Noble: Elko-area oil results promising

A much-watched oil exploration program in Elko County generated encouraging results.

But an environmental study that’s being watched just as closely may cast a chill over the Nevada oil business just as it’s getting started.

Executives of Noble Energy Inc., the Houston-based company that’s assembled a big package of land for oil exploration in northeastern Nevada, told investors a few days ago that they like the results of the first couple of wells they’ve drilled.

Charles Davidson, the company’s chairman, said that Noble has drilled its first two wells in northeast Nevada and believes that it found a 700-foot thick layer of oil-bearing rock.

The oil was sort of waxy, Davidson said, which didn’t come as a big surprise. Oil companies use down-hole heating systems to get waxy oil to flow more freely.

Noble is beginning extended tests of the well, Davidson said, and it’s studying whether to invest in the completion of a second exploratory well that it drilled.

Noble Energy plans to drill four more exploratory wells this year — two to the north, two to the south of the first wells — in an attempt to gauge how far the oil-bearing formation might extend.

That will help the company get a handle on two questions that its executives have identified as primary risks in northeast Nevada: How thick is the formation, and how far does it extend?

Noble holds about 350,000 acres of leases in northeast Nevada, where it thinks oil might be found in tight rock formations 6,000 to 12,000 feet below the surface.

Noble, which operates worldwide, has identified northeast Nevada as one of its priorities for fresh exploration.

Even those results are very preliminary, companies that support the oil-and-gas industry are beginning to stir.

Pam Borda, executive director of the Elko-based Northeastern Nevada Regional Development Authority, says at least one exploration-support company has leased land in Wells in anticipation of launching an eastern Nevada operation.

“I expect there will be additional movement when they get going again this summer,” says Borda.

That movement will be slowed, however, by studies focused on preservation of habitat for the greater sage grouse in Nevada. The Bureau of Land Management and the U.S. Forest Service have been sorting through some 17,000 comments they received as they began the study. It’s scheduled for completion late this year.

Oilmen — and mining executives, for that matter — worry that sage-grouse protection could put wide swaths of northeastern Nevada out of bounds for exploration.

In the meantime, the BLM has delayed an auction of oil leases on hundreds of thousands of acres of federally owned land.

Originally scheduled for mid-April, the lease auction was delayed until mid-June — and now has been delayed again until Sept. 9.

Exploration outfits have asked the federal agency to allow them to bid on leases on 435,919 acres in 214 separate parcels in eastern Nevada, a BLM spokesman said last week.

Much of that interest has been focused on the White River Valley south of Ely and a good jaunt south of the area that’s the focus of Noble Energy’s drilling.

Hawkwood Energy LLC of Denver is among the companies assembling land positions and evaluating the potential of the region. It holds leases on about 200,000 acres in Nevada.

Patrick Oenbring, the chief executive officer of Hawkwood, said a formation known as the “Chainman Shale” in the region appears to have the right technical ingredients to produce oil.

If preliminary exploration is successful, he said the region could see “significant development drilling and construction activity” as commercial production is established.

“Since the Chainman Shale is present over a large geographical area, exploration success could ultimately lead to large-scale oil production at some point in the future,” Oenbring said.