January 22, 2006

Depleted Oil Fields Make Natural Gas a Player

By Dan Piller, Fort Worth Star-Telegram, Texas

Jan. 22--KILGORE -- As the diamond anniversary of the East Texas Oil Field is marked, the celebrated "Black Giant" field that made fortunes for W.A. Moncrief, H.L. Hunt, Jake Haman and other celebrated Texas wildcatters isn't running out of gas, although it may be running out of crude.

Starting 75 years ago, old-time wildcatters took East Texas crude from the Woodbine sandstone formation about 3,600 feet below the surface. Today, natural-gas producers pull their treasure from the Cotton Valley, Bossier and Travis Peak formations 10,000 feet or more below the region's red clay.

Crude-oil production from the East Texas field, which extends from Rusk County north through Smith and Gregg counties to Upshur County and which has produced 5.3 billion barrels of oil since 1930, has dropped precipitously in the last decade.

In 1994, East Texas produced 25 million barrels of crude. That figure fell steadily to 5 million barrels in 2004. For 2005, the field is likely to have produced no more than 4.3 million barrels, based on nine-month figures from the Texas Railroad Commission.

Of the more than 25,000 oil wells drilled in East Texas since late 1930, all but 7,000 have been shut down. The low crude oil prices of the late 1990s proved the death knell for many once-bountiful East Texas wells demeaned to "stripper well" status, producing five barrels per day or less.

But while old oil wells were dying, East Texas has been reborn as a center for natural-gas drilling. The Carthage Field in Panola County was the biggest gas producer until it was overtaken by the Barnett Shale in 2004. Carthage is still the second-largest-producing natural-gas field in Texas. Other East Texas gas fields, concentrated in Freestone, Gregg, Harrison, Nacogdoches, Rusk and Upshur counties, account for almost 20 percent of Texas' annual natural-gas production.

Like the huge Barnett Shale play that has developed around Fort Worth, the big East Texas gas fields have benefited from high natural-gas prices and technical advances, most notably hydraulic fracturing that breaks up hard rock to release more trapped gas.

The trend toward natural gas is most striking in the Overton Field in Rusk and Smith counties. Natural-gas production there ballooned from 7.9 billion cubic feet in 2002 to 31.1 billion cubic feet between January and October last year.

"Everybody is chasing natural gas now. That's where the payoff is," says James Smith of Tyler, a geologist whose 40-year career in East Texas includes stints as a producer, Railroad Commission district supervisor and independent consultant.

Panola and Freestone counties each produced more than 200 billion cubic feet of natural gas during the first nine months of 2005. Each county's production is larger than the 141 billion cubic feet produced during the same period in Wise County, the largest Barnett Shale-producing county.

Few companies have cashed in from East Texas more than Fort Worth-based XTO Energy. Since 2000, XTO has produced 743.6 billion cubic feet of natural gas in Texas, according to Texas Railroad Commission figures. Of that total, 573.3 billion cubic feet has come from East Texas. The bulk of XTO's East Texas production, 329 billion cubic feet, came from Freestone County. But XTO also produces in Gregg, Henderson, Harrison, Limestone, Upshur and Rusk counties.

XTO isn't alone in East Texas. The Carthage Field in Panola County along the Louisiana border counts heavyweights such as Anadarko Petroleum of Houston, Devon Energy of Oklahoma City, EOG Resources of Houston, Exxon Mobil of Irving and Hunt Petroleum of Dallas.

There's room in the Carthage Field for smaller independents, such as Fred Rabalais of Fort Worth, who during his career has worked for both Hunt and Fort Worth's Moncrief family.

"There's a good boom in gas drilling going on in East Texas." Rabalais said. "It's been overshadowed by the Barnett Shale. But in East Texas, the operators have gone to spacing wells 40 acres apart. That's heavy activity."

Eighty-one-year-old Jack Phillips of Gladewater, an East Texas oil and gas producer since the late 1940s, says the emphasis in East Texas has shifted to natural gas.

"In oil, we're barely replacing reserves," he said. "There's probably more shut-in oil wells in East Texas than anyplace else in the U.S., and most of them will stay shut. There's an old saying; if an oil well was producing five barrels per day when it was plugged, it will be a two-barrel-per-day producer when it's unplugged."

The East Texas Oil Ffield, nicknamed "Black Giant" 75 years ago, is now the equivalent of a fixer-upper.

The leading oil producer now is a Dallas-based entity called BASA Resources, an acronym that stands for "Buy And Sell Anything." said Mike Foster, BASA's president and principal owner.

"We're oil-field scavengers," said Foster. "We can't get in the big gas plays now, but we can do very well with the old East Texas wells. They produce an average of three barrels per day, and at current oil prices, they're economical."

BASA is the latest owner of the original Moncrief well near Longview. The well has been shut in, but Foster says: "We're looking at reopening it. There's still some potential there."

Geologist Smith thinks there is still some future for oil production in East Texas.

"What we have to do now is wring the oil from the sand, sort of like wringing oil from stains on a shirt," Smith says. "But I can assure you that if there's more oil to be produced in East Texas, somebody will be out there producing it."

Dan Piller, (817) 390-7719 [email protected]


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