‘09 Jake well ignited boom

What Is the Tally of Niobrara Value?

EOG’s horizontally drilled Jake well in Colorado became an industry shocker when it tapped into a copious amount of oil in the Cretaceous-age Niobrara formation.

After the well was drilled in September 2009, it produced an average of 555 bopd during the initial three months of production.

“When EOG released the information, I think everyone was shocked at the production being so big,” said Denver-based AAPG Honorary Member and House of Delegates chair Randy Ray. “We all knew the oil was there, but no one pursued it with the new horizontal drilling and staged fracs that were fine-tuned in all the shale gas plays.”

Since the Jake’s dramatic debut, more than 400 horizontal well starts targeting the Niobrara have been recorded by the state of Colorado, according to AAPG member Chris Eisinger, Colorado Geological Survey geologist.

“The bulk of the action has occurred in Weld County in the Denver Basin, but Niobrara horizontal production has also been established in the Piceance, Sand Wash and North Park basins,” Eisinger said. “At the end of 2011, at least 4.2 million barrels of Niobrara oil have reportedly been produced through horizontal drilling technology in Colorado.”

So, what exactly does this plethora of Niobrara tight oil wells mean for the Centennial State?

What Does It Mean?

Eisinger and Colorado Oil and Gas Conservation Commission geologist James Milne, another AAPG member, are working diligently to come up with an answer.

They currently are busy constructing an up-to-date analysis of overall Niobrara tight oil production in Colorado and its estimated value to the economy, using a combination of state and commercial database resources.

Detailed analysis of Niobrara drilling and production activity is valuable for assessing the early success and future potential of the play.

“We’re looking at economics, the upfront investment costs like leasing and drilling costs and how that compares to payout time, what the ultimate recovery is for a given well,” Eisinger said.

He emphasized that geological and regional variability play a key role in drilling successes, noting that many folks in Colorado hear the word Niobrara and target it wherever it exists at suitable depths, thinking it has to be a potential play target.

The talk and the big action have been about oil, but the formation can produce gas, oil or both.

“In the Piceance, it’s more of a gas play,” Eisinger noted. “The depth of burial and maturation are more conducive for hydrocarbon conversion to gas – but no one is looking to produce gas at this time with pricing what it is.”

Typical of unconventional plays, the Niobrara tight oil wells apparently have a steep initial decline rate prior to stabilizing.

Milne noted that stable production has been observed between six and seven months after initial production in the Weld County fields. Currently, production of 200-400 bopd is not uncommon for stabilized rates.

“We’re trying to look specifically at how long the wells stay stabilized and what the ultimate recovery potential is going to look like if you start taking into account a year or two of production data,” Eisinger said.

To his chagrin, data to move the study along are being released very slowly compared to some other plays.

“Things are taking longer to trickle in than they should,” he lamented. “That makes the sort of thing we’re doing kind of tricky; we need to take the numbers we have and do the analysis, and we’re waiting to get additional data.”

There are emerging areas for horizontal Niobrara field development toward the southern end of the Denver Basin. As the southward move progresses, the unknowns increase.

For example, geological uncertainty enters the picture in some locales – along with a pushback by some communities that are against drilling.

An Unusual Twist

Another emerging area in Moffat and Routt counties in the Sand Wash Basin in the northwestern part of the state presents an unusual twist.

Most players there are drilling vertical wells and fracturing them because the Niobrara is much thicker there, and the geology is different.

“The sweetest zones are not nearly as thick as they are in the Denver Basin,” Eisinger said. “There, you have basically A, B, C chalk layers in the Niobrara, and they’re mainly putting horizontals in the B.

“In the northwest, the Niobrara is thicker, but the potentially fractured zone is not as thick or well developed, so they mainly do vertical wells with hydraulic fracturing,” Eisinger explained.

If the data enable the researchers to define if some Niobrara tight oil areas are truly better than others, it could save a lot of future drilling dollars.

As for Colorado itself, it will have a better handle on the long-term benefits for the state, e.g., potential royalties.

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Emphasis: Offshore Developments