World Oil
®
Originally appeared in
SEPTEMBER 2012 issue, pgs 82-93. Posted with permission.
NIOBRARA SHALE
Shale Energy Technology Conference
HOPING COMPLEX PLAY
BECOMES NEXT BAKKEN
ŝŝJIM REDDEN, Contributing Editor
The Niobrara tight oil shale play is the oilfield
equivalent of the young athlete, who is built up
as having world-class potential, only to struggle
in meeting the lofty expectations. To be sure, the
near-universal euphoria that accompanied high
initial flowrates a couple of years ago has been replaced with cautious optimism, as operators work
to further their understanding of the complex organic-rich play in the heart of the U.S. Rockies.
Nevertheless, despite a comparatively brief, and
at times fickle, horizontal exploration and production history, and ever-increasing environmental
challenges, the independent, largely home-grown
operators dominating the liquids-rich Niobrara
continue to maintain reasonably stable drilling
programs. In the meantime, geophysical investigations are underway to get a better grasp of the
highly variable natural fracturing, to help operators uncover the secrets to increasing the drainage
of horizontal and multi-frac wellbores in what was
once hyped as the “Bakken-lite.”
82 september 2012 / WorldOil.com
DRILLING ACTIVITY
Owing to its fairway in the Denver-Julesburg basin, and its often equal billing with the underlying
and correspondingly prospective Codell sandstone,
the multi-horizon play is known interchangeably
as the DJ-Niobrara and the Niobrara-Codell. As
delineated, the thermally mature Niobrara shale
(which vertically ranges in thickness from 275 to
400 ft) and its myriad sub-plays extend geographically across northeastern Colorado, northwestern
Kansas, southwestern Nebraska and southeastern
Wyoming. However, up to now, the overwhelming majority of activity has centered in Colorado
and, to a much lesser degree, Wyoming, mainly in
and around the prolific Silo field, Fig. 1. Colorado’s
Weld County, home turf of the billion-bbl Wattenberg field and the spark for the Niobrara horizontal
tight oil play, is the epicenter for the lion’s share of
active rigs and approved drilling permits, Fig. 2.
The uncertainties notwithstanding, the active
year-on-year rig count has increased slightly over
An Anadarko Petroleum rig making hole in
the Wattenberg field, north of Denver. Photo
courtesy of Anadarko Petroleum.
World Oil / september 2012 83
shale TECH / NIOBRARA
the 2011 tally. As of Aug. 17, Baker Hughes
data show 45 rigs active in the core DJ-Niobrara, an increase of four over the same
period last year, Fig 3. Of these, 40 were
making hole in Weld County, with the remainder drilling in Adams, Freemont and
Lincoln counties. In Wyoming, only two
rigs were reported to be drilling new wells
in that state’s portion of the DJ-Niobrara,
one each in Goshen and Laramie counties. However, state officials reported 25
rigs drilling in the Powder River basin,
but no breakdown was available on how
many were actually targeting Niobrara
wells. Chesapeake Energy told investors in
August that it, alone, has eight rigs drilling
Niobrara prospects in the southern Powder River and plans to have 11 on location
by year’s end.
Owing to the distinctive complexity of
the Niobrara petroleum system, collect-
ing cumulative data is not nearly as clearcut as the more clearly defined North
American shale plays. However, of the
2,432 drilling permits that the Colorado
Oil and Gas Conservation Commission
(COGCC) had approved as of Aug. 7,
665 were issued specifically for horizontal wells, with an additional 1,418 permits
approved for directional wells from common drilling pads. In 2011, the COGCC
issued 4,659 permits, of which 878 and
2,778 were for horizontal and multi-well
pad directional projects, respectively.
Thus far in 2012, Colorado’s Weld
County is the runaway winner of the
permitting sweepstakes, with 1,169 new
wells approved, compared to 2,262 approved last year. The COGCC reports
that as of Aug. 7, Weld County held
18,623 of the state’s 48,192 active wells,
making the construction of new horiFig. 1. Activity in the
Niobrara play, to date,
focuses exclusively on
the Denver-Julesburg
basin (DJB), the
Powder River basin
(PRB), the Park basin
(PB) and the Greater
Green River/North
Park basin (GGRB/
NPB).
