The Mississippian Lime: Not New, But Reinvented

Among the significant tight oil plays in the U.S., one of the Mississippian Lime’s distinguishing traits is its lower-cost, shallower nature. Production per well in this play, which straddles the Oklahoma and Kansas border, may sometimes average less than other plays, but countering these lower production numbers are the advantages of lower well costs and increased access to infrastructure. The Mississippian Lime remains one of the nation’s more active plays after North Dakota’s Bakken, Texas’ Eagle Ford, and the Permian. It’s one of several plays that have helped turn around crude oil production in the region. Combined Oklahoma and Kansas crude oil production in 2012 surpassed that of 2005 by 37 percent, or 100,000 barrels per day, with the largest part of the increase in Oklahoma. About 22 percent of Oklahoma’s crude production was in Mississippian Lime counties in 2012, according to the Oklahoma Corporation Commission’s Oil and Gas Division.

It’s not that oil and natural gas activity in this “patch” is anything new – conventional exploration and development goes back here more than 50 years, and exploration and production in these states goes back to the 19th century. But with advances in horizontal drilling and hydraulic fracturing, it’s another case of an “old” play that’s become new again.

What is the Mississippian Lime?

Taking the name apart, the “Mississippian” refers to a geologic period roughly 320 to 360 million years ago. “Lime” refers to marine limestones laid down during the Mississippian when an inland sea covered parts of the North American continent. This thick limestone section does diverge slightly from other plays that have a bigger shale component as part of their interbedded zones. The oil and natural gas play of that name focuses on a specific part of this area centered along the Kansas/Oklahoma border, with some experts estimating it to extend as far as southern Nebraska. While the largest share of activity has been in northern Oklahoma, areas now considered as part of the play stretch farther north and west within Kansas. Earlier descriptions put the area of interest at around seven million acres, but with extensions to the north and west, estimates now range to 17 million acres. The play’s surface area is similar to that of West Virginia or South Carolina.

One of the play’s attractions is its shallower nature. The Mississippian Lime section, typically 300 to 500 feet thick, is found at depths of 3,000 to 6,000 feet, contrasting with 9,000 to 10,000 feet to the top of the Bakken in North Dakota and depths of 4,000 to 15,000 feet for both the Eagle Ford in Texas and the Permian/Delaware Basin (Texas and New Mexico). This translates into faster drilling times, lower requirements for rig horsepower and fracturing pressure, along with other cost savings per well. Typical well costs of around $3-3.5 million are publicly cited, which is half or even a third of the cost in more complex shales like the Bakken.

The source rock for the Mississippian Lime is traced to the Woodford Shale below it, which has also driven many of the more traditional plays in the region. While tending to be more “oily” to the east and “gassy” to the west, a roughly 50/50 split between oil and natural gas would be typical in the Mississippian Lime. However, the recent economics have been driven mostly on the recovery of crude oil and natural gas liquids (NGLs).

The Mississippian Lime itself has a complex and varied geology. It is interbedded, with areas of high porosity alternating with tight limestones. It is topped by the Mississippi “Chat” – a varied combination of chert, limestone, and dolomite. The “Chat” is the legacy from when the top of the Mississippian was transformed through uplifting, erosion, and exposure to weathering and other geologic processes, all before being buried again in subsequent periods. Due to its more brittle nature, the “Chat” has served as a reservoir rock, a target in the past for thousands of more traditional vertical wells, as well as for more recent activity. As a low permeability, high porosity formation, it may hold oil, natural gas, and/or water in its abundant pores, but these may not flow easily because the pores are not connected.

Crudes from the Mississippian Lime are in the light sweet category. IHS in its “Potential for Tight Oil in North America” multi-client study released late last fall, projected total oil and condensate recoverable resources from the Mississippian Lime play at 1.3 billion barrels through 2035.

History

Looking more broadly at the states, Oklahoma’s first commercially producing well, the Nellie Johnstone No. 1, was drilled by the Cudahy Oil Company under contract to George Keeler and William Johnstone. It came on stream in 1897 in Washington County, just east of the current area of interest and producing from 1,320 feet. Beginning in 1905, the discovery of the Glenn Pool Field in Creek County set off a major trend of oil activity in the state. The early 20th century was a period of discoveries and production growth for Oklahoma, with crude oil output reaching 760,000 barrels per day in 1927. A subsequent decline was reversed in the 1950s and production climbed above 600,000 barrels per day by the late 1960s.

