The New Albany Shale

When we think fracking, we look at places like Texas or North Dakota, and now even California as it gets going. But there are whispers coming out of Illinois that have us wondering.

Yes. Illinois. For a couple years now we’ve been hearing the rumors; Illinois farmers have been leasing their land to drillers who have gone unidentified. We know it’s in southern Illinois, and we know that land is getting snatched up, but by whom and where they plan to drill – it’s been hush-hush.

If we don’t keep our ear to the ground, we could miss something big. There’s got to be a good reason everyone is keeping so quiet. And now a new state law has silently been implemented that tells us something is definitely going on.

The Illinois Department of Natural Resources opened its website to the fracking registration process this month. There you will find a registration form where would-be drillers can apply for a fracking permit after a 30-day wait. The company registers with the state, waits 30 days, and then can file an application to drill.

And the company’s intentions will be posted online, giving town officials and residents alike an idea of what they’re in for and just how much tax revenue they could receive. It’s all part of the new law.

It’s easy to forget, but Illinois has produced 4 billion barrels of oil and 4 trillion cubic feet of natural gas conventionally.

A big horizontal play could be right around the corner, and it would be big for the state of Illinois.

Companies are still keeping mum about it, but the Illinois Basin and its New Albany shale might just hold the prize.

The Illinois Basin is roughly 60,000 miles in the central United States of southern Illinois, southwest Indiana, and northwest Kentucky.

Drilling dates all the way back to 1853, and like most oil discoveries, was a complete accident as early settlers searched for saltwater to help preserve food and agriculture.

And the basin has seen success through the years, especially during the 40s and 50s when it was the third largest oil producing basin in the U.S., according to 4-traders. Production peaked in 1940 at 147.6 million barrels.

After World War II, production started to fall, and since, there hasn’t been one new oil target that has been drilled. All the success it did have came from the traditional vertical wells.

The unconventional plays have never been touched, and underneath all those conventional oil pools, deep below the surface lies the New Albany Shale, where fracking can unlock a vast new play.

If we look at other shale plays around the U.S., the New Albany Shale was formed around the same time – 350 million years ago – right along with the Bakken, Woodford, Marcellus, and the Antrim shale.

Given the success of those other plays, I would say that New Albany has some pretty good company.

A 2002 study estimated that the New Albany Shale could possibly produce up to 300 billion barrels of oil, according to 4-traders. With that much possible recoverable oil, even if a fraction is realized, it could be a very big horizontal play.

Of the 140,000 wells that have been drilled into the Illinois Basin, 32,000 are still producing, according to 4-traders. That tells us drillers have had plenty of time to sniff around sites and follow a good lead, straight down to the New Albany.

The New Albany is getting comparisons to the Elm Coulee Bakken of Montana, where production has already surpassed 120 million barrels of oil from horizontal wells. The two formations appear to be very familiar – similar in age, size, and in all likelihood, oil – but no two shale plays are exactly alike.

If this is true, now we know why land has been getting leased out and why companies are doing their best to keep it a secret – the last thing they want is to let the cat out of the bag and see land prices skyrocket.

We know a few wells have been drilled, but once again, results have been kept quiet.

What we do know is that the play has something to offer. And it must be big because the amount of land that has been leased over the past couple years has been tremendous. In that time, the price per acre has already quintupled.

The way things stand now, as applications start rolling in, regulators will likely take months to finalize and approve permits.

Companies that have spent millions already on leasing land, like Strata-X Energy (TSX-V: SXE) with some 50,000 acres, are bound to be frustrated with the process.

It will be slow going as Illinois adopts its new fracking laws and regulations that seem to be some of the toughest in the country.

And Woolsey Energy is another; they will have to bide their time while their roughly 200,000 acres sits in limbo waiting to get fracking.

But it is coming and it’ll likely be big. Heck, even some environmental groups have gotten behind this new law, saying it is tough on drillers.

As things do unravel, many jobs will be created and a lot of money will go to a state that can surely use it. It’s just a waiting game.

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Figure 5. Decreasing hydrogen index (HI) contours show regions of increasing thermal maturity of New Albany Shale source rocks within the Illinois Basin. Contour interval is 50 HI. The 400 HI contour (red line) outlines the area of source rocks that are thermally mature for oil generation. Catchments are labeled clockwise from 1 to 7. Irregular dark-green line outlines the maximum extent of the New Albany Shale (modified from Lewan and others, 1995, 2002).

Figure 7. Generalized stratigraphic column of Devonian and Mississippian strata in the southern part of the Illinois Basin. Horizontal red lines to the right of the column indicate the primary oil and gas productive intervals. Shown are names and vertical and lateral associations of strata from Late Devonian to Late Mississippian time. The New Albany Shale hydrocarbon source rock is also labeled (Modified from Bell and others, 1961; Buschbach and Kolata, 1991, reprinted by permission of The American Association of Petroleum Geologists and AAPG Data Systems (Datapages, Inc.)

