Strong growth projected for underbalanced drilling

John R. Duda
U.S. Department of Energy
Morgantown, W.Va.

George H. Medley Jr., W. Gregory Deskins
Maurer Engineering Inc.
Houston

Interest in underbalanced drilling is growing worldwide at a rate not seen for a new drilling technology since the introduction of horizontal drilling in the mid-1980s (Fig. 1 [18916 bytes]). Underbalanced drilling has proven very beneficial in areas such as the Austin chalk trend in Texas and Louisiana, and the technology is used widely in Canada (Fig. 2 [19721 bytes]).

Current underbalanced drilling operations in low pressure or depleted reservoirs can be conducted using air, mist, or foam. A well is drilled underbalanced if the pressure in the well is maintained less than the formation pressure. Many operators are reluctant to drill underbalanced with foam because of the difficult hydraulics calculations required and the general lack of information and training in underbalanced drilling. The addition of air or gas to the drilling fluid can also cause many technical problems.

The Department of Energy's Morgantown Energy Technology Center manages a portfolio of drilling-related research, development, and demonstration (RD&D) projects designed to reduce costs and improve efficiencies. This research is market-driven and comprises a balance of near, mid, and long-term projects. These drilling-related projects, along with others, support the Department's ultimate goal of facilitating development of U.S. natural gas resources.

The Department of Energy directs RD&D resources toward relatively higher impact areas in terms of cost, safety, environmental quality, etc. Individual projects are cost-shared by the technology developers at various levels, depending on the stage of development and the commercialization risk. Typical cost-sharing ranges 15-50%, and in some cases partnerships are negotiated with service companies. Teeming with the service sector allows industry to realize benefits sooner.1

The Department of Energy sponsored Maurer Engineering Inc. (MEI) to develop a user-friendly foam drilling model that can accurately predict pressure drops, cuttings lifting velocities, foam quality, and other foam drilling variables. The program allows engineers to predict pressures and flow rates at the surface and downhole for foam drilling and workover operations (OGJ, July 1, pp. 114-119).

A second objective of the project was to develop a light-weight drilling fluid that would allow underbalanced drilling in low-pressure reservoirs without the limitations commonly associated with existing light-weight fluids. A new light-weight solid additive was proposed, and the initial investigations of its properties as a drilling-fluid additive were conducted during Phase 1 of the project. Field performance tests will be conducted during Phase 2 of the project to analyze the performance and economics of the system.

Hollow glass spheres with a specific gravity of 0.38 effectively reduced the density of drilling fluids. Hollow glass spheres have been used for years in the oil industry, primarily to lower the density of cement slurries to combat lost circulation. In the early 1970s, the hollow spheres were used in the former Soviet Union to drill wells where lost circulation had previously made conventional drilling impossible. A 50% concentration by volume of hollow glass spheres decreases the density of 8.5 ppg mud to 5.8 ppg, which is sufficient for many field applications.

Light-weight fluids

Light-weight drilling fluids (fluids with a density less than water) have typically been used in the particular U.S. regions where the technology was introduced 40 years ago. These regions include portions of the Permian basin in west Texas and eastern New Mexico, the San Juan basin of northwestern New Mexico, the Rocky Mountains, and the Appalachian basin.

The use of light-weight fluids first found success in these regions because of the hard rock formations encountered. Drilling underbalanced with light-weight fluids resulted in large increases in rate of penetration (ROP) of four to ten times conventional drilling rates.

Unfortunately, because the primary reason for using light-weight fluids in the early efforts was ROP, these techniques tended to become associated with those particular regions to the exclusion of most other areas of the U.S.

In the past few years, the driving force for drilling has slowly shifted from an emphasis purely on cost reduction to the need to reduce formation damage as well. This shift is driven largely by the tremendous increase in the number of horizontal wells drilled.