Fig. 2. Horizontal
drilling and permitting
activity in the DJNiobrara play.
84 september 2012 / WorldOil.com
zontal wells particularly vulnerable to
communication with the many vertical
wellbores constructed previously. Consequently, accurate wellbore placement
is a paramount challenge for operators
drilling horizontal wells in the tight and
previously highly-explored areas within
the Niobrara structure.
The COGCC says it does not have the
capability to separate Niobrara oil production, as it typically is comingled with that
from the Codell, which historically has
been the primary pay zone for the Wattenberg. The underlying Codell is now
the target for horizontal exploration and
development outside its core perimeters.
For the first seven months of 2012, agency
data showed the Weld County core produced a total of nearly 11.5 million bbl of
oil, compared to just under 26.5 million
bbl in 2011. Gas production, thus far, has
totaled nearly 101.4 MMcf, compared to
approximately 238.4 MMcf last year.
Meanwhile, in 2012, COGCC’s Wyoming counterpart has issued 430 permits
for new Niobrara wells in Campbell and
Converse Counties, compared to 485
approved permits for all of 2011. Tom
Doll, then-supervisor for the Wyoming
Oil and Gas Conservation Commission
(WOGCC), told a key state legislative
committee last October that only 66 wells
were actually completed in the main fairway at the end of last year.
Doll told the legislators that the disparity between permits issued and wells
completed is proportional to average
lackluster production rates. “The reason
we’re not seeing a lot of drilling activity in
the Niobrara is those wells are not coming
in as strongly as people thought,” he told
the state legislature’s Joint Minerals, Business and Economic Development Interim
Committee.
While Wyoming operators historically
have held individual well production close
to their vests, state records show that the
Niobrara produced more than 500,000 bbl
of oil last year. However, Niobrara production was less than a third of the 1.5 million
bbl produced from the Sussex formation,
and only slightly more than the 480,000
bbl that the Frontier formation yielded
in 2011. During the first half of 2012, the
Sussex produced upwards of 900,000 bbl,
compared to 515,000 bbl from the Niobrara, according to WOGCC.
Despite the less-than-stellar early production rates, Wyoming officials say they
expect activity to pick up over the next
shale TECH / NIOBRARA
Fig. 3. Drilling location
for the Bonanza
Creek Energy North
Platte 44-11-28 well in
Wattenberg field. The
Denver operator plans
to drill 24 Niobrara
wells this year on the
62,000 net acres it
controls in the DJ and
North Park basins.
Courtesy of Bonanza
Creek Energy.
year, mainly because many operators are
nearing the expiration of their three-year
lease requirements. Nearly 4 million producing acres within Wyoming are under
the jurisdiction of the U.S. Bureau of
Land Management (BLM), compared to
some 1.5 million acres in Colorado.
In late July, the WOGCC released a
new policy to open the books on individual well results, which operators traditionally had not made public to maintain their competitive leasing positions.
The regulatory agency said that it is in
the process of releasing previously confidential information on more than 900
oil and gas wells. According to WOGCC,
the newly released data, which are being
presented on the agency’s website, will include production rates for hundreds of oil
wells drilled 7,000 ft and deeper into the
Niobrara Shale.
COMPLEX GEOLOGICAL MAKE-UP
Far from a recently discovered commodity, the Niobrara has been producing
from vertical wells for the better part of a
century. Horizontal drilling, likewise, is
not new to the Niobrara, but in late 2009,
horizontal well paths were combined with
multi-stage fracing, and the preliminary
results led many to believe that they were
on the cusp of the next great unconventional play. Typical drilling depths for Niobrara wells range from 7,000 ft to more
than 8,000 ft with variable geopressures.
A self-sourcing unit of alternating chalk
and shale, the Niobrara formation has long
been known as the source rock for the prolific Wattenberg and Silo fields. While the
geological characteristics are anything but
uniform, the Colorado Geological Survey
says every sedimentary basin in that state
includes some Niobrara or equivalent
rock. The three primary carbonate-rich
benches of the Niobrara average from 10–
25 ft thick with 5–10% porosity.
The Niobrara, which has been welldocumented in the literature, has been
86 september 2012 / WorldOil.com
described as a Cretaceous hybrid shale/
carbonate reservoir deposited in a deep marine environment, with areal variations in
reservoir properties and tectonic overprint.
