The U.S. Department of Energy is more involved than ever before in promoting projects to help domestic operators produce oil and gas.
In recent years, DOE's oil and gas research activities have blossomed under the encouragement of former Deputy Sec. Henson Moore and current Deputy Sec. Bill White, both of whom had long experience with the oil industry and were well versed in its problems and potential.
Although both have tried to help producers with nonresearch initiatives, industry groups' dismay with the Bush administration's 'performance has carried over into the Clinton administration (OGJ, Sept. 19, p. 23).
Reginal Spiller, DOE's deputy assistant secretary for gas and petroleum technology, has overseen the department's research and development function for the past year.
Spiller is a petroleum geologist with 16 years of experience, mostly in the Gulf of Mexico. He worked for Exxon Co. USA during 1979-84, Elf Aquitaine Petroleum in 1984-1987, Primary Fuels Inc. in 1987-88, and Maxus Energy Corp. in 1988-93, serving as international exploration manager.
His orientation still is that of a geologist. His desk faces a large wall map showing tracts leased in the Gulf of Mexico.
Spiller said DOE relies on industry to tell it how to spend R&D money. "This whole program is based on one fundamental idea: The industry knows more about the oil business than the government does. And that's true.
"The industry-not the federal government-should be the driving mechanism in these programs. And most of the-technical people who work at DOE like that approach. Some folks don't.
"Our technical people are saving that when they go to oil industry meetings now and explain what they're doing, industry people no longer tell them, 'We were doing that 10 years ago. Why are you spending your money on that?"
DOE's renewed emphasis on oil and gas R&D shows in its budgets. For fiscal years 1993-95, R&D budgets have increased more than 46%. Gas went to $220 million from $150 million and oil $82 million from $56 million,
Spiller said, "The unsung hero of this whole turnaround is Energy Sec. Hazel O'Leary. Hazel has been criticized by the oil industry, but the thing I appreciate is that 'she is a great facilitator. She's the one letting all this happen. She's letting Bill White do his thing."
DUAL APPROACH
Spiller said DOE's Domestic Natural Gas and Oil Initiative, unveiled a year ago (OGJ, Dec. 20, 1993, p. 21) involves two approaches to helping the industry.
The first is direct help through R&D spending. DOE has signed about $140 million of technical joint ventures with industry under Spiller's tenure. And because the programs are cost shared, "there is about $280 million of business we're doing with industry.
"The second thing is what we call the 'increasing the margin, reducing the cost area. Those are all the things we don't spend a whole lot of dollars on: things like working to get marginal well tax credits, working with the Minerals Management Service (MMS) on deepwater royalties, helping open western land for exploration, and providing the Environmental Protection Agency information so we get regulations that are risk-based."
He said a key "oil of today" program is the Petroleum Technology Transfer Council, budgeted for $3.5 million in DOE funds this year (see story above).
"the program is just getting up and is focused at the 'Mom and Pop' producers, those producers that don't have geologists or geophysicists on staff and have some kind of problem. It's our way of letting industry tell us what we have to do to help independents."
DOE's offer to the oil industry to harness national laboratories' world class computer technology for exploration drew 122 proposals valued at $185 million last month.
The Advanced Computational Technology Initiative will use computer technologies at national laboratories to enhance competitiveness of the U.S. oil and gas industry (OGJ, June 13, p. 145).
The proposals include industry-proposed teaming arrangements with all nine of DOE's multiprogram national labs: Sandia and Los Alamos in New Mexico, Lawrence Berkeley and Lawrence Livermore in California, Argonne in Illinois, Oak Ridge in Tennessee, Brookhaven in New York, Pacific Northwest Laboratory in Washington, and Idaho National Engineering Laboratory in Idaho.
Proposers included 62 independents, 13 majors, and 86 service companies, consulting firms, and hardware and computer manufacturers.
Also, 47 universities and eight gas transmission companies are partners in prospective projects.
Overall, industry is offering to contribute more than 50% of the funding, or a little more than $100 million, while asking for $85 million from the government. DOE has made $27 million available for the first year of the competitive process.
The production related ventures include use of high speed computing to improve drilling, process seismic data more efficiently, find geopressured hydrocarbons, design more stable floating production systems, and simulate fluid flow in oil and gas reservoirs more accurately.
