Missouri oil production is small but growing

Those lured to make a fortune drilling for oil in Missouri, an industry saying goes, arrive in a Learjet and go back on a Greyhound bus.

But take an exit off Interstate 49 just south of Grandview and go a couple of miles, not far from the Loch Lloyd subdivision. Pass through an ornamental metal gate flanked by fancy stone work and feast your eyes on cornfields and a couple of pretty lakes.

And on some big black pumps. Welcome to a Jackson County oil field.

In the U.S. energy boom, Missouri since 2008 has more than doubled its oil production — to 201,000 barrels in 2013. Most of the increase, about half, came from nearby Cass County, with the rest coming from a handful of other counties — Jackson, St. Louis, Vernon and Atchison.

The rising cost of oil — before its dive the past few months — drove the increase, helping overcome challenges in dealing with the state’s complex geology and the expense of recovering the state’s often heavy oil.

“There’s a lot of oil in the area, but it’s a hard fight to get it,” said Jim Long of Nevada, Mo., who has drilled several wells in the state.

The drilling challenges make Missouri one of toughest places in the country to earn a living in the oil business, and why it’s been a perennial footnote in the industry. Those challenges are the reality that has sent those who dreamed of making it rich in Missouri oil scrambling for bus fare.

And even with doubling in recent years, Missouri’s oil production is just a drop in the national barrel — enough to meet 15 minutes of U.S. oil demand each year. But the uptick has been enough to rekindle century-old dreams that Missouri could be a bigger player.

Over the years, experts have estimated that Missouri might have as much as 2 billion barrels of oil. And a state agency valued Missouri’s recoverable oil at $42 billion back when oil was $65 a barrel. At today’s prices, that would be more than $50 billion.

Hard to get at

Oil has threaded through Missouri’s history. Pioneers traveling through to California are believed to have used tarry oil that seeped to the surface to grease wagon axles.

After the Civil War, oil and natural gas were found when water wells were drilled near Kansas City. By the 1930s the state boasted more than 2,500 wells, according to the Missouri Department of Natural Resources.

But it never rivaled other oil states. Kansas, where oil production peaked in the 1950s, still dwarfs Missouri’s output with 46.8 million barrels produced in 2013.

Missouri’s oil is typically at shallow depths — starting at around 150 feet. That doesn’t provide much natural pressure that would make it more easily recovered. Compounding the problem, Missouri has a lot of heavy oil that flows like molasses.

“That’s where Missouri really struggles,” said Shari Dunn-Norman, a professor of geosciences and petroleum engineering at Missouri University of Science and Technology in Rolla.

The solution so far has been to fire up large boilers of water heated with natural gas. Then steam is injected into the oil to thin it and help it flow.

But that makes drilling and recovering the oil more expensive. Dunn-Norman said for the state to fulfill its potential, cheaper methods have to be developed.

“I think it’s waiting for a technology, to produce it economically,” she said.

Plummeting oil prices recently threaten to slash U.S. production in major oil states such as Texas and North Dakota. It’s yet to be seen whether a barrel of oil will stay around $80 — it closed Friday at $78.65 — but there are concerns that the lower prices will nip the budding effort in Missouri to make something more of its oil resources.

Despite the recent worries, the number of producing wells in the state hit 601 last year, according to the Missouri Department of Natural Resources. The amount of oil recovered was worth $17.7 million.

Small companies in the lead

Big Oil sniffed at Missouri’s oil prospects decades ago but apparently left unimpressed. The state has been left to wildcatters and smaller companies. More than a dozen last year were combing the state looking for some of the black gold.

The oil field near Grandview is operated by Colt Energy, based in Fairway. Colt Energy and companies such as Kansas Resources Exploration and Development are tapping what is known as the Clark-Miller Oil Pool, which has been Missouri’s largest producer.

Situated in northern Cass County and southern Jackson County near the Kansas state line, it’s one of the pockets of lighter oil in the state that doesn’t require the expensive steam flooding. The oil in porous sandstone is flushed out with water instead of steam.

Colt Energy’s pumps in the field near Grandview pull up to four barrels a day from roughly 30 wells.

Sometimes oil has been unexpectedly tapped. The Laclede Group, best known for its St. Louis gas utility and the owner of Missouri Gas Energy in Kansas City, recovers 20,000 barrels of oil a year in St Louis County. In the 1950s, drilling to find a good place to store natural gas in the county instead struck oil.

Fracking, the injecting of water mixed with chemicals, a practice hotly criticized by environmentalists, is sometimes done in Missouri. But Missouri oil drillers say the state’s porous rock and smaller formations require far less water and chemicals than that used in other states.

The state has also had problems with inactive but unplugged wells, which can be a conduit for contaminants that pollute groundwater.

By focusing more on lighter oil, companies lower their production costs and have more of a safety margin when prices dip.

“We’re watching it (the oil price) but we still have plans to drill,” said David Bleakley, vice president of Colt Energy.

Heavy oil bonanza?

The potential for making the big money, however, lies in recovering that heavy oil.

In 1979, the Missouri Department of Natural Resources took its last in-depth look at the state’s prospects and claimed there could be 1.4 billion barrels or more of heavy oil in western Missouri. Vernon County, south of Kansas City, is the most promising area for drilling.

The estimates are educated guesses at best. Missouri doesn’t have good maps of its oil resources. But the state’s heavy oil becomes a lure when oil prices rise.

Megawest Energy, a Canadian company, came to Vernon County in 2007 with big plans, leasing thousands of acres over the heavy oil. It had some initial success, but the recession, which at the time also caused plummeting oil prices, tanked the effort.

But the dream lives on. Palo Petroleum, an energy company based in Dallas, chose Vernon County as the best place in the country to use some new technology. A petroleum consulting company said the site Palo picked west of Nevada held 31.5 million to 45.2 million barrels of oil.

The company’s Bushwhacker project initially used the new approach — a single horizontal well to inject the steam and recover the oil.

But it didn’t work. The porosity of the sandstone varied, and more wells were needed to inject steam in different directions. Now, three years into the project, the company believes it has the answer but will need a few more months to be sure it works and is economical.

“We believe we have it figured out,” said James Graham, president and CEO of the company. “We’re hoping it doesn’t have any more curves to throw at us.”

This story was originally published November 7, 2014 at 8:47 PM with the headline "Missouri oil production is small but growing."