New in­no­va­tions touted to give shale oil a boost

Re­port on well pro­duc­tion concludes that com­pa­nies cur­rently are leav­ing money in the ground

Houston Chronicle - - BUSINESS - By Jor­dan Blum STAFF WRITER

The U.S. shale boom is at a tip­ping point as it strug­gles to profit amid weaker oil prices, but the in­dus­try is leav­ing tens of bil­lions of dol­lars in the ground each year with wells that aren’t nearly ef­fi­cient enough.

That is the con­clu­sion of a re­port by the ac­count­ing and re­search firm Deloitte that was re­leased Wed­nes­day after the re­sults of 80,000 shale wells were ex­am­ined. The oil sec­tor, es­pe­cially in West Texas’ pro­lific Per­mian Basin, has shifted to a fac­tory-style ap­proach of re­peat­edly drilling and frack­ing sim­i­lar wells at in­creas­ing depths. But the in­dus­try must move be­yond the “brute force” ap­proach be­cause well pro­duc­tiv­ity seem­ingly has peaked.

More plan­ning and newer tech­nolo­gies are needed to de­velop the best wells, the re­port con­tends.

The in­dus­try must in­no­vate yet again or face a slow demise as Wall

Street sours on the sec­tor and cap­i­tal needed to stay in busi­ness be­comes harder to get.

Bet­ter well de­signs cou­pled with greater un­der­stand­ing of the shale rock and fluid move­ments un­der­ground could boost ef­fi­ciency lev­els by about 20 per­cent, rep­re­sent­ing al­most $25 bil­lion in an­nual sav­ings for the U.S. shale sec­tor, said Scott San­der­son, a prin­ci­pal in Deloitte’s oil and gas strat­egy and op­er­a­tions prac­tice.

“The mar­kets are putting pretty sig­nif­i­cant pres­sure on the in­dus­try, and we need to find a way out,” San­der­son said. “Even though we’re over 10 years into the shale era, the in­dus­try is ac­tu­ally in the early stages of un­der­stand­ing. We’re hope­fully com­ing out of this trial-and-er­ror phase.”

It’s time for a course cor­rec­tion, he said. There’s a “happy medium” be­tween the fac­tory ap­proach fa­vored by the Big Oil gi­ants and the drilling of over­cus­tomized and too-ex­pen­sive be­spoke wells, he said

While there’s no sin­gle, magic bul­let so­lu­tion, oil pro­duc­ers have be­gun adopt­ing myr­iad tech­nolo­gies, in­clud­ing elec­tro­mag­netic fluid track­ing, mi­cro­seis­mic mon­i­tor­ing, geo-chem­i­cal oil trac­ing and DNA se­quenc­ing of bac­te­ria in oil wells, all de­signed to more ef­fi­ciently pro­duce crude.

The Tom­ball-based startup Deep Imag­ing de­vel­oped fluid track­ing tech­nol­ogy that cre­ates elec­tro­mag­netic fields to ob­serve the move­ments of flu­ids — the slurry of wa­ter, sand and chem­i­cals in­jected to crack open shale rock — that are used dur­ing hy­draulic frac­tur­ing, called frack­ing. Con­ven­tional seis­mic tech­nolo­gies ob­serve the rock, while Deep Imag­ing fol­lows the liq­uids.

Too of­ten, the fluid move­ments don’t match the ini­tial mod­el­ing as the flu­ids travel far­ther than pre­dicted or even es­cape into nearby wells, wast­ing mil­lions of dol­lars in the process, Deep Imag­ing Chief Ex­ec­u­tive David Moore said. Ob­serv­ing these prob­lems as they oc­cur al­lows com­pa­nies to quickly ad­just as needed and make bet­ter plans for sub­se­quent wells in the area.

“The in­dus­try is stag­nant,” Moore said. “It’s time for a deeper un­der­stand­ing of the data.”

The ul­ti­mate goal is for the tech­nol­ogy to al­low oil and gas pro­duc­ers to prop­erly dis­tance their wells from each other for op­ti­mum pro­duc­tion. Within the wells, the com­pa­nies can bet­ter gauge the right depths to drill and the most ef­fi­cient ways to hy­drauli­cally frac­ture the well.

Es­sen­tially, Moore said, the end goal is to save money while pro­duc­ing more oil and gas.

Other tech­nolo­gies in­clude mi­cro­seis­mic mon­i­tor­ing, which tracks he move­ments in the earth — mi­cro-eathquakes — in real time as wells are fracked and com­pleted. The idea is to bet­ter as­sess the frac­tures as they oc­cur and make any nec­es­sary changes

And then there’s the geo­chem­i­cal trac­ing com­pa­nies. RevoChem of Hous­ton can iden­tify where a drop of crude orig­i­nated within 10 to 15 feet of ac­cu­racy from the unique chem­i­cal sig­na­ture of each drop of oil. San Diego-based Biota uses DNA se­quenc­ing to mea­sure bac­te­ria in the wells and bet­ter track how and from where the oil is flow­ing.

The Deloitte study doesn’t claim to have all the an­swers, but it does point to a more promis­ing fu­ture for the oil in­dus­try if it can again evolve.

While com­pa­nies ob­vi­ously can’t change the ge­ol­ogy, the study found the be­lieved qual­ity of shale acreage of­ten is a less im­por­tant fac­tor in a well’s suc­cess than proper plan­ning and ex­e­cu­tion. Ef­fi­ciently drilled and com­pleted wells can be very pro­duc­tive even in re­gions well out­side of the so-called sweet spots in the Per­mian and South Texas’ Ea­gle Ford shale.

Com­pa­nies must bet­ter un­der­stand how the shale rock re­sponds, pick op­ti­mum well de­sign for each lo­ca­tion, and make ev­ery dol­lar count.

“I have faith in the in­dus­try’s abil­ity to in­no­vate,” San­der­son said.

Jon Shap­ley / Staff pho­tog­ra­pher

The re­port from the re­search firm Deloitte con­tends that more plan­ning and newer tech­nolo­gies are needed.

Michael Ciaglo / Staff pho­tog­ra­pher

Bet­ter well de­signs cou­pled with greater un­der­stand­ing of the shale rock and fluid move­ments un­der­ground are seen boost­ing ef­fi­ciency lev­els by about 20 per­cent.

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