Southwest Mississippi seeing revitalization of oil industryPublished 12:18am Sunday, July 8, 2012
NATCHEZ — Southwest Mississippi’s oil industry — and overall economy — could receive a major upward boost with the development of the Tuscaloosa marine shale, an oil formation that forms an underground ribbon under the southern end of the state.
“The oil industry has traditionally seen a series of ups and downs, booms and bursts, and we have seen that in this area,” said attorney Marion Smith, former president of the Mississippi and Alabama Division of the U.S. Oil and Gas Association.
“What I am seeing in Southwest Mississippi is a revitalization of the industry.”
The Tuscaloosa Marine Shale is a marine deposited shale formation that has been the source bed for the Tuscaloosa sand sections that have been drilled in Mississippi for the last 30 to 40 years.
While companies were able to drill through the shale to access the oils under it, operations to pump the shale itself were unsuccessful because migrating clays in the shale would clog the drilling equipment.
“We have always gotten oil and gas kicks while we drill through the formation,” Geologist Frank Davis said. “Oil companies are having some problems, a few obstacles they are having to overcome, to get these formations to give up the oil and gas — they are very expensive to drill.”
But the elevated oil prices of recent years and the availability of new technologies, have made accessing the shale oils worth the investment, and now Southwest Mississippi — especially Wilkinson and Amite Counties — are seeing extensive oil exploration efforts, Smith said.
“One thing that drives the industry is prices, and we are seeing pretty good increase in crude oil prices, which have boosted exploration efforts for that particular hydrocarbon,” Smith said.
Crude oil commodities were trading at approximately $84 a barrel Friday.
“Those wells are very sophisticated operations that require a lot of technology, and those wells cost somewhere between $12 million to $20 million, but the production has been well greater than we have seen,” Smith said. “There is one well in Wilkinson County they said was producing between 650 to 700 barrels a day — at today’s prices, that is a pretty rewarding well.”
Exploring unconventional oil plays is a reality the energy industry will have to face more and more in the coming years, Davis said.
“We have found all our easy (oil) in this country,” he said. ”We are having to go deeper, we are having to go into some of these areas where unconventional drilling is becoming necessary to get to some of this harder oil everybody always knew was there but it was never commercial because of how expensive (it was) to get it out of the ground.”
And W.T. Drilling President Leo Joseph said that, even if the unconventional oil plays are more expensive to develop, they’re likely to be a part of the national energy future for a long time.
“Until the country gets to where it wants to get serious about energy policy and switch to natural gas, I think oil is where it is at,” Joseph said.
Smith said one oil company he knows of claims to have 355,000 acres under lease, with plans to drill wells with a 1250-acre spacing.
The natural gas shale in Northwest Louisiana, the Haynesville shale, led to an economic boom in that area in recent years.
The Tuscaloosa shale is different, though, because it is primarily an oil formation, Smith said.
“Unfortunately, natural gas prices have been compressed,” he said. “But oil brings five to seven times more money than gas. Fortunately for us, most of the production in this area has been crude oil.”
That reality has local economic development authorities viewing the development of the Tuscaloosa shale as a major opportunity, with the potential for major support industries and suppliers to locate in the area, Natchez Inc. Executive Director Chandler Russ said.
“If (the shale) continues to open up and continues to materialize, the play has potential to be just enormous for the region,” Russ said. “You could literally have 4,000 to 5,000 people employed in that industry relatively quickly.”
“Based on the last couple of wells that have made, it is looking more and more positive.”
Adams, Amite, Pike and Wilkinson counties all will be affected by the play, and Russ said the four are looking at forming a regional working group to be able to address the issues that might arise from the development.
“Our hope is to form a regional alliance within those four counties initially, and really have a group in place that can discuss and handle local issues like common road ordinances through counties, water issues, things along those lines,” he said. “We are working towards both the kind of local issues on the ground amongst those areas.”
The alliance would also look at ways to capitalize the play for the area, Russ said.
“How do we make sure that those suppliers are coming to Natchez and Liberty and McComb and housing their people here and supplying the field and the play from this direction?” he said.