Obstacles beyond technology may limit US production, lawmakers told

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 10 -- Technological breakthroughs have increased the amount of economically recoverable oil and gas resources in the US, industry experts told the US Senate Energy and Natural Resources Committee, but they warned that amounts that are actually produced will be limited if other challenges aren’t addressed.

“With the framework of primary recovery, we’ll only access some of the resource,” said Thomas L. Davis, director of the Reservoir Characterization Project at the Colorado School of Mines. Waterflooding will help produce some oil from the Niobrara and similar shales, “but we will need [enhanced oil recovery] eventually,” he continued. “Just the injection of carbon dioxide in the Sinclair field in Canada has doubled or tripled production. A government framework should enhance CO2 availability through some kind of incentive that allows us to use it in these formations, and not just store it.”

“We produce about 100 million bbl/year, or about 5% of our needs in the US, each year from EOR,” said L. Stephen Melzer, engineer and founder of Melzer Consulting Inc. in Midland, Tex. “Our growth of the industry has been hampered as of late because we’re out of CO2.” Demand stems from opportunities and the ability to reap financial rewards from oil production, but matching CO2 supplies with demand can be expensive and challenging, he said in his written testimony.

US Department of Energy programs are advancing carbon capture and storage technology, but more pipelines will be needed to move CO2 from industrial sources to oil fields where it can be used, Melzer said. CO2 under new contracts costs about $2/Mcf, although contracts from the 1980s and ‘90s make the average price closer to $1, he indicated. “There are several pent-up projects which could double our CO2 utilization,” he said.

Supplies ‘maxed-out’
US CO2 supplies are limited now because natural sources and the pipelines serving them “are maxed out,” Melzer told the committee. “We’re trying to take low-hanging fruit from industrial sources first, and hopefully can begin to use CO2 from coal plants with combustion capture.”

Others described just how much technology has changed oil and gas exploration and production in the last 20 years. “Our industry is about high-tech tools and equipment these days,” said Andy Hendricks, president of Schlumberger Ltd.’s drilling and measurements division in Sugar Land, Tex. “Drilling has become a sophisticated science over the years. Today, we have precise navigational systems built into our wells which are more sophisticated than what’s in your car.”

Current technology allows drilling of multiple wells from a single surface site onshore in places like the Rocky Mountains and offshore from a single production platform, Hendricks added. “This reduces a drilling operation’s surface footprint by eliminating the need for multiple single-well locations,” he said. “The challenge in this process is to navigate a dense cluster of well bores, and we accomplish this through the use of sophisticated navigational and guidance systems.”

Improved technology has been necessary to produce oil and gas in the Arctic from the outset, observed Kevin R. Banks, director of the oil and gas division in Alaska’s Department of Natural Resources. “This has been a process where industry has come up with new and unique solutions applicable only to the Arctic and where industry has brought north advances in technology tested elsewhere and adapted to the special conditions of the North Slope,” he said. “Everything from the civil construction of man-camps, treatment and handling of byproducts of oil development, and the installation of roads and pipelines to the high-tech science of oil exploration and development has been modified and specialized for the conditions found only in the Arctic.”

Lisa Murkowski (R-Alas.), the committee’s ranking minority member who suggested holding the hearing, asked Banks if technology has improved to a point that oil might be produced from beneath the Arctic National Wildlife Refuge’s coastal plain from the Sourdough well in the Point Thompson unit on state land immediately west of ANWR. “It’s a logical spot to begin looking for and producing oil, and extended reach drilling could make a major impact,” Banks replied. Another well which was drilled in the 1980s also could be reached from state-submerged land, although its prospects aren’t as certain, he added.

Sees likely impacts
But Lois Epstein, The Wilderness Society’s Arctic program director, strongly questioned the idea that directional drilling can provide access to fragile areas off Alaska as well as in ANWR without significant consequences. “Directional drilling allows a region to become industrialized and compromised to an extent similar to conventional drilling,” she told the committee. “There’s no question that conducting directional drilling immediately to federally protected areas such as [ANWR] would have impacts.”

The hearing came one day after Jeff Bingaman (D-NM), the committee’s chairman, introduced two oil and gas bills. The first, S 916, the 2011 Oil and Gas Facilitation Act, would extend the oil and gas permit processing improvement fund, facilitate coproduction of geothermal energy on oil and gas leases, mandate a comprehensive inventory of US Outer Continental Shelf resources, create an Alaska OCS permit processing office, and phase out mandatory OCS deepwater and deep gas royalty relief for future leases.

The second bill, S. 917, the 2011 OCS Reform Act, would codify US Interior Sec. Ken Salazar’s plans to create two bureaus to manage federal OCS resources and operations, establish a separate office within the US Department of the Interior to manage federal OCS royalties and revenue, create an OCS environmental and advisory board for the new bureaus, and give the secretary authority to offer higher salaries for critical positions and reemploy retired private sector oil and gas employees.

“Both bills are comprised of provisions that were introduced and passed out of our committee in the last Congress with strong bipartisan support,” Bingaman said on May 10. “Along with this hearing, these two bills are a good starting point for what I hope will be a constructive, bipartisan dialogue on the topic as the rest of this month unfolds.”

He said that he hoped to have a hearing on the bills and related legislation next week, and that the committee could mark up oil and gas legislation as part of its overall agenda during this work period.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected