DENVER—Oil and gas technology mavens see a unique opportunity in the current industry slowdown. H.C. Freitag, vice president of integrated technology for Baker Hughes Inc. (NYSE: BHI), outlined how thousands of drilled but uncompleted (DUC) wells in the U.S. offer up a laboratory for the next leap in shale drilling and completion technology.
Countries around the globe are looking to the U.S. shale industry to help them crack the code on their domestic resource bases. “They are looking to North America for insight and experience,” Freitag said during Hart Energy’s DUG Rockies Conference & Exhibition. “This is a wonderful time to be looking at where we should be going, at understanding reservoirs, and what we should be experimenting with to get ready for when prices pick up.”
In some cases, new methods of drilling and completing shale wells are doubling EURs.
“We need to see what else is possible,” Freitag said. “We have a large inventory of DUCs that we can try new technology in.”
Despite periods of low commodity prices over the past three decades, the industry has been able to increase global proved reserves of oil and gas by 56% and 58%, respectively, he said. Technology has propelled the reserve numbers to new heights.
International unconventional activity is in its infancy but ready to take off.
Argentina has vast resources in the Vaca Muerta Shale and elsewhere. Saudi Arabia wants to produce its shale gas to reduce its dependence on oil for electricity generation. Russia’s Bazhenov shale resource is 80 to 100 times as large as the Bakken Shale, according to Freitag. Plus, China in February increased its subsidy for coalbed methane exploitation by 50%, as it pursues an alternative to lignite for fueling its power plants. Australia has significant coalbed methane development and is building out its LNG facilities to reach Pacific Rim markets and the Middle East.
Dollars spent on unconventional resource development dipped in 2014 and 2015 as commodity prices languished, and Freitag said it may be some time before spending fully recovers.
In the meantime, “here we are, still producing at $30/bbl, and not quite giving up,” he said, noting that North American production is only just now beginning to decline. “The unconventionals have been more resilient than anyone imagined.”
At the end of 2014, $70/bbl was considered the average breakeven costs across U.S. shale basins. “Now, a lot of fields in North America are still profitable at $30/bbl,” he said. “Yes, service companies have been flexible in helping operators address costs reduction, but this is not sustainable for a long period of time, because technology must be developed and is costly.”
Newer technologies exist that may help operators efficiently and cost-effectively extract more shale resources, using DUCs as testing grounds, Freitag said. “People used to say the days of easy oil are over; that’s quite wrong. It never was easy. It just appeared easy looking back.”
Instead, he suggested, the days of easy oil may be here now.
“We have all these wells in place. Let’s see what we can do to get past the 6% to 8% recovery factors of today, which I think is quite unacceptable,” Freitag said.
The industry must return to basics—available data, he said, adding big data can be used to develop technologies for source rock as opposed to conventional reservoirs, but not without economic considerations.
“We have to use whatever helps us understand the formation, but technology has to pass the economics test,” he added. “Yes, data acquisition on each and every well is helpful, but it has to be economically and scientifically viable.”
In the effort to understand, model and predict the performance of unconventional assets, the industry should determine what an ideal unconventional well looks like in construction, stimulation, costs, recovery and more. Supercomputing, geomechanics and fluid dynamics will be brought to bear. Freitag highlighted work with frack propagation modeling where high-side fracking has helped double cumulative production versus conventional techniques. Refracking and restimulation techniques have also made great strides and offer promise in boosting EURs.
“We are at the beginning of a new oil age and at the end of the first oil age,” Freitag said. “We’re now talking about unconventionals and the huge potential they hold for supplying the world with energy.”
Susan Klann can be reached at sklann@hartenergy.com.
Recommended Reading
Biden Totters the US LNG Line Between Environment, Energy Security
2024-01-30 - Recent moves by U.S. President Joe Biden targeting the country’s LNG industry, which has a number of projects in the works, are an attempt to satisfy environmentalists ahead of the next upcoming presidential election.
EQT’s Toby Rice: US NatGas is a Global ‘Decarbonizing Force’
2024-03-21 - The shale revolution has unlocked an amazing resource but it is far from reaching full potential as a lot more opportunities exist, EQT Corp. President and CEO Toby Rice said in a plenary session during CERAWeek by S&P Global.
Watson: Implications of LNG Pause
2024-03-07 - Critical questions remain for LNG on the heels of the Biden administration's pause on LNG export permits to non-Free Trade Agreement countries.
GOP’s Reaction to White House LNG Pause Takes Shape
2024-01-31 - The U.S. House Energy, Climate and Grid Security subcommittee set the date for a hearing on the Biden administration’s recent pause on LNG export approvals for Feb. 6; Republican Louisiana Sen. John Kennedy pledges to block Biden nominees.
Venture Global Seeks FERC Actions on LNG Projects with Sense of Urgency
2024-02-21 - Venture Global files requests with the Federal Energy Regulatory Commission for Calcasieu Pass 1 and 2 before a potential vacancy on the commission brings approvals to a standstill.