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A year after oil companies began gobbling up leases in the Tuscaloosa Marine Shale, 19 wells are producing or under way, but some industry experts expect a big increase in drilling to hit next year.

Most of the leases are now over a year old, and oil and gas companies typically sign three-year leases with options for two-year extensions, said Kirk Barrell, president of Amelia Resourcess LLC in The Woodlands, Texas.

“I think this play has to accelerate drastically next year,” Barrell said.

Barrell said it’s an exciting time in the Tuscaloosa, a shale formation that stretches across the middle of Louisiana and is being targeted for oil production.

There’s a basket of good operators, and they’re getting some good wells, Barrell said.

For example, two of Encana Corp.’s most recent wells had 30-day initial daily production rates of 933 barrels and 1,072 barrels.

“I would say we’re very pleased with the reservoir performance. As a matter of fact, I’m excited about the reservoir performance,” Eric Marsh, executive vice president and senior vice president of Encana USA Division, said during the Barclay’s CEO/Power Conference on Sept. 6.

Encana has 355,000 acres leased in the Tuscaloosa with an estimated 9.4 billion barrels of oil, Marsh said. The company has around 1,250 well sites, has drilled and completed five wells, and plans to drill seven more this year.

The Tuscaloosa has a couple of things in its favor, Marsh said. There is a significant amount of infrastructure in place, and the oil itself, Louisiana Light Sweet crude, can fetch $15 or more per barrel than the benchmark crude, West Texas Intermediate.

In the last year, the premium for a barrel of Louisiana Light Sweet has ranged from $8.50 to as much as $29.75, according to Bloomberg. This week the price for Louisiana Light Sweet was more than $17 higher than the benchmark West Texas Intermediate price, which has been in the $95 to $97 range in September.

Encana has said its target estimate for its Tuscaloosa Marine Shale wells’ potential production, also known as estimated ultimate recovery, is the equivalent of 730,000 barrels of oil per well (worth around $83.2 million at this week’s prices).

Encana has “a reasonably high confidence level” that it will achieve its target recoveries, spokesman Doug Hock said.

Halcón Resources Chief Executive Officer Floyd Williams, who also spoke at the Barclays conference, said he expects wells in the formation to produce the equivalent of 600,000 to 700,000 barrels per well.

Halcón began leasing around six or seven months ago and expects to lease 100,000 to 150,000 acres, Williams said. The company has around 60,000 acres under lease, and the price has jumped from $250 an acre to around $1,000.

With those kind of production results expected, local officials have begun scrambling to prepare residents to nab some of the expected job bonanza when the shale booms.

“We do have a good feeling about the oilfield shale over here in this parish,” said Dennis Manshack, West Feliciana Parish director of economic development. “The well that they (Devon Energy) did complete is almost 500 barrels a day with a tight choke on it.”

The well’s daily production could actually be two or three times that amount, Manshack said. Drilling companies often restrict the flow during initial production, but let the well flow more rapidly once full production begins.

Manshack said he has done some preliminary reviews of what happened in the Haynesville Shale in northwest Louisiana and the Marcellus Shale in Pennsylvania.

Drilling activity in those shale formations, and others, led to big increases in the demand for skilled labor and services, such as housing, for those workers.

With the proper training, residents of West Feliciana, East Feliciana and Pointe Coupee parishes could fill many of those jobs, Manshack said. The West Feliciana Police Jury and the Economic Development Board are working together now to plan for “the inevitable” boom.

However, Louisiana Oil and Gas Association spokesman Ragan Dickens, who has twice addressed West Feliciana officials, said it’s too early to tell whether the Tuscaloosa will be similar to the Haynvesville Shale, a natural gas-producer that triggered a drilling frenzy that helped drive down natural gas prices to a point where producers are favoring oil plays.

“The jury’s still out,” Dickens said of Tuscaloosa’s outlook.

“There’s definitely resources in the ground … but they’re still trying to figure out how to extract those.”

People in that area, and Dickens as well, hope the Tuscaloosa will bring the same kind of economic impact that the Haynvesville did, Dickens said. There are lots of positive signs — eight of the biggest players in natural gas have leased acreage in the Tuscaloosa — but it’s impossible to say what will happen.

