Industry Veterans See Great Untapped Potential in Nevada’s Chainman Play

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Nevada’s Chainman play offers great untapped potential in terms of conventional and unconventional resources, say industry veterans who’ve studied the play in the past few decades.

In March, SAM Oil will test the potential of a conventional prospect in the Pluto 27-1 re-entry prospect, an anticlinal trap with migrated hydrocarbons into sand and fractured shale reservoirs. Originally drilled in 2007 by Plains Exploration & Production near the copper mining town of Ely in northeast Nevada, SAM redrilled the well last fall. In its test, SAM is targeting an anticline structure with an estimated 50 to 89 million barrels of oil recoverable, SAM manager Allen Matzke told Rigzone.

Additionally, the well’s unconventional potential will be evaluated as the well will penetrate an oil mature Chainman source rock section. Pluto offers a large anticline structure with no surface breach of the sealing layer, with four way closure expected, and three large reservoir targets, the Scotty Wash, Joana and Guilmette, said Matzke.

The Pluto 27-1 well had possibly the best natural gas shows ever encountered in Nevada when it was drilled in 2007, according to a presentation by SAM. The oil well shows from 4,460 feet to 7,950 feet and experienced a gas kick at 4,460 feet after Plains drilled through 200 feet of the upper Chainman. However, it appears the well, which was drilled in the nearly vertical east flank of the anticline, missed the target structure.

THE RICHEST OIL SHALE IN NORTH AMERICA, WORLDWIDE?

The Chainman shale is considered to be possibly not only richest oil shale in North America, but worldwide, said Charles Laser, an oil and gas consultant and wildcatter with nearly 40 years of experience. “The Chainman is superior to the Bakken or Eagle Ford due to the fact is a secondary, tectonically, naturally fractured shale with excellent total organic carbon (TOC), allowing for much large reserves and higher flow rates.”

Nevada has not seen the level of oil and gas activity as that of Texas or North Dakota. Oil and gas drilling has taken place in the Eastern Great Basin, which encompasses eastern Nevada and western Utah, since the late 1800s in Utah, according to a 2007 study by the U.S. Geological Survey (USGS). The first commercial oil production in Nevada started in 1954 with Shell Oil’s completion of the #1-35 Eagle Springs, the discovery well for the Eagle Springs field in Nye County, Nevada. From the early 1900s to Shell’s Eagle Springs well in 1954, roughly 90 exploration wells were drilled in the Eastern Great Basin.

“As the exploration industry became more established, popular exploration targets were large, surface exposed anticline structures,” according to the USGS report. “Some of these structures had oil shows in prospective reservoirs, but no accumulations were found.” The Shell discovery resulted in a sharp increase in drilling for approximately three years, but drilling activity fell due to low oil prices. Four more drilling activity spikes inspired by new field discoveries occurred in 1961, 1965 to 1970, 1977 to 1981, and 1984 to 1988. “The correlation between the number of new oilfield discoveries and the number of wells or total footage drilled, however, is poor,” said USGS.

The discovery of the Grant Canyon field spurred a wave of interest by oil and gas companies in the early 1980s. The Grant Canyon No. 3 well, discovered in Nye County in 1983, was the most prolific onshore well in the continental U.S., producing more than 4,000 barrels per day for nine years with no water or decline, according to Laser. The field, which covers less than 300 acres, has produced 22 million barrels of oil to date, Laser told Rigzone. Thirteen oil fields have been discovered in Nevada since 1978; as of this year, oil is being refined at a facility in Nye County. Oil exploration in Nevada has primarily taken place in Railroad Valley, home to the Grant Canyon field and in Pine Valley.

NEVADA EXPLORATION CHALLENGES

Nevada’s geology and remoteness pose challenges and increase costs for Chainman exploration and production. Acquiring permits for the Chainman play, much of which is under the jurisdiction of the U.S. Bureau of Land Management, presents another challenge. The Chainman is a rich source rock very similar to Midcontinent shale plays. However, its structural deformity adds complexity to exploration and production, said geologist Thomas Davis, who started studying Nevada’s oil potential while working for Atlantic Richfield Co. (ARCO) (now part of Tesoro Corp.). “You can’t just go in and find a rich zone in a resource play and then drill down a lateral. The fact that it’s deformed means it’s broken up, and that hydrocarbons may have escaped to other resources.”

According to the USGS, early exploration in the province presented several challenges. Complications stemmed from multiple tectonic compressional events, which created numerous and diversified structural configurations, followed by an extension event that dissected and rearranged many of the previously formed structures.

Another difficulty was the fact that several stacked and structurally segregated carbonate sequences were difficult to identify with biostratigraphy, USGS said. Multiple deposition and differential erosion events resulted in a complex burial and thermal history, leading to difficulty identifying vertical stratigraphy.

Seismic data in Neogene basins also were difficult to acquire because thick, unconsolidated basin fill sediments are interspersed with thick – but commonly discontinuous – volcanic beds. The remoteness of the area to field services and the absence of pipelines in the region also present challenges, USGS noted.

Thomas Davis, a geologist who started studying the Chainman while working for ARCO in Nevada, said that the difficulty in selling a conventional play to potential partners with no 3D or 2D seismic data has been the biggest obstacle to attracting interest in drilling anticlines. It is easier to get better images in Nevada’s valleys because they are younger in geologic years, with younger sediments that offer more contrast; but, the hard surface rocks on hills and mountains prevent the collection of good seismic data.

To drill on Nevada’s hills and mountains requires the heavy use of surface mapping, an exploration approach widely used in the 1920s and 1930s, said Davis. The reluctance to pursue a play without 2D or 3D data, combined with a hesitance by companies to be the first to test a new play, has prevented more oil exploration from occurring. “Most people in the business of exploring chase what other people are doing,” Davis noted.