In horizontal wells, drilling and completion fluids contact the producing formation for much longer periods, and a much larger formation area is exposed than in conventional vertical wells. Consequently, the potential for formation damage from drilling fluids is magnified many times over.

Some operators in Canada, for example, have reported ten-fold productivity increases in horizontal wells drilled using underbalanced techniques as compared to horizontal wells drilled conventionally. As a result, underbalanced drilling activity in Canada is about ten times higher than that 3 years ago. This benefit highlights perhaps the largest potential market for light-weight drilling fluids in general.

The other obvious potential market for light-weight fluids is in areas where the formations are pressure depleted. Depletion not only leads to increased formation damage, but it may completely halt drilling if circulation is lost. Depletion can increase costs and risks as the potential for differential sticking increases.

The increased use of underbalanced drilling resulting from concern about pressure depletion is best illustrated by the experience of one foam drilling contractor in the Hugoton field in western Kansas. In this area, the reservoir pressure has declined to the point that light-weight fluids are desired to prevent formation damage during reentry horizontal work. The number of foam units in use by the contractor grew from none in 1988 to 15 in late 1994. This increased demand led a major service company to enter the market in early 1995 in this region.

The potential market for an incompressible fluid (made with light-weight solid additives) would include not only horizontal wells, but also many of the wells currently being drilling with air, mist, or foam. This type of incompressible fluid would overcome many of the problems associated with drilling fluids containing a gaseous phase.

Industry survey

Maurer performed a study to gauge the potential for light-weight drilling fluids and the extent of underbalanced drilling activity in the U.S. Data from many industry sources, including recent publications on the potential for air drilling, were evaluated and incorporated into this study. Recent output from the DOE Energy Information Administration "Rig Model" computer forecaster was also included.

Maurer Engineering also contacted Petroleum Information Corp. and Spears & Associates Inc., two private data base companies. Neither of these companies has collected well data specific to underbalanced drilling or the use of light-weight fluids in underbalanced drilling. No company currently is specifically counting wells drilled underbalanced or with light-weight fluids.

These sources were investigated to determine the percentage of current wells drilled underbalanced (mud weight <8.6 ppg). these data included a contact with smith international inc. to research bit records. data were also gathered from operators and service companies through ongoing informal discussions, forums such as the mei/drilling engineering association project updates, and workshops. data were obtained from service companies listing major players in the underbalanced market, cost of underbalanced services, and projections of market increases.

Discussions were held with five of the largest air drilling services contractors in the U.S. The wells drilled by these contractors represent about 80-90% of the wells drilled with air in the U.S. (This percentage is based on the number of wells they reported drilling compared to the total number of air-drilled wells reported through the project survey.)

The final source of information for evaluating the light-weight fluid market was an industry-wide survey sent to companies concerned with advanced drilling technologies. For the most part these companies are current or past participants in projects carried out for the Drilling Engineering Association (DEA).

Other major players in underbalanced drilling, including operators, drilling contractors, air-package suppliers/vendors, drilling fluid service companies, several service companies that specialize in underbalanced drilling, and other related service companies, were contacted as they became known to the project.

The survey requested information describing reservoir types and drilling conditions in each area of operation. The intent was to determine not only where underbalanced drilling is currently being planned or carried out, but to identify areas where conditions may be favorable for underbalanced drilling (depleted reservoirs, horizontal wells, lost-circulation zones, hard rock, etc.). The survey also gathered information on why underbalanced drilling is not being used and on what will be required to increase the level of utilization.

Prior surveys of the underbalanced drilling market have generally concentrated on air, foam, and mist drilling in geographic areas where these techniques are already common. This survey sought to identify new areas of application and to include the prospective use of incompressible fluids containing light-weight solid additives.

Data from other published sources concentrated on historical descriptions and forecasts of drilling activity, with particular emphasis on gas wells. The number and type of wells drilled each year, target formations, drilling activity by region, depth of wells being drilled, and any available cost data were included. This information was gathered for oil and gas wells, dry holes, and specifically those drilled underbalanced, where available.

