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Combatting low oil prices through technology


This article also appears on the Oilfield Technology website.

The dramatic drop in oil prices created great uncertainty in the world market. The outcome was grim. The price for oil was cut in half. Tens of thousands of workers were laid off. There were company closures and mergers. Scheduled projects were canceled or shelved indefinitely.

Yet, the industry found a way through the uncertainties. It is even producing more oil in the process. The industry found that greater efficiencies offered a certain path forward to maintaining competitiveness. Utilization of new technology plays a key role.

“Advances in technology are definitely making things more efficient,” Mike Chadsey, Director of Public Relations for the Ohio Oil and Gas Association, said. “The more efficient you are, the faster you are. The faster you are, the cheaper you are.”

By implementing technological solutions, the industry has been able to retain a high level of production, but at much lower costs. The results have been remarkable. Despite lower prices, global oil production is expected to exceed 2014 levels. The U.S. Energy Information Administration predicts production of global petroleum and other liquids will reach 95.46 million barrels per day in 2015, while production in 2014 was 93.27 million barrels per day. In the U.S., where hydraulic fracturing is increasingly used to extract oil from shale, production is expected to grow from 8.7 million barrels per day last year to 9.2 million barrels.

Technological advancements are being introduced at each stage of oil production, from analyzing potential drilling sites, acquiring land rights to develop new sites, drilling and extraction, pipeline construction, project operation and maintenance, and standardizing organizational procedures. This article discusses some of the advancements newly available and others in development.

Making an impact

Oil producers can now develop new wells and begin drilling quicker. They are extracting oil from individual wells in greater amounts than ever before.

Due to technology to aid in identifying and obtaining approval for new wells, as well improved seismic technology, companies have been successful in reducing the time to drill a well by 33 percent. Efficiencies made possible through technology have reduced the time to start production for a new well from weeks or months to only a few days. Drillers are focusing on parts of foundation known to be the most prolific. Improved speed of bringing new wells online reduces the financial risk of drilling, and increases the chances for favorable ROI.

According to the U.S. Department of Energy (DOE), which monitors technological developments in energy industries, crude oil development and production in the United States primarily involve three distinct methods of recovery: primary, secondary and tertiary.

During primary recovery, the natural pressure of the reservoir or gravity drives oil into the wellbore, combined with mechanical lift techniques, such as pumps, to bring the crude to the surface. Only about 10 percent of the reservoir’s oil is produced through primary recovery.

In secondary recovery, water is injected to displace oil and drive it into the wellbore. This extends the well field’s productive life, but still only extracts 20 to 40 percent of the reserves.

DOE sees much promise in tertiary or enhanced oil recovery. Producers have been successful in extracting 30 to 60 percent of the original oil in place through this process. Three methods of enhanced oil recovery have been proven commercially successful in varying degrees: thermal recovery, gas injection and chemical injection. Of these, DOE reports, carbon dioxide (gas) injection is getting the most commercial attention.

Introduced in 1972, carbon dioxide injection has been used successfully throughout the Permian Basin of West Texas and eastern New Mexico. Now, it is being pursued in Kansas, Mississippi, Wyoming, Oklahoma, Colorado, Utah, Montana, Alaska and Pennsylvania.

Most carbon dioxide for enhanced oil recovery had come from naturally occurring reservoirs. New technologies are being developed to produce carbon dioxide from such industrial applications as natural gas processing, fertilizer, ethanol and hydrogen plants in locations where naturally occurring reservoirs are unavailable.  DOE cites one demonstration at the Dakota Gasification Company’s plant in Beulah, N.D., which is producing carbon dioxide and delivering it by a 24-mile pipeline to the Weyburn oil field in Saskatchewan, Canada. Encana, the field’s operator, is injecting the carbon dioxide to extend the field’s productive life. The North American energy producer hopes to add another 25 years in well life and as much as 130 million barrels of oil that might otherwise have been abandoned.

Such technology is reducing the need and expense of developing more wells, thereby creating substantial efficiencies that are cutting costs of oil production.

DOE’s R&D program is researching Next Generation Carbon Dioxide Enhanced Oil Recovery techniques which the agency reports have the potential of increasing the productive life of oil reservoirs to an even greater extent.

Hydraulic fracturing

While extracting oil from shale through hydraulic fracturing has significantly increased production in the U.S., there are hurdles to overcome. Technology could provide the answer.

