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Technology forged during downturn preps oil industry for upturn: Fuel for Thought

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Upstream operators have masterfully used the current down-cycle to prepare for the years ahead, achieving stunning efficiencies in drilling and completions even though tweaks and improvements were continuous in the years leading up to late 2014 when oil prices plummeted and kicked off what has arguably been industry’s worst slump.

Some of these advancements “absolutely” would not have happened if not for the downturn, Allen Gilmer, CEO of DrillingInfo.com, said.

One of the first ways operators cut costs and drove what has become known as “efficiencies” was simply getting better at the logistics and coordination of supplies and equipment.

Efficiency gains have varied by operator and play, but results obtained by the best operators “look like step change–two times as much as before per same quality of rock,” Gilmer said.

An even more exciting way that companies improved their cost structure was getting better at how oil was extracted and delivered. And one method that made this happen was better geosteering–the ability “to land in the right spot…the sweet spot” of a reservoir, Muqsit Ashraf, Managing Director for Energy at Accenture Strategy, said.

“You can be off a few feet [from the optimum target] and see significantly different levels of production,” Ashraf said.

In addition, advances in reservoir modeling, lateral logging and measurement-while-drilling allows real-time gauges of the rock’s petrophysical properties and higher productive zones, he said, which are “constantly being perfected.”

With continual technology improvements in geosteering and real-time monitoring as the well is drilled, “you can avoid sidetracks [drilling detours], which are costly, happen more frequently than people expect them to–typically every five to ten wells–and can add hundreds of thousand dollars each time,” Ashraf said.

For example, EOG Resources has publicly stated in the last year that it continues to perfect what it calls “precision targeting” to drill the very best areas of a formation. Instead of landing wells anywhere within a 150-foot window, the company steers them exactly in a much narrower window of around 20 feet, its executives have said.

Microseismic monitoring

Other technologies, such as microseismic, allow operators to effectively monitor the hydraulic fracturing process in real time to change perforation spacing–adjusting the number of intervals or sections that require fracturing–and also modifying the fracturing fluid recipe that includes sand and chemicals.

These and other technology advances can improve perforation efficiency from about 50%-60% to as much as 80% or more, Ashraf said, and yield significantly more production from a given well.

“Companies say it enhances net present value [by] one to two million dollars per well,” he said.

In addition, EOG also recently announced it has developed a proprietary enhanced oil recovery technology to use on mature wells in the south Texas Eagle Ford Shale, to force out crude that was missed the first time around.

A recent focus of upstream companies has been to drill the longest laterals that are possible while using geosteering to stay within a zone, Guggenheim analyst Subash Chandra said. A lateral is a well’s horizontal portion.

“The only limit to this is the ability to stimulate the ‘toe’ of the well,” Chandra said.

While 10,000 feet has become a customary lateral length in recent years, big independent Pioneer Natural Resources–one of the first companies to try unconventional technologies to produce oil from West Texas’ Permian Basin–is taking some of its horizontal wells there out to 13,000 feet. Longer laterals allow access to more hydrocarbons per well.

As oil prices climb and operators step up activity these advances will begin to bear fruit that forecasters may be missing in their estimates of future production.

Some market watchers have said that since producers have already migrated to a basin’s sweet spot, it will be difficult to achieve production levels seen over the last two years.

However, with untouched areas underneath currently exploited shale plays and EOR projects yet to get underway; the US could be primed for yet another oil boom.

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