History of Oil & Gas in Louisiana
The volume of hydrocarbons in Louisiana is due to the state's geologic history. It has had the fortune of possessing the optimal conditions needed for the formation of hydrocarbons. The sedimentary section beneath coastal and offshore Louisiana is a major part of the Gulf Coast Continental Margin basin which extends from Mexico across Texas and Louisiana and into the panhandle of Florida. Louisiana's hydrocarbons are the result of the right sediments (source materials), temperature, timing of geologic events, and salt both development and later movement.
Gulf Coast Region
Surface seeps of hydrocarbons in southern Louisiana were known long before the resource became profitable to exploit. Indians in Louisiana used oil from natural seeps for medicines. In 1540, Hernando DeSoto discovered the resource. Early explorers called the oil "stone pitch" and used it to seal their ships (Franks and Lambert, 1982).
While the first oil well in the world to be drilled was in Romania, 1857, the first production well drilled in the United States was in 1859 in the town of Titusville. It was drilled by Colonel Drake on behalf of the Pennsylvania Rock Oil Company. It was less than 70 feet deep, cost about $2,500 dollars to complete, and produced about 25 barrels (bbls) of oil per day.
One hundred forty years later, drilling for hydrocarbons are routinely conducted on both dry land and open ocean to depths exceeding 20,000 feet below ground level (BGL) and in water up to 8,000 feet deep.
The Drake discovery well spurred the quest for petroleum in the United States. But it was the discovery of oil in Beaumont, Texas in 1901 that changed the world and created the modern oil industry. This discovery was known as Spindletop. The well was drilled atop a salt dome, but at about a depth of 1,020 feet, the driller was having problems getting the bit to continue cutting downward; the was resistance, then there was vibration and shaking of the drilling platform, then came a low rumbling sound. Finally, the noise was a deafening roar and the well erupted sending mud, gas, rock, oil, and drill pipe into the air. The gusher produced 100,000 bbls of oil per day which was about 3,000 times the volume of oil produced by the Drake well in 41 years earlier. By the end of the year, there were over 400 such gushers from additional wells that sprang up in the same area almost overnight.
In September, 1901, the first successful oil was completed in a rice field at Jennings, Louisiana. It was called the Heywood #1 Jules Clement well, drilled to a depth of 1,700 feet deep. This discovery created an oil rush in Louisiana; wells sprang up one after the other. By the end of 1905, more than 6,000,0000 bbls of petroleum was produced. It was priced at $0.72 cents/bbl which created a huge sum of money totaling $4.3 million dollars.
QUESTION: What would 6,000,000 bbls of oil bring in today's market? To answer this question, you need to know what the current rate/bbl is selling for; where would you look to find this?
ANSWER: To find out the current price/bbl of Louisiana crude oil, look in a newspaper such as the Wall Street Journal, Section C, under the stock quote category of Futures' Prices, for Light Sweet (this is the type of crude oil produced in Louisiana). On November 1, 1999, the market price for Sweet Light was 21.75/bbl per thousand barrels meaning that you got this price only if you bought a minimum of 1,000 bbls of crude. At this rate, 6,000,000 bbls of oil would bring $130,500,000 million dollars.
The demand for oil was rapidly exceeding the supply by 1905 and the industry's ability to produce it. Newspapers were predicting national shortages and economic crisis. But the crisis never developed; more oil was discovered. During the early years of production, drilling methods were crude and oil recovery from the subsurface was very inefficient. Large volumes of oil were left in the ground. Moreover, there were little to no established exploration techniques; everything was a wildcat approach to discovery or relying on the ideas of Creekology. But there were other problems as well such as storage. Storage of crude oil was a problem because transportation was slower than production and crude outstripped storage capacity. So wooden storage tanks were often constructed to store the product until it could be shipped to the refinery [pg 11- lindstedt]. In 1910, the first long-distance pipeline was constructed to carry crude from Caddo Lake near Shreveport to a refinery located at Baton Rouge.
Initial exploration efforts were concentrated in looking for salt domes because they had created topographic expression in the surface landscapes. It wasn't until 1913 that the relationship between salt domes, creek beds , and anticlines was made and related to most of the big oil pools of the day. Once this was realized, the rush began to locate anticlines. Much of the initial work was conducted in Oklahoma in the Ouachita Mountains. But most exploration was restricted to very shallow salt domes because there were no geophysical techniques yet established. But all of this changed in 1915.
Exploration strategies changed again when it was shown that oil not only existed beneath salt domes (anticlines), but also in fault structures. This strategy was used to discover one of the largest fields in Texas, the Texas-Mexia field. This single exploration concept changed petroleum exploration forever in the Gulf Coast. And a clearer understanding of how oil is trapped was beginning to form.
Another major boost to drilling came in 1909 with the development of the Hughes rotary drilling bit. Prior to this time, drilling was accomplished by percussion. This means that a drill bit was raised by hoist and then allowed to free-fall into the hole. The force of impact by the heavy drill bit broke the rock at the bottom of the hole. Every so often, a device called a bailer had to be lowered into the hole to remove the rock debris. It was a slow, tedious effort to drill a well.
QUESTION: Which drilling methods were used for the Drake well in Pennsylvania, Spindletop in Texas, and Heywood #1 well in Louisiana?