West Feliciana officials have already met with representatives of Council Development Corp.’s Morgan City location and Baton Rouge Community College.

Council Development is owned by PEC Premier Safety Management Training and provides accelerated training for onshore and offshore oilfield workers, Manshack said. A nine-day course can prepare workers for an entry-level job in the oilfield.

The community college is designing a number of courses for the parish that will help residents and students gain welding, electrical/instrumentation and carpentry skills, Manshack said. Those skills can help residents get jobs in industry and the oil field.

“These courses cost. The Police Jury’s not going to be able to foot the whole bill,” Manshack said. “But we need to train some people so we can get some of those people in the industry, to make them productive.”

The nine-day course is around $3,000, Manshack said.

West Feliciana has little in the way of economic development funding, he said. But with the kind of potential the Tuscaloosa Marine Shale offers, local officials can try to get help from state legislators and officials, as well as private industry.

Manshack said West Feliciana hopes to be able to have the training programs in place in January.

Dickens said sitting down with the oil and gas industry, as Caddo and Bossier parishes did, to talk about things like roads, permitting and the environment, is a good idea.

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It has been over a year now now since oil companies began gobbling up leases in the Tuscaloosa Marine Shale in Avoyelles, and already three wells are under way. Some industry experts expect a big increase in drilling to hit next year

Halcón Resources Chief Executive Officer Floyd Williams, who spoke at the Barclay’s CEO/Power Conference on Sept. 6, said he expects wells in the formation to produce the equivalent of 600,000 to 700,000 barrels per well.

Halcón began leasing last May in Avoyelles and expects to lease 100,000 to 150,000 acres total in several parishes, Williams said. The company has around 60,000 acres under lease, and the price has jumped from $250 an acre to around $1,000 in some of the more promising areas. When Halcon entered the Avoyelles market offering $500 an acre with 25 percent royalties, other companies upped their offers of $300 to match.

Halcon recently began drilling its first well in Poland, just west of Avoyelles Parish. EOG has already begun drilling the first Tuscaloosa Horizontal wells in Avoyelles, one at Brouillette and one at Hamburg. Both companies are out of Texas. Halcon is Spanish for “hawk”, which is somewhat of a spinoff to the successful oil drilling company Petrohawk which shares founders.

Eight of the biggest players in natural gas have leased acreage in the Tuscaloosa, at least two of them in Avoyelles— but it’s impossible to say what will happen as the exploration companies test wells to attempt to pull oil from difficult and never tapped before resources under Avoyelles.

Most of the leases are now over a year old, and oil and gas companies typically sign three-year leases with options for two-year extensions, said Kirk Barrell, president of Amelia Resourcess LLC in The Woodlands, Texas.

“I think this play has to accelerate drastically next year,” Barrell said at.

Barrell said it’s an exciting time in the Tuscaloosa, a shale formation that stretches across the middle of Louisiana and is being targeted for oil production.

Some hope the Tuscaloosa will be like the Haynesville Shale in northwest Louisiana and the Marcellus Shale in Pennsylvania.

Drilling activity in those shale formations, and others, led to big increases in the demand for skilled labor and services, such as housing, for those workers.

However, Louisiana Oil and Gas Association spokesman Ragan Dickens, who has twice addressed West Feliciana officials, said it’s too early to tell whether the Tuscaloosa will be similar to the Haynvesville Shale, a natural gas-producer that triggered a drilling frenzy that helped drive down natural gas prices to a point where producers are favoring oil plays.

“The jury’s still out,” Dickens said of Tuscaloosa’s outlook.

“There’s definitely resources in the ground … but they’re still trying to figure out how to extract those.”

People in that area, and Dickens as well, hope the Tuscaloosa will bring the same kind of economic impact that the Haynvesville did, Dickens said.

In West Feliciana officials have already met with representatives of Council Development Corp.’s Morgan City location and Baton Rouge Community College to offer training a nine-day course to prepare local workers for an entry-level job in the oilfield.

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Louisiana will need to add tens of thousands of skilled workers over the next five years just to build the multibillion-dollar industrial projects already in the works, not to mention even larger endeavors the state is trying to attract, according to economic development officials.