Companies seeking to replicate the success of the Grant Canyon discovery in Railroad Valley experienced little success at first due to their lack of understanding of Nevada’s complex geology. Just as companies were starting to understand the geology, the 1986 oil price crash brought exploration plans to a halt. Low oil prices prevented many wells from being tested, hydraulically fractured conventionally or drilled deeply enough to encounter the lower Chainman, which is believed to be more productive than the upper Chainman.

Laser, whose interest in Nevada was sparked by the Grant Canyon No. 3 well, said he and a number of geologists continued to study the Chainman play even after the price collapse. These studies found that the exceptionally rich Chainman shale – a source rock – is thicker than the Bakken or Eagle Ford plays and is a tectonically naturally fractured shale compared with the Bakken tight shale.

Laser believes Nevada would be a prolific oil state today had the 1986 price collapse not occurred. He attributes the lack of focus on the Chainman to oil companies moving their exploration activity overseas after the crash. When they returned, their focus was limited to plays such as the Barnett and Eagle Ford, he said.

CHAINMAN POTENTIAL

In some places, the Chainman shale is up to 2,500 feet thick. The maximum thickness of the Bakken is 150 feet, Laser said, adding that the Eagle Ford’s average thickness is 250 feet. “There are many places in Nevada where oil seeps or Chainman shale outcrops have the odor of crude oil on top of the ground,” Laser commented. “Because the formations are naturally fractured, it is believed that much higher flow rates will occur than in other shale and conventional formations in other oil states.”

“There is no doubt that oil is migrating from deeper reservoirs via faulting up to a higher-porosity reservoir formations,” said Laser, adding that proprietary data shows multiple repeated thrust oil-bearing sections down to 25,000 feet in eastern Nevada.

Not an oil shale in the classic sense, the Mississippian Chainman shale is a typical lacustrine shale that is extremely high in Type 1 kerogen. Lacustrine shales are responsible for many of the world’s largest accumulations. In Chad and Sudan, much of the oil discovered to date comes from lacustrine shales of Cretaceous age.

“In the case of the Chainman, it is indeed an extremely rich source rock that is locally at peak maturity and abundant throughout the Nevada portion of the Eastern Great Basin and part of western Utah,” said Laser. Approximately 60 percent of the world’s oil reserves exist in carbonate reservoirs very similar to Nevada.

According to Laser, the state has world-class geological structures – including anti-clines/grabens/strat traps, slide blocks, multiple repeated thrusts, domes, sediments down to 40,000 feet and other structures – similar to those seen in Middle Eastern countries. Nevada boasts some of the richest oil source rocks and some of the best reservoir rocks in North America, Laser observed. The Guilmette formation, which produces oil at Grant Canyon, is a vuggy, or porous, high permeability rock that allows for high oil production.

At Grant Canyon, oil has been sourced by the Chainman shale; however, some believe much of the oil migrated from deeper, lower Chainman shale rock. Nevertheless, the Chainman would also likely have been a source for the oil at Grant Canyon because it is in the oil generation preservation window with excellent TOC. In some places, the TOC in the oil window is up to 3,000 feet thick and is sourcing oil from the Chainman as well as the Ely, Joanna Limestone, Devonian Guilmette and Simonson Guilmette (where the Grant Canyon No. 3 well came in). The Pilot shale is another potential additional source rock existing throughout eastern Nevada.

The Grant Canyon field wells are attempting to refill after 30 years of production, indicating that oil is migrating up a fault and depositing oil into vuggy limestone/sandstone porosity zones, Laser observed.

The drilling of the Pluto well disproved the assumption that Chainman reservoirs do not have a good seal, Davis noted. “It takes a long time to change people’s minds,” he said, noting that, even back in the early and mid-1980s, ARCO decided against drilling because of the size of the traps. Since Shell’s discovery in 1954, most of the drilling that took place in Nevada occurred in valleys, which had mature source rock underneath. After looking again at the number of big surface anti-clines that are untested, Davis sees potential. If an anti-cline play can be proved, it can be produced for less than resource plays.

According to the USGS, the Eastern Great Basin province has total conventional mean resources of 1,598 million barrels of oil.

PLAY POTENTIAL GIVES REASON FOR OPTIMISM

The play’s potential is not fully known, but the presence of sands and that fact it is not just one play type give reason for optimism, said Davis. The Chainman’s conventional sands are profitable at lower oil prices, and the shale portion of the play holds great potential. The play could have a naturally fractured reservoir in which hydrocarbons have been migrated into those shales – like reservoirs in the Santa Barbara Channel.

From a resources standpoint, the production and breakeven costs for the shale portion of the play are higher. While transportation costs would need to be considered, production costs could be quite low for oil found in the sandstone or the Scotty Wash, said Davis. Laser anticipates higher flow rates for Chainman wells compared to rates seen for Bakken or Eagle Ford wells, without the decline rates seen in other shale wells.

From a resources standpoint, the production and breakeven costs for the shale portion of the play are higher. While transportation costs would need to be considered, production costs could be quite low for oil found in the sandstone or the Scotty Wash, said Davis. “There’s a benefit to the conventional plays that I do more of because they’re more desired right now” because of low oil prices, said Davis.

Chainman has had some recent publicity as a rich source rock, but its anti-cline trap potential is not well-known. Combine big traps with good source rock, and it makes for a nice story, Davis said.

“Anti-clines haven’t been tested since the 1950s,” concluded Davis. “If SAM Oil can find success with the Pluto well, people will begin to realize that the play is attractive even at low oil prices.”

 

 

 

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