Technology and science can be leveraged to address spiraling costs and more difficult, technically challenging environments.
Technology and science can be leveraged to address spiraling costs and more difficult, technically challenging environments.
Newly-minted, Schlumberger Ltd. chief executive officer Paul Kibsgaard outlined several instances of how the company was diverging from the standard unconventional shale model by emphasizing commodity services in a factory approach, relying on geometrical well placement in grid patterns, using one-size-fits-all completion practices and reducing excessive use of water, proppant and pressure-pumping, hydraulic horsepower.
In its stead, Schlumberger is promoting a shale reservoir characterization approach that allows operators to place wells in local sweet spots, drill an optimum well path that stays within the formation, and optimizes completion by moving away from regularly placed stage intervals to stages placed in those parts of the reservoir that are most likely to generate optimum production, he told attendees at Howard Weil’s 40th annual energy conference in New Orleans on March 26.
Schlumberger’s reservoir characterization process is part of a multi-pronged approach to decrease well costs and inputs by working more smartly. A separate part of the process involves Schlumberger’s low-pressure, frac-fluid-delivery system that reduces water and proppant volumes and can be piggy-backed onto frac spreads from third-party, pressure-pumping vendors to broaden the technology’s reach without adding more hydraulic horsepower to an oversupplied pressure-pumping market.
Additionally, Kibsgaard touted Schlumberger’s HiWay pulsed well-stimulation technique, which has now been used on 5,000 stages to date in 10 countries among 40 customers. According to the Schlumberger CEO, the HiWay system has saved 6.0 million barrels of water and 340,000 tons of proppant, while eliminating 33,000 truck loads and producing measurable production gains versus standard slickwater completion techniques.
The HiWay system, low-pressure, frac-fluid mixing, and shale reservoir characterization are part of Schlumberger’s messaging about doing more in the oil patch with less by leveraging technology and science to mitigate risk and reduce costs as the globe struggles to move the needle meaningfully on production-volume growth in an era of spiraling costs and more difficult, technically challenging environments, both onshore and offshore.
While exploration success rates have remained largely unchanged at roughly 40% globally over the last decade, the commercial success rate has dropped from 24% in 2004 to 11% in 2010, Kibsgaard explained. At the same time, the discovery cost per barrel of oil equivalent (boe) more than tripled from $1 in 2002 to $3.75 in 2010.
Kibsgaard outlined a new generation streamer technology for the offshore market that combines seismic measurements with petrophysics to image trap, reservoir charge, and seal-in much greater detail than existing technologies.
Currently, the industry tows up to 12 streamers 50 to 140 m apart behind a marine seismic vessel with each streamer producing a unique image slice. The industry then interpolates between each discrete slice to generate an image.
Schlumberger is proposing a multi-component, next-generation sensor that can image the area between each streamer, resulting in a more detailed 3D picture of the subsurface. It means a traditional 12-stream marine vessel can produce the equivalent of 30, 50, or 60 streamers worth of data without any additional capex or operations complexity.
“This is a massive step forward for marine seismic,” Kibsgaard noted, comparing it to the technological breakthrough in medicine that moved patient imaging from 2D X-rays to 3D cat scans.
Kibsgaard confirmed that over-capacity in pressure pumping will impact Schlumberger’s first quarter financials and that North American gas drilling activity is “unlikely to resume in the short term.”
The comments follow last week’s pre-announcement of an earnings shortfall at Baker Hughes as pressure pumping loses momentum in an oversupplied market.
Reports of falling prices for well stimulation services are no longer outliers as the long-expected crest in pressure-pumping pricing appears to be at hand, roughly one year before pressure-pumping company executives’ projections last fall, and a full six months ahead of the more bearish sell-side analysts.
“In North America, we have seen over the last two quarters that hydraulic fracturing pricing is starting to come under pressure and this represents an element of uncertainty for 2012,” Kibsgaard noted during the opening address at the conference.
“During the first quarter, the downward pressure in the gas basins has also reached the liquids-rich basins. In addition, the continuing addition of capacity to liquids-rich basins has lowered utilization, which altogether will have an impact on our results in North America and the world in this and coming quarters,” he noted.
Contact the author, Richard Mason, at rmason@hartenergy.com.