More recently, a number of various subplays are undergoing continuing development efforts, including the Codell, Fig. 4.
Although generally identified as shale,
the play’s reservoir rock primarily comprises limestone or chalk intervals, says
Dr. Steve Sonnenberg, professor of petroleum geology at the Colorado School
of Mines, and one of the principals of the
school’s multi-faceted Niobrara Research
Consortium, whose membership comprises a who’s-who of operators active in
the play. “The formation demonstrates
facies changes that range from limestone
and chalk in the eastern end to calcareous shale in the middle and eventually
transitioning to sandstone farther west,”
Sonnenberg wrote in a June 2001 issue of
the American Association of Petroleum
Geologists’ AAPG Explorer, “Depth and
thickness are highly variable.”
As is the natural fracturing of the
structure, which Mick Domenick, senior geologist for Recovery Energy of
Denver, describes as the “single, most
critical component of successful Niobrara oil production for all reservoir types,
including proven calcareous mudstone
reservoirs, such as Silo, Wattenberg and
Hereford.” In a presentation to the Tight
Oil Niobrara Congress 2012, last May in
Denver, Domenick concluded that productive Northwest DJ basin wells tend
to benefit from high, natural fracture
density, while reservoirs with lower fracture density yield higher water cuts and
reduced production rates.
Like its natural fracturing, the intrinsic
total organic carbon (TOC) content of
the Niobrara varies from area to area, says
the state’s chief geological agency. While
a 5% TOC composition generally is considered advantageous for a “good source
rock,” the Geological Survey said that in
Fig. 4. Detailed Niobrara stratigraphy.
the northeastern portion of the DJ basin,
the clay-rich limestones and shales of the
Niobrara can contain more than 8% TOC,
but carbon contents drop to between 1%
to 4% farther to the west.
BAKKEN COMPARISONS
PREMATURE
Comparisons of the Niobrara to the
Bakken shale began hitting the mainstream in October 2009 after EOG Resources brought in its Jake horizontal well
in Weld County, which is still producing
50,000 bbl/month. Jake was followed in
early 2010 by Noble Energy’s Gemini
well, also in Weld County, which was
completed with a 16-stage frac treatment
and produced 1,100 bopd at its peak. The
results of these wells, in tandem with attractive commodity prices and comparatively low-entry costs, triggered forecasts
that the Niobrara would become a premier unconventional oil producer, second only to the Bakken. “This is a known
petroleum system and is very regional. I
think it is probably one of the most important plays in North America, other
than Bakken,” Sonnenberg, one of the
play’s most recognized authorities, told
Reuters in April 2011.
The buoyancy was fueled even further in December 2011, when Anadarko
Petroleum said that horizontal wells and
shale TECH / NIOBRARA
multi-frac completions promise to uncover an additional 500 million to 1.5
billion boe in its Wattenberg holdings,
Fig. 5. “The Wattenberg HZ (horizontal)
is a billion-bbl opportunity in an existing core area, making the field one of the
largest and most cost-efficient onshore
oil and natural gas projects in the U.S.,”
said Jim Kleckner, VP of operations for
Anadarko’s Rockies Region.
Yet, disappointing well results elsewhere, especially in the Wyoming sector
of the DJ-Niobrara, have since tempered
that passion with even the CEO of the
operator that ignited the play, saying it’s
time to take a breath and a closer look.
Last year, EOG Resources chief Mark
Papa, whose company was one of the first
to gain an acreage position in the Niobrara, told investors that while he remained
“cautiously optimistic,” more data were
required before the prospects of the stillemerging play could be fully evaluated.
Citing “disappointing well results,”
Chesapeake Energy, another early Niobrara player and major leaseholder, announced earlier that it was putting 503,863
net acres of the DJ basin on the block. The
story is quite different, however, in the
more than 350,000 acres that Chesapeake
holds in the Powder River basin, where the
operator is conducting an aggressive drilling program. “In the Powder River Niobrara play, we’ve finally cracked the code with
numerous recent wells,” Steven Dixon,
Chesapeake’s COO and VP of operations
and geosciences, told investors.
INCREASING EUR
Much of the additional data that Papa
said is required, involve getting a better
handle on the intricate geological structure to increase both production rates and
the estimated ultimate recovery (EUR).
To that end, Global Geophysical recently
completed an extensive, multi-client, fullazimuth, 3D seismic survey, encompassing more than 800 sq mi in Silo field, in
southeastern Wyoming.
In a presentation at last month’s World
Oil Shale Tech Conference in Houston,
Galen Treadgold, vice president of the
Weinman GeoScience division of Global,
said that the survey serves as the basis for
Fig. 5. Global
Geophysical says its
multi-client 3D survey
offers the potential
to combine azimuthal
anisotropy results
with an analysis of
the regional structural
framework, basement
and salt deformation,
and stress field.
Fig. 6. Noble Energy
has the leading
acreage position in
the Niobrara shale
play.
a regional structural interpretation and
azimuthal velocity analysis of the Silo segment of the Niobrara. The ultimate aim, he
said, is to improve overall well results that
remain extremely variable.
The Global Geophysical study integrates seismically-derived rock attributes,
and well and production data, in an integrated, regional structural interpretation
to better understand the Niobrara’s natural fracturing and to reduce drilling risk,
Fig. 6. The cause of the natural fracturing,
explained Treadgold, holds considerable
influence over both production rates and
EUR. This interpretation has been debated extensively and attributed to a host of
variables, including basement faulting, salt
dissolution, lithology variations, compaction over basement highs, hydrocarbon expulsion, strike-slip faulting, uplift and the
present-day stress regime. “Our results suggest that the Niobrara has been a difficult
play, because fracturing is highly variable
and may not be caused by a consistent set
of variables everywhere. By understanding
the structural segmentation of the area and
combining that with rock property results,
azimuthal anisotropy products and well
data, we explain past well performance and
predict areas of future potential,” he said.
In the meantime, operators are working to improve immediate production
rates in a formation, where the unique
fracturing characteristics require special
attention to completion practices, says
Mark Davies, business development manager of Packers Plus Energy Services. “Microdarcy permeability, low porosity and
high-capillary pressure make it difficult
to ensure high production and economic
wells. The subject area is also prone to
diagenisis, which causes the already low
porosity of the rock to become more compacted, making it more difficult to ensure
an economical flowback,” he said. “The
challenge is to effectively capitalize on the
multiple natural fractures found throughout the formation while establishing communication with the rest of the rock.”
TECHNOLOGY APPLICATIONS
Packers Plus recently employed its
StackFRAC open-hole, multi-stage frac
system to increase drainage from a Niobrara well in Weld County. The technology uses the company’s external and
hydraulically set RockSEAL II packers,
rather than cement, to isolate sections
while the proprietary FracPORT sleeves,
which rely on size-specific actuation
88 september 2012 / WorldOil.com
shale TECH / NIOBRARA
balls, create openings between the packers to facilitate fracture stimulation. The
balls, he explained, create internal isolation from stage to stage, eliminating the
need for bridge plugs.
Davies said the StackFRAC technology allowed the subject Weld County well
to increase production to an estimated
1,110 boed, with more than 100,000 boe
produced in four months. “With 60,000
boe in its first 60 days, it quickly became
become an even more precious and closely guarded resource.
Colorado is somewhat unique, in that
water is either “allocated,” which is diverted to municipalities, or “unallocated” and
available to the highest bidder. In April,
operators were the high bidders for unallocated water supplies from the Colorado
River basin that historically had gone to
farmers and ranchers, which further ignited long-running complaints. Late last year,
Fig. 7. A rig at
work on Denverbased PDC Energy
holdings in the
Wattenberg field.
Photo by David
Tejada of Tejada
Photography for
PDC Energy.
the operator’s best producing well in Weld
County and one of the most successful in
the Niobrara to date,” Davies said.
Elsewhere, Pathfinder, a Schlumberger
North American land directional drilling
company, utilized real-time images from
the Micro-Scope resistivity and imagingwhile-drilling services to help a Niobrara
operator maximize wellbore intersection
with natural fractures to optimize recoveries in a highly faulted zone. Pathfinder
said the technology allowed the operator
to successfully place the horizontal lateral
within the predefined target interval to
successfully complete the well. The Micro-Scope service was credited with enabling the operator to better understand
the structural complexity of the reservoir
to optimize well placement.
