Shale Shifts Attention To This ‘Forgotten’ Oil Play

The Permian has been getting most of the headlines on U.S. shale, but there is another play in the vicinity that has been attracting more industry attention than media attention. Pretty much forgotten since the ‘90s, when shale oil and gas moved to the forefront of the U.S. oil industry, the Austin Chalk has now gotten a new lease on life, it seems.

Over the last six months, oil majors including ConocoPhillips, Marathon Oil, and EOG Resources have purchased some 600,000 acres in the chalk formation that runs from the Mexico-Texas border through central Louisiana and into Mississippi. Drilling is set to begin in late 2018. And that’s not all, because drillers are also returning to old fields in the Chalk.

Reuters recently reported that an independent player, Wildhorse Resource Development, has started drilling in an old field in the Chalk using technology developed for the shale plays. Though the Chalk is not a shale formation—it is, as the name suggests, made up of limestone and chalk, soaked with oil and gas—and fracking tech could increase resource recovery.

Drilling rigs in the Austin Chalk rose twofold in the past six months, Reuters said, quoting DrillingInfo data, to 14, and production grew to 57,000 bpd in 2017 from just 3,000 bpd five years ago. Technically recoverable oil reserves stand at around 4.1 billion barrels and gas reserves are estimated at 18 trillion cu ft, according to the Energy Information Administration.

That’s plenty of oil and gas, and one begins to wonder why we aren’t hearing more about the Austin Chalk. Well, as it happens, the play is not without its problems. In a recent story, Bloomberg’s Alex Nissbaum noted, quoting Wood Mackenzie, that the Chalk has a bad reputation with wells that start strong and then quickly dry up. That’s because of the geology of the place: it is highly fractured, which means the geology changes quickly over short distances, “so you have to do a lot of geology to understand where it’s going to produce,” a drilling industry insider told Nissbaum.

Oil and gas production from the Chalk has until now been done using conventional drilling methods. Now, fracking tech is being applied to the formation with drillers seeing long horizontal wells combined with steerable drilling and the injection of sand and chemicals mixtures improving recovery rates.

In fact, thanks to the application of this technology, some test wells in the Chalk are already outperforming shale wells. Wildhorse, for example, says some of its newly drilled wells in the Chalk produced three times more than the initial output from comparable Eagle Ford wells. EOG also said its Austin Chalk wells yielded over two times more than a new well in the Permian.

Then there is the fact of the Chalk’s proximity to the Gulf Coast refiners and the fact that land is still cheap. This combination of factors could bring it into the spotlight to rival the Permian, especially when we throw in the fact that parts of the Chalk are overlapping with the Eagle Ford play, meaning that drillers in these parts could tap the oil and gas from more than one formation. Given all that, we will probably be hearing more about the Chalk in the coming months.

Source: By Irina Slav for Oilprice.com