A public-private partnership that includes the Greater Baton Rouge Industrial Alliance, the state departments of economic development and labor, the Baton Rouge Area Chamber, Baton Rouge Community College, Associated Builders and Contractors, and the state’s community college and vocational school system is working to put together a comprehensive worker-training program.

“The ones (projects) that have been announced are significant. The ones that are coming will dwarf what we’ve announced cumulatively to date,” Louisiana Economic Development Secretary Stephen Moret said.

And the demand for workers, he said, doesn’t take into account the possibility of drilling taking off in the Tuscaloosa Marine Shale oil play, which stretches through the middle of Louisiana. Energy producers are still exploring the formation’s potential and figuring out the best techniques to extract the crude.

The industrial projects — many of them spurred by cheap natural gas and Louisiana’s industrial infrastructure and transportation capabilities — that have been announced include Nucor’s $750 million iron pellet plant, the first of possibly five phases for a steel complex Nucor is planning over several years worth $3.4 billion; Sasol’s $10 billion plant that will convert natural gas to diesel; Cheniere Energy’s $6.5 billion export facility for liquefied natural gas; as well as hundreds of millions in new chemical plants, expansions and modernizations, Moret said.

Louisiana could see multiple LNG export facilities (two others are applying for export permits) and will see world-scale methanol plants, ethane crackers and ammonia plants, Moret said.

Methanol is used in everything from paint and plastic bottles to plywood floors and windshield wiper fluid. Ethane crackers convert natural gas liquids to building blocks in alcohol- and plastic-based products.

However, if Louisiana can’t figure out a way to provide the new industrial construction workers — without disrupting the needs of existing plants — costs could escalate for the new projects, Moret said. Some might even become unfeasible.

Kelly Serio, a Greater Baton Rouge Industrial Alliance board member, said there are three major challenges to solving the training issue: figuring out how many workers are needed and in what crafts; how to attract people to those jobs, an ongoing problem; and how to connect the people interested in those professions with training.

“It’s a big problem. There’s not an easy solution. If there had been, it would have been done a long time ago,” Serio said.

The massive projects and their associated construction jobs represent an enormous opportunity for Louisiana, where more than 30 percent of high school students drop out, and for the Baton Rouge area, which has high unemployment, he said.

“It’s kind of ironic that you would have these two problems … and yet as an industry, we’re dying for craft labor,” Serio said.

Estimates vary regarding the number of jobs that will be needed, depending on who you ask.

Serio’s organization expects 6,500 more construction workers — welders, millwrights, pipefitters, carpenters, etc. — will be needed in the Baton Rouge area by late 2013. The Lake Area Industrial Alliance, which represents Lake Charles plants, says it will need to add 10,000 construction workers by 2014-2015.

Dan Borné, president of the Louisiana Chemical Association, said over the next four years about 34,000 additional workers are going to be needed statewide to deal with the anticipated projects.

Moret said the number is at least 20,000, and there is the potential for that to reach 30,000, 40,000 and possibly more.

There are projects out there the state doesn’t know about yet, Moret said.

“A really good question is: ‘How many tens of thousands?’ How much bigger remains to be seen,” Moret said.

Economist Loren Scott said the competition from Lake Charles and the Houston-Beaumont-Port Arthur region, also attracting mega projects, complicates the labor picture in the Baton Rouge area.

Lake Charles has Cheniere’s LNG export facility, the largest project in the area’s history, and Sasol’s gas-to-liquids plant and an ethylene cracker, Scott said. Two other Lake Charles-area LNG facilities have applied for export permits.

Those five projects represent more than $30 billion in investments, Scott said.

“You’re talking about a humongous amount of money being spent in the Lake Charles area, which is really using the exact same skill set of people,” Scott said. “If we alone were needing this many workers, that would be one thing. The problem is it’s not we alone.”

Moret said industrial construction workers are mobile, so Louisiana can draw from the entire Gulf Coast.

But companies prefer hiring locals because it’s less expensive, he said. Among other things, per diem costs are lower.

On the plus side, Moret said, most of the biggest projects will take two to three years or longer to really get going, which gives the state time to prepare.

“The really big numbers are three to five years out,” Moret said.

That’s fortunate because the labor demand is going to be very substantial and widespread, he said. In addition to the Lake Charles and Baton Rouge-New Orleans corridor, south central Louisiana, where ultra deepwater exploration activity will drive the fabrication industry, will need skilled workers.