DOE said many of its advanced computational capabilities are outgrowths of the nation's 40 Year investment in national defense technologies. For example, many of the complex modeling capabilities that will be used to find and produce more oil and gas are adaptations of techniques developed to model complex subsurface conditions for underground nuclear testing.
An industry review panel is evaluating the proposals. DOE expects to make the final selections in January.
Spiller called the initiative "the oil and gas of the future program." He added, "It's the 'high fallutin', high computin', 'How are we going to get oil out of the ground 10 years from now?' program.
"It's a clear example of industry saying we're no longer going to support these big industry R&D centers, but we still know how to do this work and we want to do it at the national labs."
RESERVOIR CLASS PROJECTS
The foundation of DOE's R&D efforts has been a program the current administration has continued from the Bush administration. The program aims to find better recovery methods for the most common U.S. reservoir types.
The first round focused on fluvial dominated deltaic sand reservoirs and the second on shallow shelf carbonate reservoirs. The 25 approved projects involved federal spending of $87 million and industry spending of $115 million.
Under the Class III program, DOE chose nine projects totaling $88 million-$38 million federal and $50 million industry-to demonstrate better production from slope and basin clastic reservoirs.
Spiller said the Class III fields are deep marine reservoirs. "Most of the dollars for those programs will be spent in Texas and California. We wanted some projects in the Gulf of Mexico but couldn't seem to attract industry to do business with us in deep marine sediments there.
"Those are programs we call the 'oil of today, programs. What we're interested in is a better way to define the container oil and gas is located in.
"If you can define the container, you can put more wells into one area of the field and maybe less wells in other areas of the field. Pretty basic stuff. But it's letting geology and engineering drive development of the field.
"What's nice about this is that this is technology that is here today. Service companies can get a chance to participate. And the range of participants, from the biggest companies to the smallest, is very evenly distributed. Probably 70% of the projects are with small to medium size independents.
"If someone has success using this technology they will generically use it next door. The only thing we ask of operators is that they report their successes and failures.
"Some of those things involve novel drilling techniques, like, for example, reentering vertical wellbores and drilling 50 ft horizontal holes from the wellbore into the formation. These 2 in. diameter holes would radiate in four directions so you can increase the effective radius of the well from 2 in. to 100 ft."
The Class IV reservoir program will focus on barrier beach strand plain reservoirs, common in Oklahoma, Louisiana, Texas, and the Gulf of Mexico.
Spiller said DOE wants to ask for proposals next fall but is under pressure from budgeters at the Office of Management and Budget and on Capitol Hill to defer the expense.
GAS TECHNOLOGIES
Similar to the class programs is the Secondary Gas Recovery Project, operated for DOE by the Bureau of Economic Geology at the University of Texas-Austin.
Spiller said three successful Texas projects focus on determining the shape of a reservoir for optimum well spacing.
"You go to the Texas Railroad Commission and say, 'We're developing this field on 80 acre spacing, and this part should be on 10 acre spacing and this on 160. That makes sense. It's called smart well drilling.
"We're doing some things in underbalanced drilling. Working in the Gulf of Mexico, you never drill underbalanced because you get kicked. But in most of the basins-the western basins, the Appalachian basin-you drill underbalanced or with air because if you put any fluids in the hole you damage the formation.
"But now, a lot of these places are places we try to drill horizontal wells to take advantage of fracture systems, but we don't have a measurement while drilling tool to tell us where the bit is in an air drilled, underbalanced system. So you're drilling blind.
"Our Morgantown center, in connection with a private firm is trying to develop an MWD tool for air drilling systems so we can know where the bit is in X, Y, and Z coordinates 1,000 ft from the surface.
"The other thing were doing in our gas programs is storage modeling. The test of the Federal Energy Regulatory Commission's Order 636 was, 'Can the system deliver?'
"Last winter, when we went through a cold snap, one of the reasons the system was able to deliver was that we were able to extract from storage about 18 bcf of working -as.
"If you know the shape of the reservoir, you have some sense of how much deliverability you can get. So what they do in storage modeling is very much what we do in basic reservoir modeling and reservoir characterization.
