Please note that the blue clouds (called Evil Fog), are not meant to be healed with Life Essence, they need to be unlocked with Dragon Power, so you need to get more dragons and
merge them in higher levels. When you do this, you'll see the number in the meter go up.

 

Once you unlock the Evil Fog, you'll receive Dead Land, which are tiles grayed out with items on them. This is when you should use the Life Orbs, to heal those tiles with Life Essence.