Oil Companies Tap New Technologies to Lower Production Costs
Low petroleum prices spur energy companies to find innovative ways to get more petroleum for less money
The depressed price of oil has spurred a new wave of innovation in energy exploration.
When a barrel of oil fetched $100 or more, energy companies were focused on drilling wells and pumping crude just as fast as they could. But now that prices have settled around $50 a barrel, companies are focused on efficiency—getting the most petroleum for the least amount of money. And many are turning to advanced technology for help.
Big oil-field-services companies like Halliburton Co. and Schlumberger Ltd. say their customers are hungrier than ever for technology that saves them cash. Some are using lasers and other high-tech equipment and data analytics before they drill to make sure new wells deliver the most crude for the buck. Others are looking to new techniques that they hope will allow them to wring more crude from both new and old wells.
“You have to keep your focus on finding new and innovative solutions,” says Bruce Tocher,manager for shale oil and gas research at the Norwegian energy company Statoil ASA. “You need those solutions more than ever.”
Fracking all over again
Several companies are looking into refracking—using the latest fracking techniques to get more out of wells that were originally fracked using less advanced techniques. This is still an experimental approach, and companies aren’t making their results public. But they are seeing enough to keep trying.
ConocoPhillips, for instance, says it has tried several refracks and continues to evaluate the technology. “We do see some potential, particularly in wells that were drilled a few years ago,” says spokeswoman Andrea Urbanek.
Devon Energy Corp. is actively refracking, particularly in the Barnett natural-gas field in Texas, and is applying what it has learned to other fields, like the Permian and Eagle Ford fields in Texas.
On a recent conference call with analysts about the company’s earnings, Chief ExecutiveDave Hager described Devon’s efforts to refrack wells using new technology. “We’ve got, I think, a working laboratory in the Barnett,” Mr. Hager said. The company is using finer grains of sand and experimenting with different ways of sealing off old pathways to allow new ones to be created for oil and natural gas to flow.
“When using the more recent technology of finer-grade sand and more diversion, more capable diversion techniques, that’s really what we’re exploring right now,” Mr. Hager said.
“There’s tremendous upside with the refracks,” he said.
In another recent earnings call, Halliburton officials described improvements in fracking technology, including the use of fiber-optic tools to help monitor what’s going on during fracking to make sure that it’s working as well as possible.
Schlumberger estimates that roughly 10,000 horizontal shale oil and gas wells drilled in the past five years in North America are candidates for refracking, and says it is working with eight producers on the technique.
Software and microbes
For new wells, engineers are relying more than ever on software and sensors to determine exactly the right places to use different amounts of sand, water and chemicals to maximize the amount of oil a well produces.
In recent years, companies have begun to double or triple the amount of sand they use to hold open the fissures that allow oil to flow through dense rock, which has often resulted in much higher production—but also higher costs. The new technology can help companies figure out the right balance between cost and production, says Gene Beck, vice president of Bakken development and production at Statoil.
On another front, Glori Energy Inc. of Houston is working with companies including Statoil and Brazil’s Petróleo Brasileiro to test a process that aims to boost output by using tiny organisms already present in conventional oil fields that have been flooded with water, a common technique used to help oil flow.
The process works, Glori says, by stimulating the microbes with a special nutrient mix. As they feed, the organisms attach themselves to bits of oil—essentially breaking it up and making it easier for the crude to flow through rock.
Early tests show the technology can extend the life a well by several years and boost the amount of recoverable oil by 33% from initial estimates, on average, Glori says.
The next big thing
Meanwhile, the search for new technologies goes on. The oil and gas division of General Electric Co. plans to increase its spending on R&D this year, says Eric Gebhardt, the division’s chief technology officer and vice president of engineering. And “co-funding from our customers is actually up this year,” he says.
GE collaborates with some customers who are looking for solutions to particular problems. In some cases, customers will help fund development of specific technologies that they want GE to accelerate. These days they are more willing to do that if they think it will result in improved equipment or data analytics that can help them make an old oil field more productive, Mr. Gebhardt says.
“These are things that even if the oil price came back up again would still be great solutions,” he says. “They’re just better when there’s a lower price for oil.”
WellDog, a company started in 1999 to develop techniques to extract natural gas from coal seams, is ramping up its work in North American shale formations. It opened an office in Denver this year and plans to triple its staff at a technology center in Wyoming.
The company has worked with Royal Dutch Shell PLC to use lasers to locate oil and gas deposits in shale formations. Analyzing the changes in photons that bounce back from underground rock formations can help drillers figure out the best places to locate wells.
John Pope, WellDog’s chief executive, says energy companies “are spending a lot of time and money to get wells into the lower cost bracket” by embracing data and monitoring tools.
“We’ve been shocked by how progressive and determined shale customers have been,” he says.