Responses

A questionnaire was originally sent to 63 individuals representing DEA participants involved in U.S. drilling operations. By the end of the survey, contacts had been made with 75 individuals representing 66 companies.

Eight of these companies had no U.S. operations in the past year, and nine of these companies were either equipment manufacturers or service companies whose service does not depend on whether underbalanced techniques were used. These were unable to provide much meaningful data, leaving the project with 49 companies surveyed.

Thirty companies (61% of the 49 potential respondents) answered the survey. After those responses that could not provide meaningful data (incomplete or no data, or responses from vendors that do not track underbalanced operations) were removed, 24 useful responses remained, representing 49% of the potential useful responses.

Analysis

Companies were asked to estimate the number of wells drilled with light-weight fluids in 1994 and 1995 and the number projected to be drilled in the near future. Seventeen operators, including small independents and major oil and gas companies, reported drilling a total of 1,852 wells in 1994. They expected to drill a total of 1,773 wells in 1995.

These figures represent 7.4% of all U.S. wells drilled in 1994 and 7.9% of all wells expected to be drilled in 1995. The responding operators also reported drilling 5.5% of U.S. gas wells in 1994, and planned to drill 6.6% of domestic gas wells in 1995.

These operators drilled 10% of their oil wells with light-weight fluids and 40% of their gas wells with light-weight fluids in 1994. Light-weight-fluid drilling represented 27% of their wells.

Oil well drilling with light-weight fluids was projected to remain at about the same level in 1995. A slight increase in gas wells drilled with light-weight fluid was projected (up to 44% from 40%). Total light-weight drilling for these operators was expected to increase by 1%, to 28%.

The reported use of light-weight fluids was much higher than expected, but the results probably do not accurately reflect current light-weight fluid use. Further examination revealed that several of the questionnaires were forwarded within the surveyed companies to the person specifically responsible for light-weight fluid drilling. These responses tended to portray a higher level of light-weight fluid drilling than is probably true for the industry as a whole.

The responses to this question were adjusted to try to gain a more representative picture of current activity. This adjustment entailed removing the totals for those companies that reported drilling more than 80% of their wells with light-weight fluids. In addition, one company had a large volume of light-weight fluid wells concentrated in only one geographic area. This large volume of wells skewed the overall results heavily in favor of light-weight fluids. Another company indicated its well count was incomplete; more than 85% of its gas wells were reportedly drilled with light-weight fluids.

The adjusted data set was used only to estimate the number of wells drilled in 1994 and 1995 with light-weight fluid and to make low-case projections of light-weight fluid use in the future. This estimate was then compared to other data as a validity check.

When the potentially biased responses were backed out of the total, the average percentage of wells drilled with light-weight fluid for 1994 was 7.2%. For 1995, the average was expected to be 10.0%. These estimates still represented more than 3.5% of all wells drilled in the U.S. These results agreed with another projection provided earlier to the DOE.

Carden reported in the "Technological Assessment of Vertical and Horizontal Air Drilling Potential in the United States," the final report under DOE contract DE-AC21-92MC28252, that 12.7% of all U.S. drilling was done with air in 1991-1993. Smith Tool Co. data for those 3 years indicated that the percentage of air drilling declined from 14.4% in 1991 to 7.4% in early 1993.

The adjusted activity summary for this survey for 1994 was consistent with the numbers provided by Smith Tool Co. for 1993. This served as a measure of validation to the survey results.

As interest in light-weight fluids and underbalanced drilling has increased in the last year, an increase in the well percentage from 7.2% to 10.0% in 1995 appears very reasonable. Additionally, the median response from both the adjusted survey of the operators and the survey of the service companies was that 10% of all wells in the next 2 years will be drilled underbalanced.

Responses were received from seven service companies, including three of the world's largest air drilling companies, one major drilling fluid company, and a nitrogen provider. These companies reported a combined total of 976 wells drilled in 1994 and 1,210 wells drilled in 1995. These totals represent 3.9% and 5.4% of the total wells drilled in the U.S. in 1994 and 1995, respectively.

Not surprisingly, considering the source, 93% of these wells were drilled using light-weight fluids. Responses from the service companies were not used to make any projections or forecasts of wells to be drilled with light-weight fluids.

Projection

The survey also asked for an estimate of the percentage of wells to be drilled underbalanced in 2, 5, and 10 years. Operators had more optimistic projections than the service companies, and their responses tended to be more consistent. The percentage of underbalanced wells is estimated to grow to 15% of all wells by 1997, to 20% by 2000, and to 30% by 2005.

The projected growth is primarily being driven by increasing concern about formation damage, potential for increased ROP, and the ability to reduce lost circulation in depleted reservoirs. The first driver will increase profit, while the two other large drivers reduce cost.

Estimates for underbalanced drilling growth based on the average operator were even more optimistic; their average estimated underbalanced drilling utilization for the year 2005 was nearly 37%. The median growth figures probably represent a more balanced picture of expected growth.

The service companies as a whole were much more conservative in their growth estimates. Only three of the seven respondents estimated future underbalanced drilling levels, and their median estimate was lower: underbalanced drilling will grow from 10% of all wells to 18% in the next 10 years. Because of the low response rate among service companies and their generally more conservative approach, less weight was given to this estimate in the final analysis.

At survey time in 1995, all available equipment provided by the responding service companies for light-weight fluid drilling was in use in the field. Without exception, the air-drilling specialist companies reported a 100% equipment utilization. They were struggling to meet the demand, but they were reluctant to expand their equipment inventories because of the generally depressed industry market during the past decade. Limited equipment availability was most likely driving the pessimistic response from the service companies.

Demand will be high, but supply will limit the application of underbalanced technologies, at least for the near term.

Potential targets

The second question asked for an estimate of percentages of different drilling conditions generally encountered. The purpose of this question was to determine as completely as possible the percentage of reservoirs that are potentially available for underbalanced drilling in the U.S., without regard to whether they are currently being drilled underbalanced.

Operators reported that about 52% of reservoirs they operate are in hard rock. Hard rock reservoirs are typically favorable to underbalanced drilling. These reservoirs have often been drilled with air or aerated fluids because of the increased ROPs.

The operators reported that 35% of their reservoirs were pressure depleted; this condition is conducive to underbalanced drilling (Fig. 3 [17982 bytes]). Using air or aerated fluids allows the reservoir to be drilled underbalanced, which prevents fluid invasion into the reservoir. This in turn prevents formation damage, differential sticking, and lost circulation. About 30% of the reservoirs reported were likely to have lost-circulation problems.

The fourth largest category (23%) of conditions encountered by the responding operators was low-permeability gas reservoirs. These reservoirs are candidates because an underbalanced condition during drilling is less likely to encounter formation fluids entering the well bore. If an influx does occur, it is more likely to be small and easily handled. Low-permeability reservoirs are also typically harder rock.

Other drilling conditions that are good candidates for light-weight fluid drilling include areas prone to differential sticking, sloughing shales, horizontal drilling applications, areas with fluid disposal problems, and slim-hole applications.

Because the service companies responding were predominantly involved in air drilling, their responses were significantly different from the operators. On average, they reported virtually no reservoirs being drilled with lost-circulation problems, for low-permeability gas formations, with fluid disposal problems, or differential sticking. The operation areas for the service companies were more limited in geography and in reservoir type. The dominance of air, mist, and foam drilling in their operations has eliminated or greatly reduced their exposure to several of the listed problems.

In many cases, difficult reservoir types are being drilled, but it is not apparent to the service company because the problem has been solved through the use of light-weight fluids.

