Some ‘keeping the powder dry’

Strategies Shift With Commodity Prices

Commodity prices go up, feeding enthusiasm among the oil and gas crowd.

Commodity prices go down, tampering enthusiasm – and crimping activity.

It’s a never-ending cycle, impacting companies and locales far and wide.

Noted hydrocarbon producer Colorado, for instance, is not exempt from the consequences of current bottom-dwelling gas prices and the yo-yo gyrations of crude oil price.

Jay Scheevel
Jay Scheevel

“Gas activity in Colorado is depressed currently,” said AAPG member Jay Scheevel, chief geologist for Matrix Oil Corp., Santa Barbara, Calif.

Scheevel also is general chair of the 2012 AAPG Rocky Mountain Section meeting, which will be held Sept. 9-12 in Grand Junction. And as such, he’s been intensely focused for the past year not only on the latest scientific and geologic insights for the region, but also the activity.

“The Piceance is a major gas basin, but the big players in the Piceance are just sort of staying alive because of the expense of drilling,” he said. “A lot of them are just sort of strategically keeping leases alive, so there’s not a lot of activity.

“Some operators are taking acreage they already have that they acquired with respect to gas and trying to play that where they can for oil,” he said.

“There are operators drilling horizontal or near-horizontal wells in the Mancos, which is Niobrara equivalent,” he added. “They’re kind of playing the edge of the basin because it’s more oil prone as it’s less mature.”

Other Pockets of Note

Besides the Piceance, there’s a relatively active gas play in the northern San Juan Basin of New Mexico and Colorado. It’s a Mancos gas play with a lot of fracture-driven exploration.

“The northern San Juan was developed as a gas prospect prior to the price drop, and there’s been a lot of activity permitted,” Scheevel said, “but I’m not sure how much follow-up.”

He emphasized that most Colorado activity now consists of oil plays dominated by the Cretaceous Niobrara and associated with the Mancos, Frontier and the J sand, which is one of the older targets in the Denver Julesburg (DJ) Basin.

“A lot of this is driven by people falling back from a gas position to try and get some oil production,” Scheevel remarked. “Smaller volume wells can be profitable.

“There are a lot of resource plays in the Cretaceous shales and surrounding tighter rocks that are in the oil window – people are drilling those because they’re shallower and there are plenty of them.”

Scheevel said the Sand Wash Basin in northwestern Colorado has been a hot area for Niobrara equivalent rocks. The basin is the southern extension of Wyoming’s Green River Basin, and he noted that most of the Niobrara drilling now is probably in the southern part of the basin.

The award for the highest current level of activity goes to Weld County in the Denver, or DJ, Basin.

“The majority of the wells being drilled in the Niobrara are drilled there,” Scheevel said. Most of them are horizontal, but there are verticals also – they’re doing a lot of staged fractures, like in the Bakken.”

Despite the diminished yet still respectable level of ongoing activity, the mood is reserved, according to Scheevel.

“People would be optimistic, but we’re seeing these fluctuations in oil price,” he said. “Several forecasters have come up with mid-sixty dollars for the middle of next year, which gives some people cold feet.

“So much is riding on the 2012 election, and I don’t think a lot of people want to commit a lot of effort right now if they can avoid it – they’re keeping their powder dry,” he quipped.

Vintage Geology

Whether the glass is half full or half empty, the RMS attendees – upbeat or somber – can latch onto a full glass, for real.

The meeting’s theme, “Vintage Geology – Perfectly Aged,” is apropos in more than one way.

On one hand, the name is a descriptive term for the meeting’s technical program, which will include everything from the most recent work on resource plays across the West to the sedimentary and structural architecture of the latest plays in the Rockies, plus the impact and future of energy minerals.

Big-name experts have been added to the list of special speakers, including:

  • Colorado Gov. John Hickenlooper, an AAPG member, who will talk on “Hydraulic Fracturing and Colorado’s Energy Future.”
  • Thomas J. Kerr, acting director of the Colorado Oil and Gas Conservation Commission, who will speak on the current oil and gas activity in Colorado.
  • Past AAPG president Scott Tinker, who will be presenting a special screening of his commercial documentary film “Switch: Leading a Balanced National Energy Conservation.”

And there’s one more reason why “Vintage Geology” is so perfect.

Western Colorado is the state’s wine country, according to Scheevel, and in addition to wine events planned for the confab, the annual Colorado Mountain Winefest kicks off a mere12 miles down the road in Palisade, immediately after the meeting wraps.

Scheevel noted that AAPG member Wayne Belding, who is one of a reported 186 Master Sommeliers worldwide, will be on the scene, so perhaps you’ll have the opportunity to schmooze and hone your knowledge about the grape.

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Emphasis: Offshore Developments