Houston Chronicle

New innovation­s touted to give shale oil a boost

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

- 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.
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.
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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