Ranking process

The survey asked respondents to rank various advantages, disadvantages, and concerns associated with light-weight drilling fluids. The responses were ranked in two ways:

• A total score was given for each item, determined by simply adding all responses for that item. Low numbers were assigned to the most important rankings (i.e., 1 = most important problem). If a particular item was not ranked by a respondent, the item was assigned a score equal to the highest possible rank plus 1.

• The responses were also evaluated based on the percentage of respondents assigning a particular item high importance (1 or 2). Items ranked by only a few respondents, but considered to be very important to them, would not be lost within the overall larger body of data. For instance, an item ranked as 1 or 2 by 40% of the respondents, but not ranked at all by the others, might receive a higher overall score than an item ranked 5 or 6 by all respondents.

Advantages

Each respondents was asked to rank several light-weight fluid advantages: environmental benefits, increased ROP, increased bit life, reduced differential sticking, reduced formation damage, reduced lost circulation, and others. These responses helped determine which light-weight fluid products might already have strong market acceptance.

Operators regarded reduced formation damage as the biggest advantage to using light-weight fluids, followed by increased ROP, and then reduced lost circulation (Fig. 4 [16092 bytes]). Historically, ROP increases have been considered the greatest advantage. This shift toward strong concern about formation damage may reflect the largest potential market for light-weight fluids.

This need to reduce formation damage will open up new areas to light-weight fluid drilling, especially considering that 35% of reservoirs drilled by these operators are pressure depleted. The data in Fig. 5 [18117 bytes], representing the percentage of respondents giving a rank of 1 or 2, show the high importance of reduced formation damage, increased ROP, and reduced lost circulation.

Service companies ranked as most important the same three items as the operators; however, they indicated that increased ROP is most important. Twice as many service companies ranked ROP as highly important compared to reduced formation damage. Otherwise, these rankings are very consistent with those of the operators.

Disadvantages

The respondents rated the disadvantages of air, mist, foam, and aerated fluids. Options included corrosion, difficult hydraulics calculations, downhole fires, inability to handle fluid influxes, high chemical costs, high nitrogen cost, hole erosion, inability to recirculate foam, inability to use conventional measurement while drilling (MWD) tools, and other disadvantages.

These responses will help target areas most in need of research and development to make light-weight fluids marketable.

The inability of light-weight fluids to handle formation fluid influxes effectively is their primary limitation (Fig. 6 [21376 bytes]). this indicates a good potential market for light-weight fluids that are not adversely affected by the invasion of other fluids.

Based on the percentage of operators assigning each disadvantage a rank of 1 or 2, operators are also very concerned about the inability to use conventional MWD and the difficulty in calculating hydraulics accurately (Fig. 7 [19777 bytes]).

The three most significant problems operators have with light-weight fluids are all addressed by the development work undertaken in this project. Fluids with light-weight solid additives would help overcome contamination problems associated with influxes and should allow the use of conventional MWD in underbalanced drilling. The problem of difficult hydraulics calculations is directly addressed by the FOAM computer model developed as part of this project.

The service companies expressed more concern with direct cost-related items than with operational concerns. Their greatest concern was with corrosion, closely followed by nitrogen cost, and high chemical cost. The difficult hydraulics calculations involved were also of high concern.

These results point out a need to develop tools and techniques to reduce corrosion and the high costs associated with controlling it, as well as ways to cut costs in general.

The respondents also ranked the reasons why light-weight fluids are not used more in their operations. The barriers to use included cost, hole instability, inexperienced personnel, limited equipment availability, no planning tools, unfamiliarity with light-weight fluids, well-control concerns, and other reasons (Fig. 8 [19384 bytes]).

Unfamiliarity with light-weight fluids and the perception of high cost were the two primary reasons operators gave for not using light-weight fluids more often. Inexperienced personnel and hole instability concerns were also relatively important.

The service companies' primary reason for not using light-weight fluid more often was limited equipment availability. They also ranked high cost, unfamiliarity, and inexperienced personnel as important reasons.

