Sunday, December 16, 2018
Nearly a decade since independent oil firms ushered in the U.S. unconventional oil boom with advances in hydraulic fracturing, a key challenge remains—how to stem sharp decline rates at shale wells without burning through budgets, writes Argus Media. U.S. oil production is forecast to rise by 1.3 MMbbld to a record 10.7 MMbbld this year and hit 11.5 MMbbld in 2019, driven by growth in tight oil output from the Permian Basin and other shale formations, says the Energy Information Administration.
But growth will depend on how well companies succeed in slowing the steep decline rates of as much as 70% that tight oil reservoirs exhibit in the first two to three years following startup. The initial response has been to drill longer lateral wells and pump more proppant, or sand and water. But there are limits to the amount of water or sand that can be injected and the length that a well can be drilled to, leaving companies searching for longer-term fixes. “We have yet to understand how reservoir conditions and well productivity change as we continue to inject billions of pounds of proppant and billions of gallons of water into the ground each year,” oil service firm Schlumberger CEO Paal Kibsgaard says.
A growing concern is the impact of secondary wells on output and on primary wells as more producers switch to pad drilling to lower their barrel of oil equivalent costs. If the spacing between wells is too close, it can lead to less than expected production, and reduce pressure in the primary well, creating so-called pressure sinks. The percentage of secondary wells in the Eagle Ford has reached 70%, Schlumberger says, and in the three-year period since the level has breached the 50% mark there has been a steady reduction in unit well productivity.
The industry needs to better understand the sub- surface and fluid technologies it uses, Kibsgaard maintains. But that increases costs, going against producers’ priorities as they deal with investor pressure to spend within cash flows and improve returns. “Deploying these technologies requires a significant mindset change throughout the industry, and a willingness to increase investments.”
The industry is at an “inflection point” and whoever successfully addresses the challenge of having pressure sinks that create the “parent-child relationship” between wells “is going to be a value creator,” says Concho Resources CEO Tim Leach. The key lies in the sequencing of the zones and the timing between drilling the wells, according to Leach. The right mix “optimizes recoveries, optimizes economics, and reduces stranded wells.”
Beyond secondary well challenges, producers and service providers are touting other technological advances. EOG Resources has developed a predictive algorithm to make better and quicker decisions. “We are able to pro- duce both high returns and high growth and we are able to do it organically,” CEO Bill Thomas says. Halliburton has launched its Prodigi intelligent fracturing service, with adaptive and automated controls that respond in real time to changes in the formation. It is also working with Micro- soft and Accenture to develop digital technology.
The United Kingdom’s Barclays bank views innovation as key to sustaining output growth. Some companies have reported that reservoir performance has been slipping in key basins, Barclays says, but it doesn’t agree with the idea that industry may be reaching the end of the efficiency gains cycle. “We believe that, on balance, industry innovation will keep inevitable productivity declines in check,” the bank says.
(SOURCE: The Weekly Propane Newsletter, December 10, 2018)
But growth will depend on how well companies succeed in slowing the steep decline rates of as much as 70% that tight oil reservoirs exhibit in the first two to three years following startup. The initial response has been to drill longer lateral wells and pump more proppant, or sand and water. But there are limits to the amount of water or sand that can be injected and the length that a well can be drilled to, leaving companies searching for longer-term fixes. “We have yet to understand how reservoir conditions and well productivity change as we continue to inject billions of pounds of proppant and billions of gallons of water into the ground each year,” oil service firm Schlumberger CEO Paal Kibsgaard says.
A growing concern is the impact of secondary wells on output and on primary wells as more producers switch to pad drilling to lower their barrel of oil equivalent costs. If the spacing between wells is too close, it can lead to less than expected production, and reduce pressure in the primary well, creating so-called pressure sinks. The percentage of secondary wells in the Eagle Ford has reached 70%, Schlumberger says, and in the three-year period since the level has breached the 50% mark there has been a steady reduction in unit well productivity.
The industry needs to better understand the sub- surface and fluid technologies it uses, Kibsgaard maintains. But that increases costs, going against producers’ priorities as they deal with investor pressure to spend within cash flows and improve returns. “Deploying these technologies requires a significant mindset change throughout the industry, and a willingness to increase investments.”
The industry is at an “inflection point” and whoever successfully addresses the challenge of having pressure sinks that create the “parent-child relationship” between wells “is going to be a value creator,” says Concho Resources CEO Tim Leach. The key lies in the sequencing of the zones and the timing between drilling the wells, according to Leach. The right mix “optimizes recoveries, optimizes economics, and reduces stranded wells.”
Beyond secondary well challenges, producers and service providers are touting other technological advances. EOG Resources has developed a predictive algorithm to make better and quicker decisions. “We are able to pro- duce both high returns and high growth and we are able to do it organically,” CEO Bill Thomas says. Halliburton has launched its Prodigi intelligent fracturing service, with adaptive and automated controls that respond in real time to changes in the formation. It is also working with Micro- soft and Accenture to develop digital technology.
The United Kingdom’s Barclays bank views innovation as key to sustaining output growth. Some companies have reported that reservoir performance has been slipping in key basins, Barclays says, but it doesn’t agree with the idea that industry may be reaching the end of the efficiency gains cycle. “We believe that, on balance, industry innovation will keep inevitable productivity declines in check,” the bank says.
(SOURCE: The Weekly Propane Newsletter, December 10, 2018)
