Denver, 5 October (Argus) — If Colorado's Wattenberg field is any indication, it is way too early to start defining the upper limits of US unconventional oil production.
Upstream independents Noble Energy and Anadarko Petroleum, the largest acreage holders in the Wattenberg, are fine-tuning drilling and hydraulic-fracturing techniques to optimize well performance, boosting oil and natural gas recoveries and widening their profit margins. Even as the two companies boast some of the world's largest offshore discoveries of the past several years, including deepwater finds off Israel and Mozambique, they are earmarking large chunks of their global capital budgets to Wattenberg – 35pc at Noble and 15pc at Anadarko.
It was only four years ago when the companies began horizontal drilling in the area, previously considered a largely played-out gas field. Just two years ago those projects moved from science experiments to viable development programs. The firms discovered that the 18,000 vertical wells drilled in the field since 1970 were recovering only 1-3pc of the hydrocarbons in place, and by drilling sideways and fracturing Wattenberg's dense rocks, they could tap previously unexposed oil deposits.
“We thought, now we have got something that is going to be very meaningful to the company,” Ted Brown, Noble senior vice-president for the Rockies region, said.
Anadarko's Wattenberg output is rising at an annual rate of about 20pc after topping 85,000 b/d of oil equivalent (boe/d) during the second quarter. More than 30,000 boe/d of that total is attributable to horizontal drilling, and 70pc of the new volumes are oil and NGLs. Noble, which had a 30pc year-on-year gain in the second quarter, sees its production in the Wattenberg and surrounding areas reaching almost 77,000 boe/d this year and advancing at a double-digit annual pace over the next five years.
Noble's last eight wells in an area beyond the outer fringes of the Wattenberg have had average liquids content of 85pc. Brown says that in baseball terms, the company is only about one-third of the way through in defining the potential of its Wattenberg business.
“We are not much past the third inning,” Brown said. “We are still early on in figuring out how big this thing is.”
Continuous improvements are not uncommon in US shale development. Companies such as EOG Resources and Devon Energy are reporting better and better well performance in areas such as the Eagle Ford shale of south Texas and the Permian basin of west Texas. But the Wattenberg has advantages over some other leading US onshore fields. Wells go down faster and cost $4.5mn-$5mn, versus $8mn-$10mn in places such as the Eagle Ford and the Bakken formation of North Dakota.
But some aspects of the Wattenberg are more complicated. Drillers must navigate around the many vertical wells in the area as they bore through rock sideways, and they must steer up and down because of fault systems fanning through the formation.
Noble's Brown and his counterpart at Anadarko, vice president for Rockies operations Jim Kleckner, hesitate to speculate on how high their Wattenberg production can go. Both expect to report sizable gains in reserves this year. Anadarko estimated last year that it would recover as much as 1.5bn boe from the field. The company has as many as 2,700 more drilling locations to go.
“We have got room to run,” Anadarko drilling manager Randy Sprouse said. “I think it's wonderful, but it's a big surprise.”
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