March 7, 2006

A Tale of Two Fields: Giddings Offers a Lesson in How Quickly Things Can Change

By Dan Piller, Fort Worth Star-Telegram, Texas

Mar. 7--GIDDINGS -- A decade ago, the Giddings Field in the Austin Chalk limestone formation was the Barnett Shale of its day: Texas' leading energy producer and the talk of the industry.

From 1993 to 1997, the field led Texas in production of natural gas and crude oil, an unprecedented double. Giddings' biggest operator, Union Pacific Resources of Fort Worth, produced more natural gas in 1996 and 1997 than Exxon, Conoco, Shell or Enron.

"Back then we had 27 rigs drilling, and if an oil well didn't come in at 1,000 barrels per day, we didn't think it was worth much," said Darrell Chmelar, who was a production supervisor for Union Pacific Resources.

But today, the Giddings Field serves as a cautionary tale for the boomtown euphoria that has settled over the Barnett Shale around Fort Worth, where production has doubled since 2002. Natural-gas production from Giddings has fallen from a state-leading 294 billion cubic feet in 1996, to 60.6 billion cubic feet last year. Oil production from Giddings has also dropped, from a state-best peak of 32 million barrels in 1993, to 6.1 million barrels last year.

That decline is a sobering reminder that in the oil patch, things can go downhill in a hurry. And it leaves unanswered a question that vexes engineers and geologists: whether horizontal drilling, fracturing and other new technologies used by today's operators effectively tap new sources of oil and gas but produce them at faster initial rates and with quicker declines than the lower-tech methods used to open Texas' older fields.

Chmelar and Greg Strickland, production manager for the Giddings Field, now work for Anadarko Petroleum of Houston, which acquired UPR for $8.2 billion in 2000.

Strickland said Anadarko will spend $90 million this year to rework old wells with new casings, drill more lateral extensions and use high-pressure water fracturing to clean and enlarge the tiny cracks in the Austin Chalk limestone formation as far as 15,000 feet below the surface.

Any oil-patch veteran will attest that revamping an old field is a greater engineering and geological challenge than drilling new wells.

"We're working hard just to maintain current production," Strickland said.

Anadarko will drill 35 wells in Giddings in 2006, a modest effort compared with the 140-plus wells that big operators such as Devon Energy, XTO and Chesapeake Energy plan to sink into the Barnett Shale this year. But a Giddings well is twice as deep as an 8,000-foot Barnett Shale well, takes twice as long to drill and costs at least double the $2.5 million per average of a well in the Barnett Shale.

"The rock is very unforgiving here," said tool pusher Jason Coon at an Anadarko drilling site near Brenham.

Despite the abrupt plunge from its leadership position, nobody is saying the Giddings Field is an abject failure. Giddings is unique among most Texas fields in its ability to be a top producer of oil and gas. With total production of 450 million barrels since its discovery in 1960 -- Texas' last major oil-field find -- Giddings ranks in the top 20 among Texas' all-time oil fields. Giddings began producing natural gas in 1978 and stands as Texas' fourth all-time best gas producer with 2 trillion cubic feet of total production.

"Giddings has been a fantastic success, and nobody should be critical of its decline," said Gary Swindell, a Dallas geologist who has worked the field. Swindell notes that Giddings went through two drilling phases: an early vertical drilling period from the late 1960s through the '70s and then a renewed push with horizontal drilling beginning in the 1980s.

"Horizontal drilling gave that field a big new life in the 1990s and also paved the way for the horizontal drilling that has been so successful in the Barnett Shale," Swindell said.

Production declines happen in the best of fields. The Prudhoe Bay Field in Alaska, the top U.S. oil producer since it was opened in the early 1970s, has had production drop by almost 75 percent since the late 1980s. For that reason, President George W. Bush has risked political capital to try to open theArctic National Wildlife Refuge as a way to reinforce North Slope production.

The legendary Permian Basin of West Texas, producer of 70 percent of Texas' oil, is showing its age. In 2005, the Permian produced 25 percent less crude than a decade earlier.

But some fields hold their production better than others. The venerable Panhandle West field near Amarillo, which opened in 1933 and is the state's most prolific natural-gas field ever, was still the fifth-best producing field in 2005 despite its septuagenarian status. In East Texas near the Louisiana border, the Carthage gas field in Panola County, which opened in 1978, has shown remarkable consistency. Although Giddings lost 80 percent of its gas production from 1995 to 2005, Carthage increased its gas output from 166.2 billion cubic feet in 1995, to 179.7 billion cubic feet last year.

But experts are more optimistic about the Barnett Shale.

Ian Duncan, associate director of the Bureau of Economic Geology at the University of Texas at Austin, said that geologically, Giddings and the Barnett Shale are different creatures. He says the Barnett's inevitable decline will not be as abrupt and steep as the Giddings'.

"The sharp decline in the Giddings Field shouldn't have been a surprise," Duncan said. "The Austin Chalk limestone in the Giddings is naturally fractured, or cracked. So when you drill, the early oil and gas production comes up quickly but will decline more rapidly than in most limestones or sandstones. A shale is more of a solid rock. You have to fracture it before you can produce, but then production is more steady."

Conventional wisdom about the Barnett Shale, based on a half-decade of full production, is that its wells will decline by 50 percent to 75 percent after the first year of production but then produce steadily for 30 years or more. Even so, Devon Energy of Oklahoma City, which has the earliest Barnett wells in Wise and Denton counties that were drilled starting in the late '90s, has begun an aggressive effort to refracture some old wells to recapture their initial production rates.

Wise County northwest of Fort Worth, where the Barnett Shale boom was born in the late 1990s, sent out a warning signal last year when its Barnett Shale production declined, from 148.2 billion cubic feet in 2004 to 144.6 billion cubic feet. Devon, the biggest operator in Wise and Denton counties, has begun to refracture its early Barnett wells to reverse declines.

"It's a simple fact that the decline rate in the Austin Chalk wells is higher than in other limestones or shales," Strickland said. "We've accepted it."


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


Copyright (c) 2006, Fort Worth Star-Telegram, Texas

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected]