La. shale’s economic effect hard to predict

• By TED GRIGGS
• Advocate business writer
• Published: Aug 19, 2008 - Page: 1A - UPDATED: 12:05 a.m.

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The economic and environmental impact of the Haynesville Shale — a massive natural gas discovery two miles beneath Shreveport — might not be known for years, oil industry officials said Monday.

But huge volumes of water will be required to force the gas out of underground shale formations, said Dan Briggs, president of the Louisiana Oil and Gas Association.

In Louisiana so far, the shale stretches from Caddo Parish south to Sabine Parish and the eastern boundary is somewhere around Caldwell Parish, said Briggs, who spoke to the Press Club of Baton Rouge.

“We’re still discovering how far it will go,” Briggs said. “It will take some time to find out.”

“We will have to build the rigs to handle this,” said John E. Johnston III, assistant director of the Louisiana Geological Survey. “It will be five to 10 years before we know its size.”

Oklahoma City-based Chesapeake Energy Corp., which announced the discovery in March, is doing a seismic survey of 500 square miles of the shale, Briggs said.

At $85,000 a square mile for the survey, that’s a considerable investment but just a fraction of the hundreds of millions of dollars energy companies are pouring into the shale project, Briggs said.

In addition to lease bonuses that reportedly have gone for as much as $30,000 an acre, energy companies are investing in:

• Pipelines to connect northwest Louisiana to delivery systems.
• Rigs to drill the wells.
• Roads to reach the well sites.
• And water: Millions of gallons are used to increase the pressure in the fields and force the gas up, and that water has to be disposed of somewhere afterward.

Right now, there are 74 rigs working in north Louisiana, Briggs said, and 29 are in the Haynesville Shale.

The state has issued permits for 78 wells, he said. Six of those are producing, and three are expected to begin producing shortly.

By the end of the year, Briggs expects 100 rigs will be working in north Louisiana, with as many as 200 by the end of 2009.

“That’s a lot of rigs when you consider each rig can drill six wells,” he said.

The Haynesville Shale differs from conventional finds because it is a “resource play,” Briggs said. A conventional well has a 50 percent- to 90 percent-chance of failure, but in a resource play there is virtually no risk of drilling a dry hole.

A resource play’s size — the Haynesville Shale has been estimated to contain 240 trillion cubic feet of gas — allows companies to pay larger bonuses and royalties of 25 percent or more, Briggs said.