ANSWER: All three wells, the Drake, Spindletop, and Heywood #1 were drilled prior to 1909 and therefore they used the percussion method.
With the advent of the rotary bit, it now became possible to accurately identify which rock strata and how deep drill cuttings (bits or rock broken off at the bottom of the hole by the rotating drill bit) came from down the hole. These cuttings were examined under a microscope by micro-paleontologists (person who studies microscopic fossils of plants and animals) who were looking for index fossils (organisms that lived for a short period of time and that are found in a specific rock type) that would allow an accurate determination of the paleo-environment (the nature of the ancient environment in which the organism lived) in which they lived and their relative age in the stratigraphic column.
QUESTION: Why would finding an index fossil help you in find oil?
ANSWER: If, for example, the index fossils were Foraminifera or Radiolaria (microscopic phytoplankton), their presence in a particular rock unit beneath the surface would mean that this strata where they were found probably contains hydrocarbons. Remember in Chapter 3 that the presence of Foraminifera or Radiolaria are the most widely represented micro-fossils IN young oil-bearing strata.
QUESTION: Why would it be important to know the paleo-environment of the micro-fossil?
ANSWER: If, for example, the index fossil only lived in an euphotic zone in oceans with warm temperatures, then their growth is totally dependent upon photosynthesis. This implies that these fossils were living and multiplying in a restricted zone probably along a continental shelf areas, bordering and overlapping a continent where upwelling currents were bringing a lot of food. Remember in Chapter 3, the primary ingredients for the formation of hydrocarbons are raw material, planktonic organisms, some sort of a protected environment such as a continental shelf, an influx of abundant sediments to cover the dead planktonic organisms, and geologic time in which to accumulate the materials, transform the carcasses into oil droplets, and move the oil from source beds into reservoir beds. So knowing the paleo-environment tells you about the area in genera; in this case, finding index fossils that lived in the paleo-environment discussed above implies that this rock strata was hydrocarbon source materials.
The next major technological improvement came in 1923 when seismic exploration was introduced into the Gulf Coast. This technique allowed geologists to look beneath the surface of the earth. By about 1950, seismic (geophysical) techniques were widely used both onshore and offshore [SEISMIC1950].
By the late 20's and early 30's, there were few areas onshore that had not been explored, so many drilling companies began experimenting with ways to drill offshore. One of the early methods was to put a rig on a barge as this photo shows of an early drilling rig on Caddo Lake near Shreveport. This was the first over-water drilling in America.
Offshore exploration did not begin until 1934 when the Texas Company (precursor to Texaco) drilled a well one mile from the shoreline of Louisiana. The offshore drilling industry was born. In 1947, the first bottom supported platform was constructed by Kerr-McGee in 18 feet of water, 12 miles offshore beyond the sight of land. It cost $230,000 to build, an unheard of amount of money. By the 1950's, 92 offshore platforms had been placed in water to depths of 100 feet. By the end of the 60's, some 500 platforms had been constructed in water up to 350 feet deep. By the end of the 70's over 12,500 offshore rigs were producing hydrocarbons on the continental shelf of the Gulf of Mexico with the cumulative development costs for these rigs exceeding $12 billion dollars. In 1979, Shell Oil Company installed the Cognac Platform in slightly over 1,000 feet of water just beyond the edge of the continental shelf at a cost of over $250 million dollars.
Offshore construction has constantly pushed the limits of what is possible to construct. In 1989, the first tension well leg offshore platform was installed by Conoco. The platform floats on the surface and is connected to a foundation template on the sea floor by tubular steel tendons. This platform was placed in 1,760 feet of water about 170 miles southwest of New Orleans.
Since Spindletop in 1901, Louisiana has had about 1,165,000 producing wells drilled; they have produced 25.2 billion bbl of oil and 214 trillion cubic feet of gas.
The oil and gas industry in Louisiana is a major economic and industrial force. The petroleum industry account for almost 25% of the total state revenues, or about $1.2 billion dollars. The petroleum industry employs more than 116,000 people which is about 6% of the states total work force. This 6% earns almost 12% of the total wages paid in Louisiana or about 4.34 billion dollars.
The first refinery constructed in Louisiana was in Baton Rouge in 1909, a precusor to the Exxon refinery of today. Today it is the largest oil refinery on the North American continent.
A barrel of crude oil produces a number of products after it is refined. But the major product is gasoline which accounts for almost half of the barrel of crude. But the cost of a gallon of gasoline at the pump reflects more than just the cost to find it, drill a well, pump it to the surface, and send it to the refinery. There are many other factors that come into play such as taxes and other overhead costs [pg 28 - mid continent].
_____________ , 1992, Louisiana Oil and gas facts: La Mid-Continent Oil and Gas Assoc., 30th Ed., Sep 1992, 36 pp.
COLEMAN, J. M., 1998, Spindletop to deep water: Am. Inst. Petrol. Geol., Ann. Conv., Oct. 6, 1998, Abstract
FRANKS, K. A. AND P. F. LAMBERT, 1982, Early Louisiana and Arkansas oil: College Station, Texas Univ. Press, 243 pp.
LINDSTEDT, D. M., NUNN, L. L., HOLMES, J. C., AND WILLIS, E. E., 1991, History of oil and gas development in coastal Louisiana: La. Geol. Survey, Res. Info. Ser. No. 7, Baton Rouge, LA., 131 pp.