"Getting efficient storage has become a very big issue. Typically you're looking at old, depleted fields. We spend about $1 million/year on increasing the deliverability of storage."
OTHER PROJECTS
DOE has opened its Teapot Dome field near Casper, Wyo., for oil recovery demonstration projects. The field, Naval Petroleum Reserve (NPR) No. 3, has nine producing horizons ranging from 300 to 6,000 ft. It has 620 producing and 68 injection wells.
DOE said many types of wells, production facilities, and drilling equipment are available to demonstrate new inventions and new techniques.
The Rocky Mountain Oilfield Testing Center (Rmotc), established last October, is budgeted for $1.5 million, along with funding from Wyoming.
Spiller said, "People sometimes have good technologies, but they can't get into someone's field to try them. We'll let them use Teapot Dome field.
"In fact, I'm funding money out of my budget so this work can be done in the NPRs. So we're joint venturing within Fossil Energy, which is something that has never happened before. "
DOE also is helping design new hard rock and soft rock bits for the drilling industry.
"Quite often, the thing that determines whether drilling in a gas field in Appalachia or in some of the western basins makes sense is whether the rig is going to sit there for 20 days or 10 days. If the rig costs you $15,000 a day, and if you can reduce your rig time because you have a more efficient bit, the field may be economic."
ENVIRONMENTAL PROJECTS
DOE has several environmental compliance demonstration projects such as disposing of waste water and naturally occurring radioactive material from wells.
"There's a big ticket item that's called the Area of Review," Spiller said. "It deals primarily with waste water injection. What typically happens,is that you may have a field that has 500 wells in it. If you want to use a wellbore for waste water injection, you're required to do a review around this particular wellbore to make sure that all the casing in wells around this well are good so you don't fill aquifers with waste water.
Reviews often overlap and operators "can end up doing the same review on the same wells umpteen times. We're working with EPA in developing a personal computer based system to allow people to see what wells are already done so they don't have to redo them.
"EPA has signed off on the idea that there are some areas in fields where pressures are so low in some reservoirs that we don't even need to do an area review. For producer S, that means a lot less environmental regulation and red tape.
"When you get the DOE working with industry to get the EPA to do something, that's win, win, win."
Spiller said DOE is working on a project with the Oklahoma Energy Resource Board, a -roup of producers that has built a fund to clean up pollution at exploration and production sites.
It is helping operators determining which sites need to be cleaned up and the best methods for doing it "in terms of what's important to EPA and what's important to the community."
Spiller also said, "We do a lot of work with natural gas upgrading. But a lot of our natural gas resources have problems with the presence of carbon dioxide and nitrogen. You have to find ways to clean up this low BTU gas to get it into the natural gas pipeline system. We have a number of natural gas upgrading programs that look at membrane technology."
Although it's not one of his programs, Spiller is enthused about development of a fuel cell that consumes methane without combustion, generating up to 3,000 kw.
"Being a former oil and gas producer, I can't tell you the number of places where you might have a natural gas well too far from a pipeline to justify hooking it up.
"You can plop a fuel cell down next to the wellbore and start jamming natural gas into the thing to generate electricity for local use.
"I'm waiting for the point where you build these things for automobiles. I want a battery powered automobile that's fueled with natural gas. That's exciting technology."
NONECONOMIC HELP
Spiller cites a number of areas in which DOE has been helping industry, although with little financial involvement.
"The Alaskan North Slope (oil export) study we did is having an impact," he said.
"We here at DOE would like to see a recommendation that we lift the ban, but it's going to be an administration decision. We think it would make a big difference as to what gets developed in Alaska. The big impact is what's going to happen in California."
DOE also is trying to find a way to offer incentives for development of marginal fields in the Gulf of Mexico.
"I spent most of my career working in the Gulf of Mexico, a lot of it in deep water," Spiller said.
"Many of the deepwater projects I saw had the same kind of risks associated with them as stuff I was working with in Angola and Gabon. I could see my companies get excited about doing things overseas but couldn't get excited about doing it here. Why? Because it just didn't make economic sense.
"So we've been working closely with MMS and the staff of Sen. Bennett Johnston (D-La.) to encourage the administration to provide incentives to develop those fields."