Limited equipment availability will became a larger problem in the future as the demand projected by service companies and operators increases for light-weight fluids. This problem is already significant in some regions. One service company in the Rocky Mountains reported that some spud dates were being determined by the availability of air-drilling packages. All available equipment owned by this company was in service, and all equipment they manufacture was being put into service immediately. This trend may limit the expansion of underbalanced drilling with light-weight fluids.

LWSA fluid potential

The survey asked if companies would consider using a light-weight-solid additive (LWSA) fluid if it were available. About 50% of the operators said they would use an LWSA fluid, and 44% said they would possibly use the fluid, depending on circumstances.

At the time, operators reported they had 97 wells that were candidates for this LWSA fluid.

More surprisingly, out of five service companies that responded, two said they would be willing to try the fluid. The service companies stated they had approximately 110 wells that were candidates for this type of fluid.

Reported regions where the LWSA fluid could find potential use included the Rocky Mountains, the Permian basin, Oklahoma, Arkansas, northern Louisiana, and central Texas. The depths of application ranged from 2,500 to 22,000 ft.

Projected activity

The survey results and other sources were combined to develop a forecast of underbalanced drilling activity for the next decade. To project the use of light-weight fluids in drilling, it was first necessary to estimate the total number of wells that will be drilled. Without exception, respondents indicated that light-weight fluid and underbalanced drilling will form a subset of total drilling; that is, no increase in overall well counts are expected because of underbalanced drilling. Instead, underbalanced drilling will expand by replacing wells that might have been drilled conventionally.

No forecasts for underbalanced drilling prior to this project were found. This work is the first known, publicly available projection for underbalanced drilling in the U.S.

A model was created to predict U.S. drilling activity (Fig. 9 [19305 bytes]). information on well completions and rig count was collected from several sources, including gri, the doe energy information administration, oil & gas journal, and baker hughes inc. the number of wells projected for 1996 using this model is 23,650. from 1997 to 2005, the gri total well growth rate projections were used.

An analysis of survey responses indicated the percentage of all wells drilled with light-weight fluids in 1994 and 1995 was 7.2 and 10.0%, respectively. A projected increase in underbalanced drilling was also reported, as determined from the median responses of the operators (Fig. 10 [21149 bytes]).

The base case for the projection of light-weight fluid use was a combination of the median response estimate of growth in underbalanced drilling and the projected total well count.

The low-case projection used a median projected growth rate based only on operators currently drilling less than 85% of their wells with light-weight fluids (i.e., the adjusted response). The low-case projected use of light-weight fluid drilling as a percentage of all wells is 10, 15, and 25% for the years 1997, 2000, and 2005, respectively.

The high-case projection used the unadjusted average projected growth rates provided by operators. These rates project 17, 27, and 37% of all wells drilled in the U.S. will be drilled underbalanced in 1997, 2000, and 2005, respectively.

The same ratio of gas wells to total wells was used in this study to project the number of gas wells to be drilled with light-weight fluids. The forecast predicts that the number of gas wells to be drilled with light-weight fluids will increase during the next few years (Fig. 11 [21537 bytes]). the gas well projection is probably conservative because survey responses showed that a larger percentage of gas wells than oil wells are drilled with light-weight fluids.

One reason for this trend is that any gas produced during underbalanced drilling can be flared. Handling produced oil on a drilling site is much more difficult.

Acknowledgment

The authors would like to thank the Department of Energy for permission to publish this article. This work was performed under contract No. DE-AC21-94MC31197 for the U.S. DOE Office of Fossil Energy.

Reference

1. Duda, J., and Yost, A.B., "DOE/Fossil Energy's Drilling, Completion, and Stimulation RD&D: A Technologies/Products Overview," presented at the Eastern Regional Conference and Exhibition, Morgantown, W.Va., Sept. 18-20, 1995.

The Authors