Tight oil technology was improving already when crude oil prices began their plunge in mid-2014, speakers generally agreed during the US Energy Information Administration’s 2018 conference. But improvements might have quickened as the drop accelerated because producers and their goods and services suppliers felt pressed to be more economically and operationally efficient, they said during a June 4 breakout session.
“The relationship between the number of rigs and production started to decouple in 2014,” said Danya Murali, a statistician on EIA’s exploration and production team. “Prices fell, but production continued to grow. That implied an improvement in technology.”
Robert Clarke, research director for the Lower 48 at Wood Mackenzie, said, “Technology acted like a catalyst. Companies wanted to know what the break-even point would be for the next wells they drilled.”
Data became an asset because of better, cheaper technology, Clarke noted. “With 20,000 shale wells producing, there was much more of it available. The days of pump-and-pray were long gone.”
Clarke said, “Successful analysis still requires the right team, environment, and data. But we learned that every well was unique and that by sharing data, we could take 10 boomer wells from many companies and identify common characteristics.”
Identifying problems
Stephen Ingram, vice-president for technology, innovations, and solutions at Halliburton Co.’s North American division, said, “Innovations born out of a bust challenge an industry to find where the problems are. Innovations being made today in hydraulic fracturing are going to lead to potentially major breakthroughs.”
Companies working in unconventional oil and gas exploration and production seem to believe they haven’t found a diminish rate of return on what’s being found because there are too many significant deficiencies to be addressed, Ingram said. “In many basins, we’ve eliminated dependence on pneumatic transportation, which represented 30% of total costs.”
Ingram said Halliburton and other oil field service and supply companies have engineered safety issues out to a point that the most hazardous situations employees face occur when they are driving to and from well sites.
“Innovation through simplification has removed people from dangerous situations,” Ingram said. “Fiber optics and other outcome-based technology have identified problem areas along each foot of lateral to ensure effective returns on capital employed.”
Recovery rates vary
Recovery rates from unconventional production will vary by production and formations, Clarke said. “In conventional fields, it was around 25-35%. Shale gas recovery rates started around 10% but have grown toward 20%. Tight oil started around 5%, and moved toward 14-15%,” he said.
Asked whether there are enough new data-oriented scientists going to work, Clarke said producers are seeing more of them, but many positions where people were laid off in 2014-15 still need to be refilled.
Ingram said, “The desired and necessary skills sets require coding expertise now. I don’t think most university programs—upward from 50%—understand this yet.”
Clarke said, “It’s important to recognize that in 2016, most variables were in producers’ favor. Only the best rigs with the best crews were drilling the best rocks. It became dangerous for producers to think this would be the new norm. More in-fill wells are being drilled now and more technology is being used, but more headwinds are being encountered.”
The influence of algorithms are influencing a number of places at the well site, making it possible for producers to be willing to take more risks, Ingram said. “I’m not interested in a technology unless it can be scaled across platforms, whether it’s Halliburton’s or the entire industry,” he said.
Asked how much more of the shale oil exploration and production can be automated amid growing labor costs, Ingram said the sky is the limit. “Eliminating personnel injuries and environmental problems will attract more people to the industry. There are still structural inefficiencies to be extractive to increase cost efficiency,” he said.
Contact Nick Snow at [email protected].
