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Arkansas News: S's gone wild: Southwestern, Schlumberger and Shell pump millions into Fayetteville Shale

By Wesley Brown
What does a Houston company with Arkansas roots, a French conglomerate headquartered in the Big Apple and a Dutch oil giant with Texas ties all have in common?
Southwestern Energy, Schlumberger Ltd. and Shell Oil, the three respective companies described above, represent the three levels of what could be billions of dollars in investment in the hot Fayetteville Shale play.
These companies alone announced late last year that they will invest more than $1 billion in possibly the hottest natural gas field on earth.
Houston-based Southwestern said just a few days before Christmas that it plans to invest more than half of its $830 million 2006 budget to develop natural gas wells in the giant Arkoma Basin, which stretches across half of the state.
“Our capital program in 2006 … will be heavily weighted toward the Fayetteville Shale play in Arkansas,” Southwestern Energy President and CEO Harold M. Korell said.
The company's $400 million budget this year for the burgeoning Arkansas natural gas portfolio represents a 123 percent hike over the $175 million spent last year. So far, more than 50 wells have been drilled on the nearly 900,000 acres that the company owns in Franklin, Conway, Van Buren, Cleburne and Faulkner counties.
John Thaeler, senior vice president at SEECO, the Fayetteville subsidiary of Southwestern, said the region could see upwards of another $90 million, depending on the outcome of current test drilling.
In oilfield circles, Southwestern is known as an independent producer. Unlike the so-called “majors” that have their hands in the oil business from the drill bit to the refinery to the gas pump, independents mainly focus only on drilling and producing crude oil and natural gas, and then selling it on the international market.
The company left Fayetteville several years ago for Houston, the boom-and-bust Texas city that is now considered the oil capital of the world.
Meanwhile, experts have known for years that the shale region of Arkansas has large natural gas reserves. But the natural gas is contained in shale-dominated, fine-grained rocks in depths ranging from 1,500 to 6,500 feet, making it costly and difficult to extract, said Ed Ratchford, geology supervisor for fossil fuels at the Arkansas Geological Commission.
Now, with new technology and investment dollars siphoned from record natural gas prices, there has been a modern-day gold rush to obtain the mineral rights on the formation so developers and wildcatters can begin exploratory drilling.
It was Southwestern that contracted Schlumberger a few years ago to seek ways to exploit the shale reservoirs of western Arkansas.
Schlumberger is known as one of the Big Three oilfield conglomerates, along with Baker Hughes and Halliburton. The company has heavily invested in gas shale research and is known throughout the oil industry for its downhole technology expertise.
It was the former Paris-based multinational that developed a full line of key technologies – such as 3D imaging, reservoir software and hydraulic well monitoring and measuring – that now allow natural gas developers to extract gas from the porous shale rock.
Together in Houston now, after Schlumberger's recent announcement that it plans to move its U.S. headquarters from New York City Texas, the two companies have helped to draw hundreds of other natural gas speculators to the region.
But it is The Hague-based Royal Dutch Shell plc, one of the largest publicly traded companies in the world with annual revenues of $306 billion, that will put a stamp of legitimacy on the unconventional natural gas play.
Like Southwestern and Schlumberger, the oil giant commonly known as Shell Oil announced near the end of last year that it is coming to Faulkner County.
Shell said that it has acquired the rights to explore on 70,000 acres in the emerging shale play and plans to drill its first well this year.
Schlumberger, with annual revenues exceeding $11 billion, has already begun construction on a regional office at a 20-acre site in Conway's industrial park that will ultimately employ 100 locals.
Before that, Southwestern opened offices in the growing central Arkansas city and will eventually hire up to 150 people there.
If other oil majors like Exxon-Mobil, BP, Chevron and ConocoTexaco join Shell and the others, the payout for the state's economy will be enormous. And Conway, now known as a college town, will join the ranks of the nation's few boomtowns.
Wesley Brown is business editor for the Arkansas News Bureau in Little Rock. His e-mail address is [email protected]
 

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