WATER WOES AT FOREFRONT
As studies continue to expand the
geological learning curve, the industry
also must confront an ever-increasing regional threat from opponents objecting to
its water consumption. Not surprisingly,
with the Niobrara theater ensnared in the
severe drought gripping much of the U.S.,
and Colorado experiencing catastrophic
wildfires earlier this summer, water has
90 september 2012 / WorldOil.com
the
Colorado
Department of Natural Resources and the
Colorado Oil and Gas Association made
a preemptive strike by jointly establishing
a groundwater quality sampling program.
Under the program, operators will voluntarily collect groundwater samples both
before and after drilling.
In a related development, the COGCC
filed suit against the city of Longmont,
which spreads across Weld and Boulder
Counties, over the municipality’s banning of all fracing in residential areas.
The agency argues that the restrictions
by Longmont and other municipalities
conflict with state regulations. Across
the border, WOGCC Supervisor Doll
was forced to resign his post in June after
asserting at a conference that “greed and
desire for compensation” were the primary motivators for those contending that
hydraulic fracturing has contaminated
their groundwater.
OPERATOR ACTIVITY
Though Shell Exploration and Production earlier this year announced plans
to drill up to 11 wells in Wyoming’s Routt
and Moffatt counties, and ConocoPhillips established an acreage position, the
Niobrara is indicative of most emerging
shale plays, in that independents comprise the main players. A handful of international operators also have varying
stakes in the play, including Australia’s
Samson Oil and Gas, Canada’s Encana
and China’s CNOOC, which has a 33%
joint venture with Chesapeake. Samson
holds interest in about 144,000 acres in
the Hawk Springs area of Goshen County,
Wyoming, where, if approved, it plans to
drill a planned 9,000-ft lateral later this
year. Encana is operating two rigs and
plans to drill 12 net wells this year on its
49,000-net-acre position in the DJ basin.
Noble Energy, with holdings of some
860,000 net acres, is the largest leaseholder
in the DJ basin by a wide margin. It plans
to more than double its drilling activity
this year, with about 170 horizontal wells
planned, compared to 80 last year, Fig. 7.
During the year, Noble says it will accelerate development of the estimated 400,000
net acres it holds in the Wattenberg —its
largest U.S. onshore field —as well as test
exploration opportunities in its DJ holdings in northern Colorado and southern
Wyoming. The Houston-based operator
plans to operate five to six rigs throughout the year, and will complete eight to 10
Niobrara wells a month, including 12 to 15
extended-reach laterals. Thus far in 2012,
Noble has placed 38 Niobrara wells on
production with expected estimated ultimate recoveries (EUR) of 340,000 boe, up
from 315,000 boe last year.
Anadarko Petroleum holds nearly
350,000 net acres, primarily in the Wattenberg, where it targets the liquids-rich
Niobrara and Codell formations below
6,000 ft. Anadarko says its 2012 Wattenberg horizontal drilling program will employ seven rigs to drill 160 wells, up significantly from the 40 it drilled last year. The
operator has identified between 1,200
and 2,700 future drilling locations, with
EUR of 300,000 to 600,000 boe per well.
EOG Resources says it has proven
up roughly169,000 acres of the 220,000acre position that it holds in the Niobrara, much of which is Weld County. The
company said upon releasing its 2011
earnings, that the focus this year will be
on completing and evaluating a number
of wells drilled last year. EOG says it has
identified an estimated 150 drilling locations and plans to operate two rigs in
2012, which will drill up to 24 gross wells.
Quicksilver Resources of Fort Worth,
Texas, holds 260,000 net acres in the Sandwash area of the Green River basin, of
shale TECH / NIOBRARA
which it believes some 210,000 net acres
are situated in the Niobrara and Lower
Mancos oil windows. Quicksilver has an
estimated resource potential of 100 million boe within its holdings. The operator
drilled six vertical wells in the play last year,
and plans to drill up to seven vertical and
horizontal wells in 2012.
Whiting Petroleum holds about
105,000 gross acres in the DJ basin and
will focus much of its 2012 activity on
evaluating its Redtail prospect in Weld
County, which targets the Niobrara B
bench. Whiting says it will utilize one rig
and recently acquired 3D seismic data to
drill eight wells at the Redtail prospect
this year. The project will include a threewell development between its Wildhorse
and Horsetail properties.
