Gas find could be big one
Source: Casper Star-Tribune, by Rena Delbridge
July 06, 2007
DOUGLAS-- The third time proved the charm for American Oil & Gas, which says it has found what could be a substantial natural gas field at the southernmost tip of the Powder River Basin.
A drilling rig, set barely outside city limits and only a mile and a half from a Kinder Morgan gas processing plant, was particularly visible not only for its size but for a steady flame shooting into the sky for several weeks. American Oil & Gas President Andy Calerich said the flare released some of the tremendous pressure Halliburton drillers encountered deep in the Frontier Formation.
Denver-based American had previously attempted drilling into the formation twice, but was unable to complete a well. Crews were unable to get beyond about 255 feet of lateral drill bore in the 11,500-foot-deep formation.
“We encountered as much gas and as much pressure as we could handle,” Calerich said. Then, the well bores collapsed.
Those and this new well, named Sims 15-26 after the private landowner, Art Sims, are within American’s Fetter Project, a component of the company’s Douglas Project.
While the area west of Douglas has been drilled plenty in the past four decades, the complicated environment, with gas deep in the earth and over-pressured, has prohibited producing wells, Calerich said. Technological advances in the past five to 10 years, including those pioneered in western Wyoming’s gas fields, enabled Halliburton to successfully drill around Douglas.
That technology allows gas to flow while crews drill. Flow enables crews to use a more moderate weight drilling mud that poses less risk of damaging the formations and sealing off gas flow, he said.
After the first two failures, American teamed with Red Technology Alliance, which is paying for the next phase of drilling in order to earn a portion of the project, Calerich said. Halliburton is managing the project.
“Our success in this particular well is very much attributable to Halliburton’s efforts in bringing their worldwide expertise to the play,” he added.
In recent days Halliburton succeeded in drilling about 1,200 feet laterally. Calerich had hoped for 2,000 to 2,500 feet, but flows and pressure made drillers confident that they didn’t need to go any farther to attain a successful well, he said.
“We’re now in the process of allowing some of the down-hole assemblies to set up properly before we put that well into production,” Calerich said.
Gas will be processed at the nearby Kinder Morgan plant, which can support the flows in the short term, he said. For the future, American and Kinder Morgan are working on an agreement.
Historically, drillers have had to hold pressure back absent the technology to allow gas to flow while drilling, Calerich said. If mud was too heavy -- which was necessary to block that pressure -- drillers ran the risk that expensive drilling fluid would run into the formation, possibly trapping gas there.
Now, technology allows wells to flow during drilling by using moderate pressure with fluids slightly less heavy than needed to hold back the pressure.
“We don’t run the risk of damaging the formation, and we get to see how the formation responds while we’re drilling,” he explained.
“It could be a pretty substantial project,” Calerich said. “We really can’t quantify yet the magnitude of this. There is reason to believe there is significant reserve potential out here.”
American controls a 50,000-acre position in the Fetter area. If American goes horizontal, he expects drilling upward of 300 wells. The company will also explore vertical options, which could allow rigs to access multiple formations at once, doubling or tripling the number of wells.
American is talking with Red Technology Alliance to identify the next well site in the Fetter Project, which may involve re-entering a well bore American drilled in 2005.
Meanwhile, following the success at the Sims 15-26 well, American is again partnering with Red Technology Alliance and Halliburton on a new test well in the West Douglas project, another part of the Douglas Project. Drilling should start by October 2007 and go to a vertical depth of 14,000 feet, according to the company’s Web site. The well is expected to help the company evaluate how much production potential exists in several formations, including the Steele, Niobrara, Frontier, Mowry and Dakota.
“We’re very early in the understanding of this area, but we do see potential in up to three or five formations,” Calerich said. “As we produce this well, we’ll be able to understand better how the formation responds.”
For the rest of this year, Calerich hopes to move ahead on two or three wells with Red Technology funding. Beyond that?
“We hope to be able to get pretty aggressive out there in 2008,” Calerich said.
American is also engaged in a major oil exploration project across the Converse County line in Niobrara County. So far four wells have been drilled there.
“We’re drilling with an eye toward science and research right now,” Calerich said, hoping to unlock the secrets of the Mowry Formation.
“The face of exploration has changed quite a bit,” he said. “It’s rarer today to drill a single well and have a significant find. It’s more an application of technology in an area, so it’s not a one-well make or break situation.”
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