Officials tout benefits of lucky oil discovery
Published 5:00 am Thursday, July 24, 2008
A once-abandoned oil field in Lincoln County is yielding blackgold again after more than 20 years of sitting idle, thanks to oneSouth Mississippi oil company’s stroke of good luck.
T.Byrd No. 1, an oil well constructed by KFG Petroleum Corp. ofNatchez, is still flowing approximately 130 barrels of light sweetcrude per day more than 10 weeks after its installation in CenterPoint Field, a drilling area that has lay dormant since its lastproductive well was capped in 1986. The field is in the farsouthwest corner of Lincoln County near the Franklin Countyline.
“It’s not any great big discovery or anything, we justreestablished production in an old field,” said KFG PetroleumPresident Steven Guido. “We were just lucky enough to find acommercial supply.”
Guido said the well is producing 45 API (American PetroleumInstitute) gravity degree sweet crude, a commercially viable formof oil that requires little refining. The oil is almost gastank-ready, Guido said, whereas heavier, sour forms of crude oil -like those produced in Saudi Arabia – do not match well with U.S.emissions standards and are better suited for the creation ofasphalt, rubber and plastics.
“It won’t run in your car but it won’t take much refining,” hesaid.
As of Tuesday morning, Guido said T.Byrd No. 1 was flowing oilupwards naturally at 345 pounds of pressure, with its capacityfluctuating between 125-150 barrels per day. Guido rated theproduction of his 10,700-foot well as “excellent.”
How long the production will hover at its current level remainsto be seen. Guido said that while the well continues to flowwithout bringing up water, the pressure will eventually decreaseand the remaining oil in the field will have to be pumped to thesurface. T.Byrd No. 1 has already been fitted with a pump inanticipation of the supply’s depletion.
John Hansen, the geologist with Hansen Oil Corp. of Shreveportwho conducted the subsea geology and discovered the remaining oilin Center Point Field, said there was no way to tell how muchlonger the reservoir will produce.
“Once the pressure dies down below about 100 pounds, you’ll haveto pump it,” he said. “It’s been steadily declining and theoperator expects to put the well on the pump in the near future.But maybe it will flow for a while.”
Hansen said the fact that the well is flowing at all came as a”pleasant surprise.” Hansen and KFG were looking to expand intofresher areas of the field, which is dotted with “dry holes” -abandoned wells that produce such small amounts of oil they aredeemed not profitable.
Hansen stumbled across the untapped oil pool approximately twomiles deep by chance while seeking reserves in the previouslydrilled areas.
T.Byrd No. 1 was placed about 1,400 feet north from the CallonWell, a capped well that produced 96,000 barrels of oil between1973 and 1986.
“We thought there was a potential new extension to the oldfield, and apparently we got into something that’s pretty good,”Hansen said. “We thought we had a good shot, but you never knowuntil you do it.”
Hansen said the oil pocket has gone undiscovered because noother companies had “gone out and risked a million-and-a-halfbucks” to find it.
“You gotta be kind of a reckless fool like me to go out and tryit,” he said.
Guido said the drilling for T.Byrd No. 1 cost $800,000, withanother $400,000 spent on completion. With other construction costsfactored in, he said the final cost of erecting the well was around$1.6 million.
But the economic benefits of just one well are sizeable. Withoil prices only falling below $130 per barrel during the past twoweeks, Guido said T.Byrd No. 1 grossed $400,000 in June alone, andthat money trickles down all over Lincoln County.
A 25 percent royalty – $100,000 – is divided among about 20mineral rights holders, Guido said, with a further 12.5 percentstate tax. Not only are 20 county residents depositing $5,000 permonth because of the well, but the county receives a rebate fromthe state taxes.
And the pumping up of the local economy began before the firstbarrel was filled with oil. Guido said KFG purchased all of thenecessary gravel, concrete and other supplies necessary to buildthe well from Brookhaven and Lincoln County companies, and localsperformed most of the labor.
The trickle-down economic impact of T.Byrd No. 1 is welcome newsto Brookhaven-Lincoln County Chamber of Commerce Executive VicePresident Cliff Brumfield, who compared the well’s financialcontribution to a new industry.
“With the royalties paid to the landowners, the economic impactis the equivalent to a new business with 20 employees makingapproximately $60,000 per year,” he said. “We would gladly welcomeany such industry.”
Brumfield pointed out that domestic oil production, while acontroversial issue to some Americans, is a welcome and acceptednorm for many Lincoln County residents, who have lived side-by-sidewith oil production for many decades.
“I love it,” Brumfield said of the efforts of oil companies likeKFG Petroleum Corp. and Denbury Resources Inc. “The renewedinterest in oil production has many benefits, some of which, suchas in this instance, are funneling down to local residents.”
While T.Byrd No. 1 will soon be switched to pumping mode and noone is sure how long it will viably produce, Guido said the renewedinterest Brumfield spoke off is the equivalent of a boom.
The boom has caused prices on the necessary materials toincrease alongside progress,
“Everybody’s wide open,” Guido said of domestic oil productionefforts. “When we made this discovery (more than) two months ago,the pipe I put in the ground cost $15.75 per foot. That pipe todayis $35. Everything is in short supply because of this oil boomwe’re having right now. Everyone is so busy the cost of materials,goods and services has gone out of sight.”
While Guido waits for T.Byrd No. 1’s production to pay foritself, he said he is considering drilling one or two more wellsaround Center Point Field.