Researchers are investigating materials to replace water in the fracturing. Currently, the process can use between 1.2 and 3.5 million gallons of water per well, with large projects using up to 8 million gallons. Besides increasing the cost involved in fracturing, pumping that much water into the well leads to environmental and social concerns. The Ohio Oil and Gas Association joins industry representatives and observers in anticipating the significance of developing an alternative technology to replace water in fracturing.

“We’re not there yet, but I believe that someone will come up with the answer in the next few years,” he said. “It definitely will be the next big thing in the industry.” 

Advances in seismic technology are already making a big impact in hydraulic fracturing and more conventional drilling practices. Seismic technology provides information about what is in the rock, as well as its thickness and depth.

Engineers have developed sensor technology and mathematic models, first prepared for deep offshore drilling, to see the rock better and improve analyses of rock foundations. As drilling proceeds, imaging technology finds natural cracks in the rock that drillers can use when fracturing. They also can map the new cracks. With that information, they know how close they can drill another well without pulling production from the first.

Such methods, DOE reports, show that technological advances can serve as a hedge against volatile commodity prices and alleviate safety and environmental concerns.

Information technology

Operations in well fields and company offices oftentimes are heavily dependent upon spreadsheets and manual manipulation. A robust technology that limits, even eliminates manual processes can greatly increase efficiencies by standardizing processes and reducing errors. Company resources can focus more on analysis and operational improvements. Such solutions also enable proper regulatory reporting and better royalty ownership management. This is especially helpful for oil companies facing a staffing shortage due to recent layoffs.

geoAMPS, a U.S. software company, has developed Web-based solutions to increase project and organizational efficiencies. Oil producers have found they are better positioned to manage operations cost-efficiently and capitalize on margins with better pricing into the future. They are able to proceed with exploration and development without significantly scaling down facilities or payroll.

Oil producers embark on projects costing millions, even billions of dollars with antiquated data-storage systems and administrative tools. Surprisingly, some organizations still work from paper records. They might have been able to get by when the price of oil exceeded $100 a barrel. Today’s market reality is a different story.

Case study

We recently visited a midstream company gearing up for $1 billion in projects. It stored an overabundance of paper records in boxes stacked to the ceiling. This company also maintained hundreds of paper maps marked with colored pencils and crayons. They were stored in binders with printouts folded or taped together. Important project details, such as property restrictions and contact information, were jotted down on sticky notes. Company representatives told us that important information was difficult to access and sometimes lost. When a veteran left the company, project knowledge oftentimes went with him.

geoAMPS provided the company with a centralized Web database and dashboard-focused interface that made access to project and organizational information simple, reliable and secure. The company has found the system reduces costs by standardizing and streamlining project processes.

The Web-based system allows the company to seize the efficiencies possible with mobile technology. Field agents input notes of a meeting with a landowner immediately, by typing or voice-to-text. They measure right-of-way with their device and upload photographs onsite. A wide range of tasks is now completed in the field. It’s no longer necessary to wait to return to the office before updating the project file. The company also gained detached capability in the field when connectivity is lost. Field agents continue to access and update project information in the database and the file is synced automatically once connectivity is restored.

A significant cost early in establishing an oil-drilling site is acquiring leases for land and mineral rights and managing drilling schedules. By utilizing geoAMPS, the company streamlines workflows. It more efficiently manages lease checks, recurring payments, nonpayment obligations, mineral title research, legal processes, environmental studies, depth severances and property ownership.

GIS mapping broadens the company’s use of its project information. With quick access to tract boundaries, the path of a new midstream project can be uploaded into the database. Issues related to construction, such as existing land use and utilities, are quickly identified in the GIS color-coded layers. Progress toward right-of-way acquisition or the necessity for rerouting the pipeline is detailed. The company found these advantages to be an efficient replacement to their many paper maps.

This company’s new software system is configured to be beneficial after construction of the infrastructure. It will be able to streamline property encroachments, inspections and repairs. A schedule of maintenance checks can be uploaded so workflow reminders are issued automatically.

Technology’s potential

The company in our case study is anticipating project cost savings of 35 percent through efficiencies. Combined with other technological advancements, the savings for expensive oil development projects are substantial. It becomes clear how technology is helping the industry through difficult times.

A 2014 study by HIS Inc. concluded that approximately 80 percent of the tight oil capacity additions will still be profitable at the current pricing levels of $50 to $60 a barrel. Producers continue to become more efficient and precise in designing and operating wells. While these technologies and techniques mean added upfront costs, they can lead to greater potential to make money faster and reduce break-even costs.

As much as today’s new technology is providing a needed boost to a major global industry under stress, the possibilities from technology in development are phenomenal.

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