Formation northwest of Abilene draws attention of oil exploration companies

January 13, 2012, 3:29 am

With interest in oil and gas production rising along with the price of oil, the industry is turning an eye to a rock formation northwest of Abilene, local experts said.

In the Abilene region, “the biggest thing is a leasing play occurring in northern Fisher County and western Nolan County and Mitchell and Scurry counties for a potential shale that may be oil and gas productive,” said Allan Frizzell, a district vice president for the Texas Oil & Gas Association and vice president of Abilene-based Enrich Oil Corp.

Such a “leasing play” is a rush to acquire mineral rights from landowners.

“It’s pretty speculative, but the lease bonus money being paid to mineral owners is pretty high and is injecting a lot of revenue into local banks,” said Frizzell, explaining that “it’s in its infancy, as far as the drilling and completion phase.”

Mark McKeehan, past-president of the Abilene Geological Society, said about the geologic formation that “everybody’s known it shows oil and gas for long time.”

But now producers have the ability to use techniques such as hydraulic fracturing, commonplace in exploring rock formations such as the Barnett Shale and Eagle Ford Shale in Texas.

In the area northwest of Abilene, “the technology’s catching up with it: the ability to go in there and ‘frac’ the thing and open it up has caused it to be a potential moneymaker for the people in that area,” said McKeehan.

Such fracking techniques have come under fire from environmental critics who have complained about potential contamination of groundwater from fracking or waste produced by the fracking process, with the Environmental Protection Agency studying any potential harmful effects.

Frizzell emphasized the depth of the formation.

“It’s very deep. It ranges from 5,000 to 7,000 feet deep, so it’ll be safe. Groundwater resources will be very safe,” Frizzell said.

McKeehan said landowners in the region “are benefiting tremendously from this.”

“I’m not sure exactly what the monetary interest is that the landowners are receiving, but I know they’re getting a premium for the land right now,” he added.

Exploration companies aggressively pursue such deals before drilling to bolster their stake in whatever may be produced by the formation, McKeehan said.

The next step won’t be cheap for exploration companies, McKeehan said.

“The wells will be expensive to drill. They’ll be horizontal, and they’ll have to put a big frac treatment on it, so they’re going to be expensive,” McKeehan said.

The formation is not as big or as thick as other Texas formations, McKeehan said, calling it “much smaller” than the Barnett Shale region in the Fort Worth area.

Frizzell said other production areas getting a boost include the region near Throckmorton, with horizontal drilling techniques being used in some cases.

He said a spike in drilling in the Permian Basin region has benefitted many Abilene businesses.

“In the Abilene area, the service companies seem to be keeping up with the activity there, such as the trucking and well logging and well servicing and supply stores, seem to be keeping up with the demand,” Frizzell said, adding that the spike in sales tax revenue is likely related to rising revenues from oil and gas activity.

As for the formation northwest of Abilene, Frizzell said he thinks drilling will start this year. McKeehan said he expects drilling to start within six months, with no guarantees of a quick success.

“I’m sure there’ll be a lot of a learning curve involved, and some techniques will work and some won’t,” McKeehan said. “It’s going to be kind of a work in progress.”

McKeehan said the formation “has all the right characteristics … like the shales” in the Permian Basin.

Until drilling begins, however, “the jury’s still out on it out right now,” McKeehan said.

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