Speed can be a drag on oil output
Technology starts to shift to new methods to pull more crude from shale
Aged, slow-churning pump jacks known as nodding donkeys have found new life pumping oil in the plains near Bakersfield in West Texas and other places elevated by the nation’s oil boom.
And the familiar horse-head pumps are getting makeovers that could keep them on the job for many more years as components in a technological revolution aimed at extracting more oil from sometimes stubborn shale reservoirs.
Makers of oil field equipment say the next mutation in the evolving U.S. shale venture must dig into its biggest engineering hurdle: Oil producers leave a massive amount of hydrocarbons behind when they combine modern well stimulation techniques with an appetite for speed.
Cheaper and faster drilling has the unintended consequence of leaving American oil lands pockmarked with some nearly infertile wells.
The head of one of the top three oil field services companies says more disciplined engineering and “smarter wells” could yield more crude from the shale.
The approach would allow oil companies to dig fewer holes in the ground, which would reduce land surface costs, water usage and other expenses, Baker Hughes CEO Martin Craighead said in an interview with the Houston Chronicle.
Oil companies have acted on the impulse that cloning more wells means more oil, Craighead said, but shale reservoirs have proved to be the most complex and
discordant ever tackled.
“I can drill one well here, and a quarter of a mile away it looks like I’m in another state,” he said. “What a lot of our customers are finding out is if you drill wells that aren’t that effective, the last thing you want to do is go into a ‘manufacturing’ process. All you’re going to do is drill more of them faster.”
The widespread adoption of multiwell drilling platforms called pads and other technological breakthroughs have enabled hundreds of operators across the major U.S. shale basins to get more wells out of a single rig.
Over the past two years, oil companies have pushed the number of wells in South Texas’ Eagle Ford Shale alone up 34 percent to 1,171, according to Baker Hughes. Nearing a plateau
But drilling efficiencies are nearing a plateau in the Eagle Ford, the Bakken Shale and other plays that have seen significant development, Craighead said. To stand out on Wall Street, he said, oil producers will have to find ways to improve their initial production rates and the total amount of oil they can draw from shale wells, which decline rapidly a few months after an early burst.
“Some operators can’t get there,” he said. “Their company has been built on a pattern of just more efficiency, but if that starts to kind of peter out, now they’ve got to change their approach.”
Baker Hughes and its rivals in the top tier of services companies — No. 1 Schlumberger and No. 2 Halliburton — are working to help their customers make those changes.
Halliburton has developed software that it says can tell oil companies where to place well bores in the surface of the earth and, by interpreting data on geological variables, can tell drillers where and how to fracture and stimulate wells.
The service, called Cypher, went to market last September, and Halliburton says that in early tests, it boosted the total oil and gas production of one customer’s wells in North Texas’ Barnett Shale by 50 percent. Cypher bolstered oil output by an average 20 percent across a dozen programs in North America, Halliburton says.
The results demonstrate the importance of understanding the many variables in a shale reservoir.
Quickly duplicating identical wells has created a windfall of oil production, said Stephen Ingram, North America technology and marketing manager for Halliburton.
“But the reality is we don’t operate in a factory,” he said. “We operate in the reality of Mother Nature.”
And as drillers learn from each new well, a cookie-cutter approach to drilling doesn’t always work in the shale.
“The factory method of drilling every well the same length leads to production inefficiencies,” Ingram said. “There is a lot of low-hanging fruit for operators to improve their effectiveness.”
Late last year, Baker Hughes commercialized a new line of pumps that can boost oil recovery from depleting, lowflow shale wells using a variation on the venerable pump jack.
One operator in the Bakken Shale in North Dakota, the company said, collected a 25 percent increase in oil output after switching out its rod lift system for the new electrical submersible pumps, called Flex pumps.
And Schlumberger has seen “promising production results” from field tests of new fracturing technology, CEO Paal Kibsgaard said last month. ‘Low-hanging fruit’
Still, the three oil field giants are exploring production technologies that address just small pieces of the puzzle, said Marshall Adkins, an analyst with Raymond James.
“This is really cool stuff,” he said. “But is there any one thing that any of these guys has that is blowing everyone else out, singularly? No. They all have their little niches.”
New technologies will cost operators more money, and not all producers are convinced they should abandon the quick-drill method, at least not if they take the right steps ahead of time.
California’s stockpile of heavy oil taught former Exxon Mobil executive Tim Cutt the value of a good “manufacturing process.”
Now the president for petroleum and potash at BHP Billiton, the largest foreign investor in North American shale, Cutt said the biggest efficiency gains could come from technology used to push unconventional wells toward production, such as fluids used in hydraulic fracturing and the sand and other proppants that break shale rock apart.
“That’s where we’re spending a lot of our time,” he said — studying the rock and reservoir, and geological variables like water saturation, depth and pressure.
“Once we get the solution to that problem correct, then we move into the manufacturing process,” Cutt said.
Soon after they discovered how to crack the ancient shale to free its oil and gas, companies rushed to gather land positions over reservoirs that are far more complex than the country’s original sandstone and carbonate basins.
Shale plays are much more heterogeneous than older resources. They have poor porosity, meaning they have fewer holes in the rock for oil and gas. And they lack good permeability: The holes in the rock are not well connected, making it tougher to extract hydrocarbons.
In some instances, an analytical, scientific approach to shale reservoirs has gotten lost in the rush to grab acreage and produce oil.
But the most efficient operators are up to three times more efficient than the least because they have learned as they drilled, said John Fierstein, vice president of product management for Drillinginfo. ‘Learning phase’
“The industry is in a learning phase,” Fierstein said. “Every well we drill, we learn more. I would maintain that the faster we drill, the faster we are going to learn.”
Yet even as oil producers cut costs via efficient drilling, they’ve begun to invest more in post-drilling phases that prepare a well for production.
Schlumberger reported that in the fourth quarter, new technology sales helped its production unit grow faster than its other segments.
And Baker Hughes said its completion and oil flow products last year saw revenue growth in North America despite overall sales falling in the region.
Improved production is a natural fit for industry appetites: Oil producers currently recover only about 15 percent of the oil and gas reserves trapped in tightly packed shale — “not very good,” said Scott Tinker, director of the Bureau of Economic Geology at the University of Texas.
“I think it’s a pretty common evolution,” Tinker said, comparing efficiency gains in shale plays with early conventional drilling advances. If they drilled fewer wells, he said, oil companies could cut down on the chemicals used in hydraulic fracturing and send in fewer trucks — good news for the environment in general and over-used roads in particular.
“Fewer dollars down, more oil up is good.”