Doing more with less in shale requires more technology. Three executives in charge of unconventional operations for international oil companies talked about how they have slashed their cost per barrel at a plenary session at the Unconventional Resources Technology Conference (URTeC).
A critical element in that 30%-plus reduction in costs is trying to squeeze more oil and gas out of this difficult rock.
“We cannot cut costs just to cut costs,” said Gene Beck, senior vice president onshore for Statoil. Producing more oil over the life of a well is likely to exceed the value of a one-time saving while drilling a well, particularly if that limits future output. Statoil, which is interested in long-term production, has “invested through the downturn” to increase ultimate recoveries, he said.
The Norwegian company’s Austin-based unconventional resources group has delivered 24 technologies to the field, including a fracturing design using liquid carbon dioxide that Beck said “created a phenomenally complex fracture network.”
BHP has two enhanced oil recovery (EOR) pilot projects operating in the Eagle Ford, one involving gas injections and the second involving the injection of a miscible substance, which Alex Archila, president of North American shale for BHP, was careful to not name because the company is seeking to patent it.
The company is also leading a joint industry project in the Permian Basin using advanced monitoring systems to better understand and describe the interconnected fracture system among wells. Archila said the industry needs to collaborate more to speed technology development.
“One thing that continues to surprise me is the industry is so independent” when it comes to developing and testing new methods, Archila said. This is the even the case in established areas, such as the Eagle Ford where land positions are set, which means operators have shifted from leasing acreage to working to get their return on those large investments.
The industry has mixed feelings on the value of sharing information, and secrecy is common. In the Eagle Ford, BHP is following EOG Resources, which has said it is testing a gas injection method to increase production, and little else.
While there are many avenues for information sharing and collaboration, with both formal deals and informal conversations, if a company has developed something valuable, “We have to recognize that each of these companies is competing and will want to take advantage of that,” said Ken Tubman, vice president subsurface for ConocoPhillips.
All of those on the panel emphasized that the industry needs to decipher the underlying physics of ultra-tight formations.
“Understanding the basic physics is what we need to do to learn faster and improve faster,” said Beck. The industry now learns by observing what works because it cannot predict now the rock will react as it tinkers with completions.
If it takes half the wells in a development to “optimize” (defined as “not the best but better than you had) then “you destroyed value” by doing less productive completions on the wells used for testing, he said.
While everyone agreed with that goal, no one is waiting for the answer.
Shell has employed a group of 50 experts with wide-ranging expertise in everything from astrophysics to auto manufacturing, said Greg Guidry, executive vice president for unconventionals at Shell. The goal of this project, which is based in Boston, is to find tools others have developed to plug into its shale field of the future.
“We see huge opportunities to adapt existing and new technologies to the shale business,” Guidry said.
The motivation behind all this searching is the gap that remains between the cost of producing oil and gas from this difficult formations, and what it will take to earn a return on these enormous investments.
The cost savings reported since 2014 are impressive, with efficiencies of 30% or more as these international oil companies adapt their ways to working in a business where applying global standards proved to be prohibitively expensive.
Companies often report the direct cost of drilling a well but accountants are not about to ignore what it cost to get to this point. “We still need USD 66/bbl to turn profits back to Statoil,” Beck said, adding that depreciation has to be accounted for.
