Innovating for the Future: How the Oil & Gas Industry Will Survive and Thrive Past New Challenges
Exploration for hydrocarbons is a continuous challenge full of complex obstacles that are both technical as well as market driven. A downturn in the market for oil and gas has exacerbated that reality as the industry has had to weather some lean years due to weakened demand and low prices.
Still, the oil and gas industry remains an indispensable player in providing modern living the means to continue as we know it. And the entire planet is directly and indirectly dependent upon what we do to maintain worldwide access to safe and affordable energy.
Ours is an industry that has had to innovate, because the relevance of its impact won’t wane with changing technology or regulatory burdens, as the world will always need sustainable energy.
Naturally, in a down market the great expense surrounding hydrocarbon exploration and production is considered to be a high risk investment. And the costly overhead of drilling has caused a number of operators to scale back or close down operations.
Predicting when the market will rebound is an educated guess at best, and so companies that continue to frack have been forced to operate as if a new normal is in place, altering business overhead to make sure that well costs don’t make drilling unsustainable.
Accordingly, the prolonged low price environment for oil and gas has shifted operators to focus on employing cost saving methods anywhere practical throughout the drilling and completion process in shale plays. The present market downturn has forced fracking operators to place a greater emphasis upon efficiency across the board in drilling and completion operations, and in some instances re-evaluating presumed best practices in favor of more innovative technologies and techniques.
Meeting the Challenge with Innovation
The oil and gas industry has spent recent years focusing on the development of game changing solutions for retrieving oil reserves. Especially in shale plays where horizontal drilling and hydraulic fracturing have been employed. The result has been a monumental increase in producible reserves across the globe, and this has fundamentally altered the way operators pursue exploration and production.
Oil companies of all sizes have harnessed innovative technologies to locate and extract quantities of oil and gas that have proven to be substantial enough to dissipate some past concerns about dwindling reserves, at least for the time being.
And shale plays have proven to be the primary factor in the optimistic outlook for the future of the industry.
The Shale Revolution
The exploitation of shale basins with the use of hydraulic fracking and horizontal drilling techniques has enabled U.S crude oil output to surge to more than 9 Million barrels per day in 2017. The remarkable production recovery of the past seven to eight years elevates production back to the levels of the mid 1980’s, a time just before daily production rates from conventional reservoirs began decades of steady decline. Likewise, US natural gas production reached a historic high of more than 80 BCFD (Billion Cubic Feet per Day) in 2017 and the U.S. EIA (Energy Information Administration) predicts that the US will become a net exporter of natural gas in 2018.
Finding shale basins has not been a problem. Many have been known and geologically mapped since the early 1900’s but were considered to be non-productive due to extremely tight permeability. George P. Mitchell (of Mitchell Energy) spent $250 million experimenting in the Barnett Shale near Fort Worth, Texas from 1985 until 1991 before finding a recipe for commercial success. He first drilled vertical wells and applied foam fracs and then gel fracs but production was poor. Finally, after several attempts he successfully drilled horizontal wells and utilized slickwater fracs to achieve production rates that were economical.
Other operators followed the lead and a gas drilling boom ensued, spreading from the Barnett Shale to the Marcellus, the Haynesville and other gas shales. Drilling in oil shales also commenced in the Bakken, the Eagle Ford, the Permian basin and others. With large shale basins constantly being found in North America and around the globe, the prospects for developing them into producible fields are expected to have a positive impact on the overall supply and demand of oil and gas.
In the current low oil price environment much attention is given to the ‘breakeven price’ to drill and complete wells in a given basin or shale play. For instance, some operators may state that their breakeven price is $40 per barrel in the Eagle Ford or $30 per barrel in the Permian.
An over simplified explanation of this term would be to take the well cost and divide by the EUR (Estimated Ultimate Recovery) for the life of well.
Example: Breakeven Price = $10,000,000 Well Cost / 250,000 barrel EUR = $40
It becomes obvious that the ‘breakeven price’ is dependent not only on the initial well cost but also on the ability to achieve the Estimated Ultimate Recovery (EUR) of 250,000 barrels production over the life of the well.
Currently, much of the cost savings being attributed to innovation is associated with the application of new methods to save time through improved operational efficiencies. However, these innovations may not contribute to improved overall productivity of the wells. Any technology which can improve production rates and increase EUR could have a larger impact on overall well economics than would any cost savings during initial drilling and completion operations.
Production Enhancement Technology
There is considerable evidence that treating multiple perforation clusters simultaneously during a hydraulic fracturing stage can result in some clusters being over stimulated and other clusters being under stimulated in the same wellbore stage. This method is referred to as Limited Entry or Plug and Perf (PnP) completions.
Alternatively, the technique of stimulating each cluster individually is referred to as single-point entry and allows better control over the hydraulic fracture treatment and confirmation that stimulation was achieved as designed. Stage Completions offers single-point entry completion technology with the SC Bowhead II system.
Forward-Thinking Industry Leaders Recognize the Advantages of Single-Point Entry Technologies
The data is clear that single-point entry completion technology offers decisive technical advantages for drilling operators eyeing the future. No other technology on the horizon is geared toward planning and optimizing wells with the kind of control and predictability single-point entry practices can offer in terms of efficiency.
The reduced horsepower requirement that Stage Completions systems provide has resulted in potential cost reductions for fracturing operations. And a number of operators have experienced better real time control during pumping operations, and more accurate treatment modeling has translated itself into improved production results across the board.
The trending emphasis on choosing the best completion practice for each well application should encourage the industry to collectively give serious consideration to these systems.
To date, the industry has been resilient in responding to new technical challenges. And engineering a way past this latest set of market driven obstacles will have very tangible applications for how the industry as a whole tackles shale plays.
As the global demand for fracking continues to climb, operators will have to innovate to meet new challenges in the field and to the bottomline of doing business as they emerge. Stage Completions seeks to be an innovator on global terms, able to impact the industry and sustainability of our world as a whole with forward thinking initiatives that have the potential to become industry standards.
Because Stage Completions understands that implementing game changing technologies in an ever evolving energy landscape is the key to weathering rough times and ensuring prosperous opportunities for the future.
About this Blog
In this blog, we hope to engage the oil and gas community with information about multistage fracturing. We think analyzing and offering our expertise about the ways our industry is evolving will help others seek the most innovative technologies and practices as they become available. If there’s a subject you’d like to know more about, please let us know. Thank you for joining us in the conversation.