The Society of Petroleum Engineer’s 2012 Annual Technical Conference and Exhibition’s opening session debated this year’s titular theme—’making unconventionals conventional.’
Halliburton CEO David Lesar observed that unconventionals elicit strong opinions and ‘outright falsehoods’ which need to be addressed head on with better communication of the economic benefits. These include a trillion dollar boost to the US balance of payments, $100 billion in income taxes and two million jobs created at a $90k average salary. Next, industry needs to demonstrate ‘sustainable’ production by delivering long lived unconventionals reserves. Today, there is not enough production history to convince the skeptics. On the delicate topic of hydraulic fracking and water use, there have been ‘many false statements.’ While industry is not faultless there have been ‘zero cases of fracs impacting the water table. On the topic of frac additives, Lesar described Halliburton’s CleanStim as entirely made from foodstuffs adding, ‘I’ll even drink it for you’ which he did to applause, even though ‘it doesn’t taste so good!’ Today, unconventionals are a business free for all—a huge lab experiment where some operators own equipment and service companies may own land! But this chaotic process is generating a productive outcome and has become an intellectual storehouse allowing near instantaneous development of a discovery. Foreign companies see the US as an unconventionals university that they have to attend.
ExxonMobil’s Mark Albers observed that while unconventionals used to be synonymous with uneconomical, today shale oil, shale gas and oil shales are becoming essential to world energy supply. There are substantial prospects for going global. Government needs to put a framework in place and industry needs to increase understanding of the novel plays by educating the public on the risks and how they are handled and engaging policy makers and regulators.
Pioneer’s Tim Dove described how conventional exploration can turn into unconventional. Pioneer’s conventional exploration of the South Texas Edwards cretaceous reef play led to the targeting of the Eagle Ford shale. Early vertical wells were not so good—but things took off with horizontal drilling, backed up with 3D seismic that had been acquired for the Edwards. Pioneer’s Midland basin Spraberry/Wolfcamp shale was discovered in the 1940s and thought to be ‘the largest uneconomic US oil play!’ This is changing now. Dove opined that ‘factory drilling,’ a.k.a. ‘carpet bomb drilling’ has actually missed many plays. Pioneer estimates there are 50 to 100 million barrels per 960 acre section, making for a ‘brave new world’ for the Permian basin. Wolfcamp development will require around 55 wells and an investment of around $180 million per section. This is a massive investment but at low risk as it is essentially ‘mining’ oil and gas. Dove concluded saying ‘the game has not started yet really.’
Steve Holditch of the Texas A&M Energy Institute agreed that the US Is becoming a ‘university’ for unconventionals. There is a huge amount of information available on resources and on technology. Texas A&M is using this data to re-calibrate the resource assessment. The previous assessment by Hans-Holger Rogner is now considered conservative. The US government’s ‘90 day report’ on shale gas is ‘very balanced.’ Industry needs to put more information out there leveraging the FracFocus resource. Industry needs to reduce diesel fuel in emissions—notably from ‘all the trucks running past folks’ houses.’ Some of these are appropriately switching to natural gas. Holditch wound up with a plea for more R&D funding and a suggestion that ‘States should be the primary regulator.’
The groundwater question was raised in the Q&A. Albers observed that the oil industry has a good track record of protecting groundwater all over the planet. ‘We need to tell the tale through organizations such as the API and the Gas Association. Also water needs putting into context—oil and gas uses less than 0.2% of water in most of states. Lesar observed that ‘it is hard to win an emotional argument with facts.’ We need to get out there with the economics. Water, stuff in ground is emotional—we need to ‘walk the talk,’ the battle is not yet won. Albers acknowledged that there have been ‘isolated incidents’ with some operators. Some folks ask ‘why not police yourselves like nuclear?’ But this highly competitive industry needs state regulators and competent enforcers. One questioner asked if imports will disappear. Albers observed that while Governor Romney has suggested self sufficiency by 2020, this ‘may not be what we want.’ What is required is security of supply, ‘We don’t have food independence!’
John Lee (formerly with Ryder Scott) presented the updated SPE’s revised Petroleum reserves management system (PRMS) guidelines, developed by the SPE joint committee on reserves evaluation training (Jcoret). The original idea was to provide ‘real world guidance, not a manual of geology or petroleum engineering.’ The Jcoret group tried to get examples from industry to illustrate the guidelines but ‘industry said, no.’ The 220 page document includes a new chapter on unconventionals reserve estimation. In the Q&A Lee offered that this was ‘much more concise’ than the SPEE’s monograph on evaluating resource plays.
Marathon’s Marcy Woods continued with the unconventional evaluation theme, walking through the labyrinthine new SEC reporting rules as applied to the Anadarko basin’s Woodford play. The SEC recently extended what are considered acceptable evaluation methods to include ‘reliable technology’ and probabilistic analyses. Marathon has leveraged the methodology as outlined in the SPEE monograph. This includes the concept of a ‘performance area,’ decline curve and rate transient analyses with the ‘expanding concentric radii method.’ The results are used to define the ‘proved’ area. A five year simulated drilling program is bolted on and all is rolled up into proven undeveloped reserves. Woods believes that this is the first public application of the SPEE methodology.
The Digital Energy session on collaboration technology heard from Sami Alneaim (Saudi Aramco) who opined that there is now ‘quick take up of digital—there no need to justify every project.’ Digital is key to Aramco’s efforts in mega fields, well test, production optimization and novel facilities. Intelligent, digital technology ‘will be the main source of incremental oil production in the near future.’
Mike Hauser traced Chevron’s now rather mature i-Field effort. I-Field success boils down to three things, ‘leadership, leadership and leadership!’ 80% of the effort is ‘navigating people and processes’ rather than technology. Change is best seen as a positive experience in the transition to a future state that works for end users. The approach is working well as individuals gain understanding, involvement. Chevron now has developed many ‘soft’ building blocks—for competency development, leadership and value creation.
Adel Al-Abbasi (KOC) presented the Kuwait integrated digital field (KwIDF). E&P organizations are too reactive and would benefit from better collaboration. The IDF is less about the digital oilfield—but rather about change management which needs to be ‘not too fast and not too slow.’ The IDF ‘dynamic decision making world’ sits alongside the storage/big data mining environment. The IDF challenge is to transform KOC from an asset-focus to a collaborative organization.
Husky Oil’s Andrew Montes presented results from trials with Resman’s novel permanent tracers for inflow control valves. Resman’s tracers are strips of a material placed at strategic intervals in production casing. Different tracers leach in the presence of oil or water. Tests on Husky’s offshore Newfoundland White Rose field demonstrated that a ‘pseudo production log’ could be obtained from the tracer data, identifying one level with water breakthrough. All tracers were functional and received over the 10km flow line.
A enthusiastic Allan Rennie showed off Schlumberger’s ‘Ipzig’ at-bit imaging gamma ray tool which, used with Schlumberger’s own PZS pay zone steering software and real time mud pump data transmission, keeps unconventional and conventional wells clear of bed boundaries.
The SPE is quietly remodeling the ATCE. Regretfully, we note the demise of the Fun Run. Editor Neil McNaughton was an occasional participant in this event, slipping back from a place in the first ten to an ignominious ‘finisher’ status in later life. The SPE’s own ‘show daily’ has bumped-out the Harts equivalent. The SPE has also introduced an ‘SPE TV’ channel to the program. There are now LinkedIn, Facebook, Twitter and YouTube pages and, for attendees, ‘free’ iPads with the SPE’s own ‘App.’
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