South Louisiana onshore oil and gas drilling needs to attract investment

The south Louisiana oil and gas industry needs to attract lots of capital from investors to access fossil fuels over 15,000 feet deep and provide some hope for the future, an exploration executive says.
Jim Orth, president, director and co-founder of ORX Resources in New Orleans, was guest speaker during Tuesday’s meeting of the Atchafalaya Chapter of the American Petroleum Institute. The meeting was held at the Petroleum Club of Morgan City.
ORX is an operating and producing company for oil and natural gas.
Since 1901, nearly 90,000 onshore wells have been drilled across south Louisiana, producing 30 billion barrels of oil.
Of the 90,000 wells drilled in south Louisiana, 7,300 wells have been drilled deeper than 15,000 feet. And the industry has only drilled 1,500 wells deeper than 18,000 feet. A mere 392 wells have been drilled beyond 20,000 feet.
The area from 15,000 feet to 30,000 feet “is kind of our new frontier,” Orth said.
Orth is concerned about the future of the exploration and production business in southern Louisiana. There isn’t enough deep oil in south Louisiana to get big companies, such as Exxon, to come back, he said.
Therefore, small to mid-size companies need to attract investors to provide the capital required to drill deep onshore, Orth said.
“You can’t make a living on shallow wells anymore in south Louisiana,” he said. “You’ve got to apply seismic (imaging), and you’ve got to look deep if you’re going to have any future in south Louisiana.”
Drilling deep wells requires the application of lots of science, which starts with seismic imaging, Orth said. Obstacles to drilling deeper include costs, size and competition with resource plays, particularly in west Texas, to attract investment from drilling companies. Resource plays, also known as shale plays, produce oil and gas through the use of horizontal drilling and fracking.
Various factors will lead to companies drilling fewer wells, but, if successful, “they’d be more prolific,” he said.
The main reason more onshore activity isn’t happening in south Louisiana is because “we’re up against the resource plays, particularly the Permian Basin” in west Texas, he said.
“Until that changes, I think we’re going to have a fairly long period of time here before we can turn this thing around,” Orth said.
“At some point, hope-fully in our lifetime, the future is actually going to be deeper in south Louisiana. It’s pretty obvious when you look at the blanket coverage of wells that have been drilled today,” he said.
Until 2005, U.S. and Louisiana oil production were declining roughly the same amount.
“The earth-shaking, earth-moving events that have changed the U.S. have been the resource plays and the shale plays,” Orth said.
South Louisiana’s oil production peaked in 1970 at 1.5 million barrels per day. U.S. production was close to 10 million barrels per day at that time.
The U.S. is getting back close to 10 million barrels of oil production per day “because of the resource plays,” he said. But south Louisiana is only producing 167,000 barrels per day now.
Texas produces 3.2 million barrels a day, about a third of the country’s production. Most of that oil is coming from the Permian Basin. North Dakota is second in the U.S. in production at roughly 1 million barrels a day with most of that coming from the Bakken plays.
The country’s natural gas production is also rising due to the resource plays, Orth said. Texas leads the nation in gas production at 21 billion cubic feet per day, while Pennsylvania is second at 13 billion cubic feet per day.
Louisiana is fifth in gas production at about 5 billion cubic feet per day, mostly due to the Haynesville play in the north portion of the state.
Nearly 800 oil rigs are operating in the United States today after peaking at 2,000 rigs in 2008 before crashing to below 1,000 rigs. The number of rigs then dropped further to 400 rigs before rising again, he said. Texas alone has 400 rigs operating today.
Of Louisiana’s 36 rigs, only three rigs are operating in south Louisiana, Orth said. Highest rig usage on record for south Louisiana was 62 rigs, and the lowest rig count prior to the current count was 10 rigs.
“It’s pretty abysmal when you look at the rig count,” Orth said.