DOE has no funds invested but is encouraging demonstration projects in deep water and urging MMS to consider incentives such as royalty holidays and reductions "to prime the pump to get industry going there and get infrastructure built."
Spiller pointed out there are about 1,800 blocks in the shallow Gulf of Mexico that have seen little or no leasing.
"For lack of better words, those are the 'don't-wanters. What's interesting about those is that if you looked at that map 10 years ago there were thousands of don't-wanters. Industry has looked at many of them again, then somebody comes up with an idea to drill a well.
"We want to encourage industry to relook and rethink these areas. MMS is talking about doing a special sale, maybe doing royalty holidays on those blocks
DOE proposes that the administration open naval oil shale reserves for oil and gas exploration. "We have 14,000 acres in Colorado and maybe 20,000 in Utah-places that have never been open to the industry. There was some discussion about DOE getting involved in exploration programs and drilling some wells, but we said, 'Let's have industry do this.'
SYNTHETIC MUD
The National Ocean Industries Association has been talking with EPA about allowing offshore operators to use a synthetic drilling fluid rather than oil based mud-but with little progress.
"Our staff has been working with NOIA, trying to facilitate EPA signing off on it," Spiller said. "EPA is starting to realize that using this kind of environmentally safe drilling mud could be better for the environment in the Gulf of Mexico than some of the basic muds we use."
He said the Petroleum and Energy Research Foundation (PERF), a combine of about 34 companies, has sought DOE's help on refinery research, particularly cost effective environmental compliance.
"We're going to spend close to $400,000 in a joint venture with these companies, mainly on bioremediation of contaminated soils associated with refineries.
"Air quality could be the next thing we could joint venture on. We are talking with EPA about doing a refinery spill test facility."
He said EPA is requiring every valve in a refinery to be tested for leak detection. As an alternative to sniffers, one of DOE's national laboratories has developed a video camera that "sees" leaks the naked eye cannot.
"Right now the range is only 6 m, so we need to develop the technology so we can look further. But it would be a great pipeline leak detection tool. You could fly over a pipeline, videotaping the whole way, looking for fumes. It's technology that could reduce the cost of compliance simply because you have a better tool."
DOE also is improving data bases on oil and the environment. EPA uses such data bases to determine what pollution levels are unacceptable. And "it gives us a chance to have good discussions with EPA."
THE FUTURE
Spiller sees some new directions for DOE research.
He foresees projects researching California heavy oil processing, especially if lifting the Alaska North Slope crude oil export ban leads to greater use of heavy California oil.
"If we spend more money to prime that pump, it will be industry saying, 'We want to contribute money, and use DOE test facilities in a joint venture in heavy oil processing.'
He said DOE may do more to encourage exploration.
"DOE has been typically a production oriented, 'How do we get more oil out of the ground? organization. But if you're really a visionary and talk about using natural gas, where is the supply going to come from?
"We would like to see more DOE dollars spent in the Gulf of Mexico because this is where 27% of our resources are. We also would like to see more exploration in California and in the western basins.
"Although we would like to take more of an exploration focus, we don't want to get in the exploration business. We have to encourage exploration ... and say it makes as much sense to drill in this country as it does in some countries overseas."
Spiller said DOE will promote more demonstrations on cost effective environmental compliance, promote a stronger industry/national laboratory relationship, and spend more money with independents because "they really count for a large chunk of production."
He said, "You're going to see DOE budgets focused more on natural gas utilization, cooling systems, fuel cells, and even natural gas lighting.
DOE has developed a Refinery of the Future initiative with industry to identify potential R&D and regulatory barriers and solutions and develop cost shared partnerships for a coordinated R&D program.
Spiller said,- "As budgets get tighter we will have to find smarter ways, better ways to spend our dollars. And we want to make sure we are in sync with our sister agencies so we're all telling the same story."
He said DOE's White "has gone to great pains to connect DOE with EPA."
Spiller said, "We have been helped by the new relationship we have with MMS, the Bureau of Land Management, U.S. Geological Survey, and EPA. There's now sort of a pact (of cooperation) between the technical people of these groups.
"I came here as a Doubting Thomas, but I have been impressed with how well the relationship between the agencies works."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