Central and north Louisiana will also see a significant uptick in major projects, and as the economy recovers, the state expects to see manufacturing projects in those areas, he said.

In order to meet the demand for all that labor, Louisiana will need to boost enrollment in a variety of community and technical college programs, Moret said. More instructors will be needed, and efforts must be made to sell the coming jobs to residents and the training required to fill those positions.

Adam Knapp, president and chief executive officer of the Baton Rouge Area Chamber, said a comprehensive approach will be needed, one that covers training new workers, retraining those in other fields and pulling in workers in from other areas.

The process is complex, Knapp said. Lots of underlying steps must be taken to achieve each part of the training, retraining and recruiting.

The good news is that everybody — LED, the state Workforce Commission, community and technical colleges, industry, local governments and regional organizations — are focusing on the issue, Knapp said. The state also has an advantage in LED’s FastStart program, which provides customized training to firms that are expanding or relocating.

In the coming months, Moret said he expects private industry, educators, and state and local officials to assemble a model that gives a more detailed profile of the demand.

The model will include the total number of jobs, the different positions needed and when those positions will be required, Moret said.

Once those numbers are in hand, the group can work backward to determine how best to meet those needs, such as the best way to expand training programs and recruit students/workers.

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The second well to target the Tuscaloosa Marine Shale in Avoyelles received its permit today from the state of Louisiaina.

The Department of Natural Resources issed the permit July 26, for Gauthier No. 1, which is located on Mill Bayou at Bayou Des Glaises not far from Hamburg.

The permit calls for a length of 15,000 feet. A rig is being moved from the first well of the project in the Brouillette Community. Results from the Brouillette well should begin in a few weeks, after it enters its second phase of drilling with a horizontal leg.

Both the Brouillette and Hambur wells are being drilled by EOG, and are testing new technologies which were successful in the Eagle Ford oil fields of Texas in recent years.

The well ’s name comes from members of the Gauther family, residents and land owners of the area.

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ST. FRANCISVILLE- People aren’t getting rich as fast as they want from a new oil find in the Florida Parishes.

Now, they want to know if their dreams will ever come true. A meeting Tuesday night helped get answers to questions about Tuscaloosa Trend Shale.

Some are worried it is moving north. Oil and gas reps explained to the crowd that multiple companies continue to express interest in leasing.

“That’s what everyone came out to hear tonight… ‘when is the check going to be in the mail box’” said Ragan Dickens with the Louisiana Oil and Gas Association.

“And, I think we have to… look at the positive outlook that’s here.”

It could be 18 months or longer before people know if the trend will pay.

There are 18 wells in West Feliciana Parish.

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Louisiana Department of Natural Resources (DNR) Secretary Scott Angelle noted Tuesday that Devon Energy recently completed its fourth horizontal well in the Tuscaloosa Marine Shale (TMS) and the initial production test figures submitted this week show the strongest oil production results of the company’s TMS wells drilled to date − at 384 barrels of oil per day (bopd).

This newest well, located in northern St. Helena Parish, follows Devon’s successful drilling of two productive horizontal TMS wells in East Feliciana Parish and another in Tangipahoa Parish. Devon also has two other TMS well projects in progress – one in Tangipahoa and one in West Feliciana parishes.

“I want to thank Devon Energy for expressing its faith in Louisiana’s potential to provide energy and qualified workers, because I recognize that the company has a choice in where it invests its exploration funding,” Angelle said. “I hope to see Devon’s ongoing success in the Tuscaloosa Marine Shale repeated by the other operators who have begun to invest in the play, bringing the potential for economic development, jobs and new sources of domestic energy,” Angelle said.

The Tuscaloosa Marine Shale is believed to underlie much of Central Louisiana, with potential productive areas currently being explored from Vernon Parish to Tangipahoa Parish. The energy industry has been observing the development of the Tuscaloosa Marine Shale, believed to be primarily an oil-rich play. New processes and technology have led to rapid gains in domestic oil and natural gas reserves, making them recoverable from ultra-dense formations once thought uneconomical to produce.

