons while drilling fewer holes than traditionally used. Drillers can bore straight down to the level where the gas or oil resides, and then redirect the bit at an angle to bore horizontally toward multiple extraction points within the rock layer. The process has been used for some time in the Gulf of Mexico, where it enables the production of large quantities of oil or gas from a single drilling platform.

Along with horizontal drilling, producers deploy a fracturing – or “fracking” – process to mine deep shale. Fracking involves pumping millions of gallons of water mixed with sand and chemicals into a well under enormous pressure. The sand-and-liquid mixture breaks or fractures the rock and stimulates the flow of the commodity to the surface.

The successful combination of the two techniques in the Haynesville Shale about five years ago set off a firestorm of activity in the region. Production companies converged on the area in an effort to line up mineral rights on every acre of land within 100 miles of a potential drilling site. Millionaires were made overnight as individual landowners signed agreements that entitled them to future royalties on the commodities. Even small landowners were excited to learn they, too, would share in the action.

Shreveport resident Pamela Holt and her husband were among them. The couple had just relocated to the area from Kentucky in 2007 when an agent for one of the oil companies came knocking at the door. “When they came around talking to us about natural gas, we were like, ‘What?’” Holt recalls.

The couple signed a lease agreement that paid them an initial $300 per acre for mineral rights to their property, though no actual drilling will occur on their land. “We kind of thought nothing more would come of it,” Holt says, but almost two years later, royalty checks began rolling in. “We didn’t buy the land because of the gas, so to us, this is a bonus,” she says.

New Oil Play

Operators sank considerable investment into northwestern Louisiana before new economic realities began to set in. According to the Louisiana Department of Natural Resources, three-dozen companies drilled more than 2,000 wells in the region during the past four years in pursuit of a portion of the potential 200 trillion cubic feet of natural gas that lies there.

“The Haynesville Shale is now the largest-producing natural gas field in the country, and the economic impact on that part of the state has been unprecedented,” says Don Briggs, president of the Louisiana Oil and Gas Association.

Recently, though, that wealth-generating engine has slowed as worldwide prices for natural gas have declined and remained low. With prices dipping as low as $2 per million British thermal units – the common unit of measure – many operators retreated from Haynesville, at least temporarily. Briggs says that whereas around 140 drilling rigs were in place in the region at the peak of activity, only about 35 continue to operate today.

“Prices are going to have to get to $4.50 or so to make drilling affordable again,” he says. It could take a couple of years for the glut of cheap gas to be consumed so that prices can begin to rise, he adds.

Meanwhile, though, commodity stalkers are not sitting still. A few have turned their attention to another part of the state where techniques honed in the Haynesville Shale are again coming into play.

The Tuscaloosa Marine Shale lies beneath a six-million-acre sweep of land that stretches across central Louisiana, from Vernon and Beauregard parishes in the west to Washington and St. Tammany in the east. The organic-rich rock is hundreds of feet thick, roughly 90 million years old and lies two to three miles below the earth’s surface. Part of the larger Tuscaloosa Trend Formation that enriched many Louisiana landowners with natural gas royalties in the 1970s, the shale now being explored appears to hold a substantial amount of oil.

“A lot of people say this is similar to the Eagle Ford Shale in Texas, which is producing both oil and gas,” says Chacko John, director of the Louisiana Geological Survey.

John, who authored an extensive analysis of the Tuscaloosa Marine Shale 15 years ago, says he concluded at the time that the deposit may hold 7 billion barrels of oil. “It could be even more; we just have to wait and see what the drilling turns up,” he says.
With oil prices bobbing around the $100-per-barrel mark, potential returns on investments in petroleum-bearing rock look better at the moment than those in natural gas-laden shale. Devon Energy Corp. is among a handful of operators that have drilled in the Tuscaloosa play.

Still, shale exploration is expensive no matter what the commodity. “It costs $10 million to $20 million to drill a well,” depending on the depth and conditions, John says. Even if the well is successful, it could take a long time to return profits. “It could also be a totally dry hole,” he points out.

Department of Natural Resources Secretary Scott Angelle said recently that drillers are “beginning to see a very real opportunity” in the Tuscaloosa Marine Shale, but he acknowledged that exploration is at an early stage and operators have much to learn.
Among other things that further drilling will help show is whether holes that are punched in the shale will remain open and allow for long-term production or will have a tendency to reseal, causing production to taper off.

“We know that this formation has vast potential to provide domestic energy for the nation, and jobs and economic growth for this state,” Angelle said. “But it will take time to perfect the most effective means of drawing out the oil and natural gas locked within that shale.”

Danger ahead?

The ongoing exploration of the Tuscaloosa, Haynesville and other plays must inevitably include scrutiny of dangers associated with shale-drilling and fracking. Among other issues, environmental advocates have criticized the use of certain chemicals in the fracking process that they say can seep into groundwater. Two years ago, 19 cattle died after ingesting fracking fluid while grazing near a north Louisiana site being fracked by Chesapeake Energy Corp.

In an incident involving shale-fracking in Pennsylvania, Cabot Oil and Gas Corp. was ordered to pay compensation to property owners after gas leaked into groundwater.

Wilma Subra, a chemist who runs a lab and environmental consulting firm in New Iberia, says the dangers not only from fracking but “the whole drilling and production process” need to be more thoroughly investigated before shale exploration is allowed to continue.

“When you drill, stimulate, fracture or produce in these areas, huge amounts of toxic chemicals are released into the air and groundwater,” she says.

Subra has conducted evaluations of how shale exploration has affected human health in Haynesville and other shale regions in Texas, Arkansas and Wyoming. She says she has seen impacts ranging from respiratory problems and skin rashes to chronic neurological impairment.

“The technology is being developed quicker than the state agencies are able to deal with it,” she says. “We don’t have what we need in place to be sure that it is adequately monitored.”

Subra also points to another issue that could eventually bring drillers into conflict with landowners. Fracking, she says, consumes millions of gallons of water that, so far, operators have taken freely from local areas. In the Haynesville region, she says, operators tapped the ground water, and later they turned to the Red River and the Toledo Bend Reservoir to fulfill their needs.

With water supplies becoming an increasingly sensitive political issue in some parts of the country, meeting the need for water in future projects could turn into one of the next big challenges in shale exploration.

Briggs, for one, says the industry ultimately will find ways to continue bringing oil and gas to the surface of the earth. New and existing shale plays, he says, are the latest frontier in the quest to give the United States a greater measure of energy independence.
“The impact,” he says, “of all this is that we truly have the opportunity to become less dependent on foreign oil, and that’s a very good thing for our country.”