Newspaper article THE JOURNAL RECORD

Michigan Attracts Natural Gas Firms / Grace Petroleum among More Active Firms; Drilling Costs Lower

Newspaper article THE JOURNAL RECORD

Michigan Attracts Natural Gas Firms / Grace Petroleum among More Active Firms; Drilling Costs Lower

Article excerpt

While exploration in Oklahoma has been declining since 1981, exploration activity in Michigan's Prairie du Chien natural gas strata has been steadily increasing, receiving the attention of Michigan independent operators and integrated oil and gas companies.

Oklahoma City-based Grace Petroleum Corp., which is a participant in 10 of the 40 wells completed on the play, is among the more active companies.

Exploration for hydrocarbons in Michigan is nothing new. Major oil and gas companies had district offices in the state since the 1920s, when oil was produced from shallow reservoirs.

But the Prairie du Chien was too difficult to explore because the seismic technology was not advanced enough to strongly reflect the strata.

The Prairie du Chien is the subject of controversy because the formation's limits are not defined. In some counties, the upper sands produce, while in other counties, the lower or middle sands produce, said Doug Strickland, assistant vice president and chief geologist for Grace, a subsidiary of W.R. Grace & Co.

"There's a lot of stratigraphic variation, especially at the top of it (the Prairie du Chien)," Strickland said. A "zone of unconformity" made up of several sands rests on top of the Prairie du Chien.

"What we don't know is: Are these separate sands, or a reworked part of the Prairie du Chien?"

The Prairie du Chien stretches over 24,000 square miles in Michigan and is situated at depths varying from 6,400 feet to 11,600 feet underground.

The Prairie du Chien is part of the Ordovician system and is equivalent in a time sense to the Arbuckle Group, Strickland said, though the Arbuckle is a carbonate formation while the Prairie du Chien is a sandstone formation.

"You almost have to prospect by seismic claim," Strickland said.

Most of the basin area is covered by glacial till, sediment left in the path of the retreating continental glaciers. The till can be as thick as 1,000 feet in some parts of Michigan, and distorts the features of the formations below the surface, Strickland said.

Seismic technology advanced enough in 1985 that companies were able to get a better idea of where the gas deposits were located, Strickland said.

Grace had a 50 percent success rate in exploratory drilling from 1983 to 1987, compared to the industry average of 35 percent in the same time period. The company was successful in developmental drilling 75 percent of the time, while the industry was successful approximately 50 percent of the time.

"Seismic technology was the break that helped us get going in this play," Strickland said.

Natural gas reserves can be found in Michigan at depths of 8,000 feet to 11,000 feet.

The Springer sand in Oklahoma is comperable to drilling in Michigan, Strickland said. A 16,100 foot deep Springer well's completed cost is $1.55 million, while a 9,000 foot deep Michigan Prairie Du Chien well's completed cost is $1 million, Strickland said.

Michigan finding costs, which are the sum of accumulating the leasehold acreage, the geophysical research and the drilling and completion costs, are one-third of those in Oklahoma, Strickland said.

"You can get significant reserves for those depths and we're also getting a good price for the natural gas," Strickland said.

While the spot price of natural gas in Oklahoma is $1.25 per thousand cubic feet, the Michigan contract price is $2.20 to $3 per thousand cubic feet, he said.

"A lot of that has to do with the Michigan market," Strickland said. "You have some fairly significant local markets and it's a friendly regulatory climate.

"Michigan is an importer of natural gas, so by developing reserves in-state, you basically get a better price."

The Oklahoma natural gas, with its added transportation charges, firms up the botton half of the natural gas price range in Michigan, Strickland said. …

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