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Oil-rich shale formation brings high hopes to Miss., La.

GILLSBURG, Miss.

Residents living above an oil-rich shale formation that stretches across southwest Mississippi and Louisiana have been waiting on a boom for years. A steady trickle of drilling is already boosting the rural region's economy, and spending by two oil companies could make 2014 the year that many other locals finally cash in on the oil far beneath their feet.

The process began two years ago when Encana Corp. built a big gravel pad, but didn't take off until late last year when a convoy of 200 trucks carted in a drilling rig and other equipment to bore into the earth looking for oil.

Gillsburg and surrounding Amite County lie above a prime section of the Tuscaloosa Marine Shale, a geologic formation that stretches in boomerang shape across Louisiana's midsection and into southern Mississippi. Drillers have known about the formation north of the Gulf of Mexico for years, but affordable technology to remove the oil from the shale's tight pores was slow to develop.

Thanks partly to advances in hydraulic fracturing techniques, Encana and Goodrich Petroleum plan to spend hundreds of millions of dollars in the area in 2014. So far, Goodrich and others have drilled more than 30 wells across the region, trying to find the right methods.

Goodrich chief operating officer Robert Turnham said that number could double or triple in the area straddling the state line just this year if drillers continue to make progress.

"It's at a stage where you need more wells that have consistent results, that show the repeatable results there are in other plays," Turnham said.

Louisiana State University scientists estimate the formation holds 7 billion barrels of oil, though that total isn't proven yet. Most of it is a light, sweet crude that can be sold to refiners for more than $100 a barrel. By comparison, the federal government estimates that the U.S. has about 40 billion barrels of proved oil reserves.

Still, the exploration isn't without financial risks because of the tricky nature of the rock that holds the oil. One key issue was a troublesome well Goodrich drilled elsewhere in Amite County that initially produced a disappointing 500 barrels per day.

Economic jolt

For the region's economy, though, the drilling has already provided a much-needed infusion, even if it's not an all-out boom yet.

Heavily wooded with only a handful of small towns, Amite County has relied on forestry in recent decades. But Georgia-Pacific closed a plywood mill in Gloster in 2009. Combined with other business closures, Chancery Clerk Ronnie Taylor said Amite County lost as many as 850 jobs. The county's 4,600 workers had an 8.7 percent unemployment rate in December, higher than Mississippi's average.

Now Bernell McGehee, a partner in the Ward's restaurant in Liberty, Amite County's only fast-food franchise, said sales have gone up about 10 percent over the past year, enough to persuade the owners to buy a small lot to add more parking.

Kirk Barrell, whose company assembles lease tracts and sells them, estimates oil companies have leased as much as 1.7 million acres of Tuscaloosa Marine Shale land in Louisiana and Mississippi, spending more than $300 million.

If the LSU estimates prove true, the Tuscaloosa Marine Shale would be among the largest fields in the United States.

Among recent boom areas, the U.S. Geological Survey estimates that North Dakota's Bakken and Three Forks formations have about 7.4 billion barrels, although experts say the estimates may be low. North Dakota's booming oil industry has driven up home prices, decreased unemployment and attracted newcomers to a state that had been losing population until recent years.

Goodrich is making a big bet on the formation. It spent $27 million to acquire leases held by Devon Energy mostly in Louisiana's Tangipahoa, St. Helena and East Feliciana parishes and now plans $300 million in drilling in 2014 in Louisiana and Mississippi. Encana plans $200 million to $300 million in work on its leases, which are more concentrated in Mississippi. Others are making investments as well, with Houston-based Halcon Resources announcing Wednesday that it had acquired 307,000 acres and plans to drill 10 to 12 wells in the region this year.

Oil-rich shale formation brings high hopes to Miss., La. 02/27/14 [Last modified: Thursday, February 27, 2014 8:15pm]
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