Synergy Resources holds 186,215
net acres in the DJ basin, where its drilling strategy had focused primarily on
low-cost and low-risk vertical wells. Synergy says it has identified 156 net potential horizontal wells in the Niobrara and
Codell formations, with four wells per
320-acre spacing and 64 net horizontal
locations in the Greenhorn area. Synergy
believes it can maximize per-well production by drilling first to the J-Sand before
plugging and moving up to the Codell
and Niobrara zones.
Ultra Petroleum of Houston controls
136,000 net acres in the DJ basin, where
it is targeting liquids-prone Niobrara reservoirs. Ultra estimates its holdings have
a resource potential of 200,000 to 400,000
bbl per well, with attractive potential in all
three of the resistive benches. While no
precise well count is available, the operator
was to have begun a horizontal evaluation
program during the second half of this year.
Marathon Oil, which in April 2011
sold a 30% working interest in its Niobrara
holdings to Japan’s Marubeni, said the two
firms intend to operate two rigs and drill 17
to 24 net wells this year. The 70/30 joint
venture holds 144,000 net acres of prospective Niobrara holdings in southeastern
Wyoming and northern Colorado, with
most of the companies’ activity focused in
the Weld County area. As of March, six Niobrara wells had been put onstream, with
observed rates as high as 500 bopd per
well. Six additional wells were scheduled
for completion at that time.
Recovery Energy operates 115,000
net acres, most of which are contiguous with long-term leaseholdings. The
Denver independent has identified more
than 130 Niobrara horizontal drilling locations. Recovery estimates its holdings
contain risked unconventional resource
potential of 50 to 100 million bbl of oil.
PDC Energy says it will earmark nearly all of its $184-million 2012 capital budget toward developing its core Wattenberg holdings. There, the Denver-based
independent plans to operate two rigs
and drill 27 horizontal Niobrara wells,
and refrac and recomplete up to 263 vertical wells in the Wattenberg. In April, PDC
completed an estimated $327-million
acquisition of additional acreage from
an undisclosed private party, which now
gives the company about 74,000 net acres
in the Wattenberg.
Carrizo Oil and Gas owns 61,500 net
acres primarily in Weld County, where it
is targeting the 80% liquids Niobrara play.
As of June, Carrizo had drilled 19 horizontal wells with 18 on production containing 48 MMboe of net reserves. The
Houston independent said the average
well is tracking a 250,000-boe EUR-type
curve. Carrizo, which has identified 242
drilling locations, is running one rig in the
Niobrara, where it plans to invest $43 million this year compared to the $39 million
expended last year.
POTENTIAL FOR GROWTH
Whatever one chooses to call the Niobrara, the overall E&P projects planned
by these and a host of other, often homegrown independents suggests that the
play is not about to fall to the wayside
anytime soon. Denver’s Bill Barrett, chairman, CEO and president of his namesake
Bill Barrett Corp., perhaps best summed
up the prospects upon announcing his
company’s first-quarter earnings. “It is too
early to determine corresponding EURs
from results to-date, yet horizontal success in the Niobrara opens the potential
for sizable expansion of the DJ Program,”
he told investors. REFERENCES
1.Sonnenberg, Stephen A., Colorado School of Mines,
“Petroleum geology of the Niobrara formation, Silo
field, Wyoming,” AAPG Search and Discovery, Article
No. 20115, September 2011.
2.Domenick, Michael A., Recovery Energy, “Understanding the geologic variability of the Niobrara to maximize
production rates in the Denver-Julesburg basin and
beyond,” presented at the Tight Oil Niobrara Conference, Denver, Co., May 24, 2012.
3.Treadgold, Galen; Gloria Eisenstadt, John Maher, Joe
Fuller and Bruce Campbell , Global Geophysical Services, “Niobrara fracture prospecting through integrated
structural and azimuthal seismic interpretation, Silo
field area, Wyoming,” presented at the World Oil Shale
Tech Conference, Houston, Aug. 20-22, 2012.
Article copyright © 2012 by Gulf Publishing Company. All rights reserved.
Printed in U.S.A.
Not to be distributed in electronic or printed form, or posted on a website, without express written permission of copyright holder.
92 september 2012 / WorldOil.com