Fixing Old Wells Can Add Cheap Barrels, But a Worker Shortage Is Limiting Growth
High oil prices will mean more spending on workovers to eke out more oil and gas from older wells. The amount will depend on finding those willing and able to do that tricky work.
When oil is selling for $100/bbl the payoff for adding barrels by working on old wells looks huge.
The average cost per barrel for offshore interventions is less than $10/bbl and that includes some high-cost work on wells with subsea trees, said Matt Billingham, who moderated a panel discussion among operators at the SPE/ICoTA Well Intervention Conference and Exhibition last week.
A big variable in that outlook is attracting engineers into this low-profile field which plays a significant role in the energy transition.
While $100 oil makes growth sound inevitable, the engineers on the panel were focused on the barriers to doing more well inventions, beginning with the fact that the percentage of oil company budgets allocated for interventions is about 3%, said Billingham, who is the director for well intervention at Schlumberger.
Surging oil prices are beginning to expand those budgets to levels that are testing the capacity limits of the available intervention equipment and workers.
“With the oil now up to $100/bbl, up from $40, there is a mad rush” in onshore basins, said Dwayne Purvis, a consulting engineer in Fort Worth, Texas, adding that there are “shortages of manpower and equipment.”
The same is true offshore, where finding people and equipment has become a challenge for Ralph Jones, a completion advisor for Eni. He pointed out that an online oil jobsite has posted four pages of job listings looking for people who are able to run coiled tubing, compared to a handful of listings a few years back for crews to run tools into older wells, as well as new ones.
In this tight market, securing a riser intervention system can require a long-term contract with a service company at a rate that covers the cost of getting equipment back into working order after it has been stacked for years, Jones said.
Higher-cost, long-terms deals are still a tough sell to oil companies who remain focused on maximizing profits by minimizing costs and are not sure if the price surge seen since Russia invaded Ukraine will last.
And equipment is not the big problem. “It is really tough to find the people. We can build equipment faster than we can educate people,” said Mirick Cox, well operations superintendent at ExxonMobil.
The discussion revealed reasons that go beyond the current tight job market and the up-and-down cycles of the oil industry which have left many job seekers with bad memories of rounds of mass layoffs in recent years.t
Repairing working wells and plugging them at the end of their life is a relatively small, low-profile part of the exploration and production business.
The work requires experienced problem solvers who can improvise when needed and who are quick studies in understanding how wells used to be built and why some things fail.
This is a challenge because many older offshore wells date back to times before many recent college graduates were old enough to begin attending kindergarten.
Those building wells have detailed plans to guide them, which is often not the case for wells that need to be repaired or plugged. The problem solvers need to be able to put together puzzles with pieces missing.
And it is a bit like being a mechanic who specializes in older cars. There is a limit to what customers are willing to spend on repairs, and there will be bad feelings if the cost of the job far exceeds the estimate, which is sometimes inevitable.
“When we go into an intervention, we are not sure how much it will cost and do not know what we will get out of it,” said Travis Vulgamore, senior engineering advisor for completions at Occidental Petroleum (Oxy). For example, “the estimate was $500,000 and the actual cost is $1.2 million.” And then, “Management says ‘I do not want any more train wrecks.’”
Those who get into the business of working on mechanical systems, on which the delivery of the production promised by reservoir engineers depends, live with the risk of those wrecks.
Vulgamore recalled an Oxy success story when work on three onshore wells resulted in big gains. This led to a flurry of requests from production engineers hoping for similar results. The reality is that workover results vary with a few top wells in a campaign justifying the work on less successful wells. And his story also mentioned costly problems associated with the work performed by service providers.
All of which led to a program to evaluate and better execute future jobs with the goal of improving the odds of success. But, Cox said, those managing these types of jobs need to have an idea of when they need to shut down a project to limit the cost of a likely failure.
While the discussion focused on problems, progress was also mentioned. “Intervention efficiency is getting better,” Vulgamore said. As the technology improves to diagnose and treat well problems, “we are going to see a lot more well interventions and a lot better results.”
And they are looking for ways to speed the transfer of knowledge to the next generation. All the panelists devote some of their time to teaching in formal training programs at ExxonMobil and Oxy.
Both companies have tried to foster online knowledge sharing. Oxy tried a social media approach, which suffered because the older experts didn’t join in the discussion. ExxonMobil has created a site that asks the user to describe their well, and the system will offer related cases studies and the contact information for the experts involved. Cox hopes to get some calls as a result.
Vulgamore described his class as covering “all of the things I have done wrong and how I got out of it or not.”
The goal is to teach the ability to avoid problems. But based on seeing those students “go out and doing the same things I told them not to do,” Vulgamore has come to realize that this kind of work requires making some mistakes.
Cox has learned that some really bright students are not going to last because they “did not realize what they were getting into” when they took a job which required getting immersed in oilfield work in places with the activity of the Permian and Guyana.
Others avoid working for an oil company because they worry that they will be getting into an industry that will be swept away by the energy transition and the shift from hydrocarbons.
While the energy mix of the future will change, the scale of the task is so enormous it will take decades. Those who work on producing wells and plugging have skills that will be needed for the duration.
In the future, their work will include reducing carbon emissions. They will be the ones asked to find and fix methane leaks, among the most potent sources of global warming, in wells and to do the workovers that eke out more oil from older wells to add production without drilling new wells.
Construction of underground carbon storage will require evaluating whether older wells nearby are likely to become leak paths and sealing them if they are, Cox said. And these same workers will be needed to plug millions of wells worldwide as they play out.