Downturns offer you a choice: panic and shut down all but breathing or make use of the opportunities that desperation has handed you. What? In the good times of a price boom, we have no time, and usually no impetus, to alter the way we work and how we apply science and technology. This activity breeds inefficiency and waste, but the flow of easy profits is like an opioid drug, blinding forward-looking senses that should warn us that a price bust may be around the next corner with a demand reduction, manufacturing slowdown, renewable energy advance, or an upset in political alignments.
The world currently needs the energy density and reliability of fossil fuels, but high cost and inefficient use will eventually kill this golden goose. Often, when the good times end, we pull back, believing all the while that the next boom and easy profits are just around the corner if we can just hold on. This is the recipe for bankruptcy.
Every wave of a technology powerful enough to alter the economic landscape in any industry has a life span divided into three parts: an often rough beginning, a period of growth where the technology reaches a zenith of efficiency, and the inevitable plateau where we think it cannot be exceeded or replaced. All the while, a new technology is often quietly building that can upset our comfortable operations world. The history of the oil field is littered with the memories of companies that ignored developments by overreaching only for the profits made available by a boom and ignoring the future. While some would like to believe that wildcatters’ luck will drive the next upturn, the promises of unconventional formations will not be unlocked by chance. An attempt to express the problem might start with a small modification to the proverb, “There are none so deaf as those who will not listen.”
Better Practices
So, what is to be done in a downturn? Those on the science side of production companies can use the time to review each part of well performance with the objective of looking for better practices than the “best” practices that we have unconsciously limited ourselves to. Operators accepting this path often come out stronger after a slump. Gains in efficiency, generated from a better understanding of a company’s well-development practices, remain after oil prices rebound and supplier discounts disappear. The enablers are keeping and supporting a technological staff that is capable of learning prior to and while in survival mode, plus a management team that is wiser about how and where to invest before and after prices rebound. Most of all, it requires tearing down some barriers that “successful experience” has erected to the abandoning of methods with which we have become accustomed.
Your mistakes are valuable, if you can stop repeating them. A mountain of mistakes is a gold mine to those willing to spend the time in assessment mode. To get started, take a look at success rates for high-cost practices such as selection of well placement, chemical usage, fracture initiation points, and the consequences of operations that create huge amounts of waste. Each have excessive failure rates with consequences of high cost and questionable profitability even at high commodity prices. If 30% to 50% of fractures placed along a horizontal well are producing 80% of the hydrocarbons, then the obvious conclusion is that we are not in conventional reservoirs anymore. Every step of the process needs to be examined, from finding the best return areas and targeting the best spots to drilling the well, to knowing where to fracture, and how to best produce these wells. In a nutshell, we have to intelligently limit when we use conventional technologies to develop and produce unconventional formations. Also, in today’s world, minimizing massive water use and disposal projects are absolute necessities. Visible failures in these most basic of operations increase public concern, with very good reason.
Survival by Technology
“New” technology comes in many forms, some not so new, but it is often difficult to recognize the experimental design of the first attempt compared with accepted technology after many development cycles. Many staples of completion science failed repeatedly in the first trials. One of today’s leading technologies, horizontal wells, were shunned for almost 60 years until a combination of horizontal and fracturing technologies, blindingly obvious afterwards, renewed the North American industry. Even the application of hydraulic fracturing to shale gas wells went on for 2 decades before Mitchell Energy tried the first high-rate slickwater fracture in shale. As Mitchell Energy CEO George Mitchell put it, the “Barnett Shale was a 17-year, overnight success.” As useful as this technique is, we became too rigid in how we applied it, entrenching efforts in ever more stages and ignoring petrophysical and chemical learnings until a price drop again forced us to become more efficient. These decade-long developments take too long. Efficiency gains require reducing development time.
The role of forward-looking people willing to take a risk and learn from mistakes is the driver behind our efficiency development. Results often are subject to change when crews change. Keeping technology innovators and risk-takers in an organization are keys to survival. Even when the technology is proven, people make the difference in its application. When the core of experienced appliers is stretched thin, the A team is replaced by the B or C team and failures increase, and it becomes clear how much the right people add to performance. Technology is transferred, applied, and stored in people—it is not just the color of the iron on location.
A Message to Inventors and Innovators
Many new ideas will come from entrepreneurs, but successfully landing your ideas and products may require more than you think. First, understand the problem and do the historical work on if or when it was attempted before and what problems were encountered. Using that knowledge, what have you done to prevent a repeat of the last failure?
Companies from outside the oil and gas industry sometimes offer technologies that represent solid advances. These can be highly interesting but equally frustrating to adapt to the current environment of the oil industry. If you want to sell into the oil industry, learn more than just a few basics of what happens in a well.
Trying any new technology or product in a well creates a level of risk. Do not ask operators to accept the risk of developing a technology in their wells without an upside for taking that risk.
- Innovation can be many things, but it must have a scientifically valid, field-based case history, as well as a business plan to market the “device” in a manner that keeps it effective, practical, affordable, and ensures stable supply. If you plan a sellout exit to a vendor, what advantage exists to an operator to fund such a project?
- Startups from outside the oil and gas industry often suffer from lack of oilfield experience. What worked in manufacturing with easily accessible power may not even function in a well.
- Pick a potential customer based on what you need to get the idea into production. Concept stage ideas can require millions of dollars before a field trial.
- The basic questions to ask are: Are the results scalable? Is the intellectual property solid? Who is your competition?