Meanwhile, commercial production in Kansas actually began earlier with the Norman No. 1 well in 1892, drilled by William Mills under contract to a group of local businessmen. By the 1950s, Kansas was producing at its peak of about 340,000 barrels per day. More recently, Oklahoma output has risen from a 2005 low of 172,000 barrels per day to 244,000 barrels per day in 2012, and nearly 280,000 barrels per day in this year’s first quarter. Kansas has recovered from under 100,000 barrels per day as recently as 2006 to 120,000 barrels per day for 2012 and early 2013.

Recent Developments

The Mississippian Lime has been producing for more than 50 years from mostly traditional, vertical wells. According to the Kansas Independent Oil and Gas Association, more than 4,000 vertical wells have been drilled in the Mississippian Lime. The first wells that demonstrated the value of this approach were drilled in 2009, and horizontal activity picked up quickly. The fact that the formation is relatively shallow, can be drilled horizontally, and can benefit from hydraulic fracturing has given this play new potential. As recently as early 2011, the horizontal rig count in the area was just in the 20s, according to Baker Hughes. More recently, it has shot up to the 70s and 80s.

The shallower Mississippian Lime, in comparison with other major plays across the country, typically means lower per well cost. That being said, the complex geology, mix of porosities, and place-to-place variations in rock types and other characteristics mean that accurate downhole measurements, practical reservoir modeling, and attention to the specifics of each location can help optimize stimulation plans. Water content, often a factor in producing oil and natural gas, is often particularly high in the Mississippian Lime and especially in the “Chat.” Precise targeting to increase hydrocarbons and reduce by-product water production is a major consideration in project design. Proper handling typically involves drilling disposal wells routing the excess water into deeper formations below the Mississippian Lime from which it originated.

To put the scale of activity in the Mississippian Lime in perspective, consider that in recent months, the Mississippian Lime has seen 70-80 active rigs, according to Baker-Hughes. While less than the 180-190 for North Dakota’s Bakken, or 220-230 for Texas’ Eagle Ford, it still is one of the most active tight oil plays after these, and at a similar rig activity level as the Marcellus tight gas shale play in the Eastern U.S.  Of course, none of these plays come close to the nearly 500 active rigs for the Permian, though in the Permian, horizontal drilling and tight oil activity account for only about a third of overall activity.

As for the so-called Mississippian Lime extension farther north in Kansas, activity seems to have slowed. The rig count for Kansas counties farther north of the Kansas/Oklahoma border had seen an increase in 2012, but has since subsided in 2013, because, apparently, some areas with a good history for conventional production in those regions have not panned out for horizontal wells and hydraulic fracturing, at least at this stage.

According to the Kansas Independent Oil and Gas Association, traditional, vertical wells in the Mississippian Lime have recovered an average of 86,000 barrels of oil equivalent (boe) per well. The association estimates horizontal wells may recover from 250,000 to 450,000 boe per well, just one measure of the dramatic changes brought about by horizontal drilling techniques. The IHS tight oil study estimated the typical Mississippian Lime well would produce 219,800 boe, a mix of crude, NGLs and dry gas.

The Mississippian Lime has drawn considerable interest from international joint venture partners, which has provided additional capital to finance activity in the play. Some of the partners include Sinopec (with Chesapeake, Devon), the South Korean firm Atinum (with SandRidge Energy) and Spanish Repsol (with SandRidge Energy).

Economic Impact

As activity has grown in the Mississippian Lime, so have the jobs directly related to drilling, completing, and servicing the wells. The resulting growth in production has also increased the need for additional pipeline capacity, natural gas processing facilities, and other infrastructure, as well as for all the goods and services used as inputs by these varied activities. In 2012, according to IHS, unconventional oil and gas activity, including the Mississippian Lime in both states and the Granite Wash in Oklahoma, led to economic activity which directly and indirectly supported more than 65,000 jobs in Oklahoma and 11,000 jobs in Kansas. Oil and gas accounted for 38 percent of the net jobs added for these two states between 2005 and 2012, which is to say 34,000 out of about 88,000. IHS projects these figures to rise to 150,000 for Oklahoma and 25,000 for Kansas by 2020 and to rise further in the following years.

The Mississippian Lime is another case that demonstrates how the technological innovation of independent producers is reviving a historical play, bringing jobs and economic growth to the region.

IPAA would like to thank the following contributors: Edward Cross, Stephen Trammel, Bill Grieser, Steve London, and Matt Wilcoxson.

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