Investment in Wyo.’s Niobrara Shale yet to pay off

By MEAD GRUVER Associated Press

CHEYENNE, Wyo.—A big financial bet by the petroleum industry that the Niobrara Shale will be the next big U.S. oil play has yet to pan out, though the arrival of warmer weather and new geological data could provide a boost.

Anadarko Petroleum, Noble Energy and EOG Resources and others in the industry have spent millions buying up rights to drill the formation beneath southeast Wyoming and northeast Colorado. Even China’s state-owned offshore oil and gas company has agreed to invest $570 million for a stake in a Niobrara drilling project run by Chesapeake Energy.

Public and private drilling rights in the Niobrara sold quickly and at top dollar in Wyoming and Colorado all last year.

But Niobrara drilling has yet to take off and wells drilled so far have produced less than those in the booming Bakken Shale in western North Dakota.

Drilling in southeast Wyoming has occurred at about the same pace as last year: 15 new wells so far in 2011, compared to 33 over all of 2010. That remains but a fraction of the state drilling permits issued in southeast Wyoming: 250 so far this year, up from 151 all last year.

Initial production from wells drilled so far has averaged between 400 and 700 barrels of oil a day, much less than many Bakken wells that come in at over 2,000 barrels a day.

“The 400-barrel-a-day wells, they’re not going to do very well. They’re not going to pay out. The higher ones, 700? Maybe,” said Bruce Hinchey, president of the Petroleum Association of Wyoming.

“When you get into the 1,000-2,000, those will probably do all right.”

So far nobody has seen a Niobrara well quite like EOG Resources’ Jake—a now famous well a few miles south of the state line in Colorado, said Tom Doll, supervisor of the Wyoming Oil and Gas Conservation Commission. That well came in at nearly 1,800 barrels a day in the fall of 2009. Yet producers remain optimistic and new exploration data could help them better pinpoint where to drill, he said.

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