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The West Feliciana Economic Development Commission is sponsoring separate meetings this month to discuss the Tuscaloosa Marine Shale oil exploration topics and insurance tips for small businesses.

The discussion of recent oil exploration developments in the area will be at 6 p.m. July 17 at the West Feliciana High School auditorium, Economic Development Director Dennis Manshack said.

Manshack said the tentative agenda includes expectations for leasing and production during the next six months and the Louisiana Oil and Gas Association’s profitability assessment based on recent production data.

The small business information seminar is scheduled for 6 p.m. to 8 p.m. July 18 at the West Feliciana Parish Fire District headquarters, 9892 West Feliciana Parkway. The free seminar will cover perils insurance, business interruption insurance, recovery from fire, water or wind damage and how to plan for such events.

Anyone wishing to attend the meetings is asked to register in advance by sending an email to dmanshack@wfparish.org or calling (225) 784-3672.

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June 27, 2012

In August 1987, Louisiana State University geologists reported that a rock formation called Tuscaloosa Marine Shale could contain as much as 7 billion barrels of oil. Writing in LSU’s Basin Research Institute Bulletin, researchers reported the shale play could contain “a potentially significant commercial oil reservoir” underneath the Mississippi-Louisiana boundary including southwestern counties in Mississippi westward through central Louisiana to the Texas border.

At the time, the fact that so much precious crude was locked away in dense shale seemed moot. There was no practical method to go about getting it out of the ground. But fast forward to the present day, and the combination of an oil-friendly political climate and new extraction technologies—namely, horizontal drilling and hydraulic fracturing, or “fracking”—might put the TMS in play.

“I categorize this play as an emerging play,” said Kirk Barrell, president of Amelia Resources, a The Woodlands, Texas-based exploration and production company. “It’s still economically unproven.”

Fracking has spurred booms in other parts of the country while also generating controversy. The process involves injecting high-pressure water, sand and toxic chemicals deep into the group to break apart dense rock formations to release gas and oil trapped between the layers. Environmental and public health concerns that fracking raised prompted the U.S. Environmental protection agency to release rules in April that limit air pollution emitted during the drilling process.

Despite the concerns, Marcellus Shale has brought thousands of jobs to the eastern U.S. and millions of dollars in investment. North Dakota and areas of Montana had similar experiences with the Bakken formation’s estimated 18 billion barrels of reserves.

Because TMS is a relatively new play, oil companies need to conduct more testing before they can really assess its full potential. Early signs are encouraging, Barrell said, but drillers will have to find ways to tamp down drilling costs before they start making real profit.

Major players in other oil-shale plays all have substantial acreage positions in southwest Mississippi, including Encanca, Devon Energy, Goodrich, EOG Resources and Indigo Minerals. These companies have been busy getting leases for mineral rights from Mississippi residents in Amite and Wilkinson counties.

But sorting through Mississippi’s complex mineral-leasing laws has proved a challenge for many landowners. An online forum for mineral-rights owners in Amite County is full of people who are confused, at best, and at worst, highly skeptical of the oil companies.

“We need to get a group together and hire a lawyer,” writes one woman on the Amite County Oil and Gas Discussion forum. “This is far too complicated for us.”

Another man, who describes himself as 80 years old and in poor health, said mineral-rights owners are “being jerked around” by landmen. In the parlance of the minerals business, landmen are intermediaries the oil companies hire by the day to track down people who hold mineral rights and negotiate a deal to lease the rights for the companies.

Typically, the companies pay an upfront “bonus payment” to lease minerals for three years, and most agreements include the option to extend the lease for two years. In addition, mineral owners receive a royalty for the oil or gas pumped out of their property, usually about 20 percent of revenues from the well.

Barrell suggests that landowners consult an attorney before they sign a deal with anyone for their mineral rights. Walking people through the process, he said, is not the oil company’s job.

“They’re making an offer for a financial transaction, so it’s not really their obligation to educate the landowner,” he said.

Dan Turner, spokesman for the Mississippi Development Authority, said the agency held an informational meeting with officials in Liberty about what the oil boom could mean for development in the county in direct and ancillary investments.

“People who come in work in the oil and gas industry have to find some place to eat and stay,” Turner said. “If this turns out to be everything we hope it is … it could be a real economic jolt.”

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