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Figure 8. This generalized southwest-northeast stratigraphic cross section of the Middle Devonian through Mississippian Kaskaskia sequence shows vertical and lateral extent of primary hydrocarbon source rock and reservoir rocks in the Illinois Basin (modified from Treworgy and Devera, 1991

Petroleum Production in the Basin

The Clark County Division field was drilled in the Illinois Basin in 1900; this is the first field that contains discovery date information in the PI/Dwights databases (1996, 1999) and Nehring database (1996).Average discovery date is 1946 for 320 fields in the databases that contain this information. The Illinois Basin has a mature exploration status. Macke (1996) estimated that 10 or fewer oil accumulations of 1 million barrels or greater remain to be discovered in Mississippian and Pennsylvanian formations in the basin and that remaining reserve growth will mainly result from secondary and tertiary methods of petroleum production from existing fields.The basin contains more than sixty different petroleum pay intervals that range in age from Ordovician to Pennsylvanian; production is primarily from structural traps at depths of less than 5,500 ft (1,675 m) (Howard and Whitaker, 1990). "A number of hydrocarbon occurrences are closely related to the tops of three major carbonate intervals"; these are listed by Howard (1991) as being the Upper Ordovician Ottowa Supergroup, the Silurian and Devonian Hunton Supergroup, and the Mississippian Valmeyeran Series. Most hydrocarbon production in the basin has been from siliciclastic intervals in Chesterian and Pennsylvanian rocks (Howard, 1991). Oltz and others (1991) determined that the Illinois Basin has almost 1,700 fields; these produce mainly oil from about 7,000 separate sandstone and carbonate reservoirs. Ninety-six percent of this production is stripper, or less than 10 BO/day per well; this percentage is six times greater than the national average for stripper production (Oltz and others, 1991). Organic geochemical correlations indicate that more than 99% of discovered petroleum in the basin was derived from the New Albany Shale (Hatch and others, 1991).

Almost 90,000 wells have been drilled in the Illinois Basin; 42%, or about 38,000 wells, are currently listed as oil and (or) gas productive (PI/Dwights WHCS data through Dec, 1996). Total number of dry holes across the basin is 47,800 (PI/Dwights WHCS database through 1996).Figure 4 shows distribution of oil and gas wells across the basin. Production is from Silurian-through Pennsylvanian-age reservoirs.

THE NEW ALBANY SHALE PETROLEUM SYSTEM, ILLINOIS BASIN – DATA AND MAP IMAGE ARCHIVE FROM THE MATERIAL-BALANCE ASSESSMENT
http://pubs.usgs.gov/of/2003/ofr-03-037/htmltext/introduc.htm#DistOGD

Chesapeake

If you have to deal with Chesapeake, I'm sorry for you. They have a history of unlawful deduction from Royalty checks along with many other problems. If you have any significant acreage, do not sign anything without spending a few hundred dollars of your own to consult with an attorney knowledgeable about leases.

Is there a map of already producing wells and/or wells to be produced .. and when?

Each state maintains their own information. I suggest digging around at the following web site to see what is available. They will be the best source of information for your area.

Pennsylvania Department of Conservation and Natural Resources
Geological Survey
Oil and Gas Resources
http://www.dcnr.state.pa.us/topogeo/econresource/oilandgas/

“The New Albany is getting comparisons to the Elm Coulee Bakken of Montana, where production has already surpassed 120 million barrels of oil from horizontal wells. The two formations appear to be very familiar – similar in age, size, and in all likelihood, oil – but no two shale plays are exactly alike.”

At the risk of being called hysterically pessimistic, don’t believe all the hype about this or most other oil shale plays.

Physics does not allow liquids to move very well through such tight rock.

The only truly bonafide successes in more of a basin-wide oil shale play come from the Eagleford and the Bakken. Even then, most of the acreage in the Eagleford is not commercial, although one hears primarily about those wells that are. Same thing holds true in the Bakken.

Liquids sitting in a tight matrix rock cannot sensibly produce commercial oil by and large unless the rock is naturally fractured. It just takes too much capital to try to bust the rock up yourself. Nature has to do it.

The only oil shales that will be wide-spread commercially attractive are those that exhibit lots of natural fractures, or those not really oil but wet gas rich shales. Places like the Niobrara just have a good well every now and then, presumably only areas that have natural fractures. An illustration of how natural fractures are important is easy to see in the history of the Monterey or the Austin Chalk formation. It’s boom or bust by and large.

The real big US shale play is in gas, which moves much more easily through the crappy formations. An unlimited supply exists in this country.

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