HOUSTON—Technologies have transformed operations onshore for oil and gas operators, but the industry continues to face challenges as it strives to keep costs down and make money.
Executives spoke about the importance of technology and existing needs recently during Rice University’s annual Energy & Clean Technology Venture Forum, which featured entrepreneurs looking to connect their new products and services with investors and others searching for solutions. With the spotlight on challenges, those gathered for panel sessions learned of areas in need of attention.
Among the most notable onshore are low recovery rates from U.S. shale plays.
“We’re up to about maybe 25% recovery of original gas in place. But liquids, we’re running at about 5% to 8% recovery of original oil in place,” George E. King, an independent consultant with 47 years of oilfield experience. “And what we’re producing at the surface is not representative of what’s in the rock downhole. We’ve got a lot of ground to make up. The reason why big data has not solved that is because we didn’t understand the process of flow. Let’s spend some money; do some research.”
A better understanding of physics and the mechanics of how fluids flow into the well could lead to higher recovery rates, King said, after noting a lack of these is why the industry can’t use big data effectively at this point. He suggested applying science and processing data into insightful information, carrying out tests to gain knowledge and adding that to experience to get wisdom.
“Hopefully, over the course of time, wisdom will lead us into a lot better decisions on the type of data we’re trying to get and the type of data we really need to get,” King said. “The trend of data that doesn’t apply is just going to give you a bunch of squiggles.”
The words were spoken as the energy industry dives deeper into the world’s technology offerings and look for innovations in what has become a continuous drive for improved efficiency and profit, while meeting the world’s growing energy needs.
Many large independents like Pioneer Natural Resources Co. (NYSE: PXD) are already seeing the benefits of drilling and completions technologies. The Permian Basin-focused company has more than 20,000 drilling locations in the basin. With a 2018 capital program of $3.4 billion, the company is running 20 rigs and using high-intensity completions.
“At Pioneer we take technology, innovation and entrepreneurship very seriously,” said Sha-Chelle Manning, director of technology alliances and ventures for the company.
The company is looking at video as sensors and how to teach machines to think like people, Manning said, after pointing out that automation must be “a cornerstone of how we drive down costs in our field. She added, “We’re asking ourselves why can’t we use new materials for our rigs,” referencing drilling rigs of the future and asking, “Why does it [a rig] have a single mass? Why does it take so long to move? … These are the challenges.”
Opportunities could also be found in modeling and simulation, she added.
The search is also on to use less diesel by electrifying drilling and fracking operations, which requires a lot of power and the ability to handling fluctuation. Pioneer has partnered with others to run field tests and trying power conditioning, Manning said. “Part of that solution is also understanding the power needs of the field,” which will likely change for Pioneer as it adds more ESPs. “So we’re actively working this right now.”
King added using waste gas or stranded gas that would’ve otherwise been flared has been given to turbine generators onsite with power purchased back from them at an economic 2 cents per kilowatt hour.
Al Denson, CEO of Hunt Oil, a Dallas-based private E&P, mentioned another related problem facing those in the Permian, particularly in New Mexico: co-ops responsible for laying grids are behind. “A lot of infrastructure is not there,” he said.
Tackling Water Issues
Besides electrification, water usage was also a topic that surfaced. The amount of recycled water used during hydraulic fracturing operations varies by company. Still, “you don’t get all the water back,” King said, adding 5 million gallons might be used but only half of it comes back out. “The biggest problem we’ve had on recycling water is the economy of scale.”
Recycled water is cheaper than freshwater, and it pays to use recycled water if many wells are being drilled in an area, King added.
That’s where the benefits of having a great amount of contiguous acreage comes into play for Pioneer, which has a large water infrastructure pipeline that spans about 100 miles, Manning said.
“Our goal is to get to 100% brackish water. We’re still doing blending right now,” she said. But the company has reached out to other operators and turned to technology to help reach its goal. Within 10 years, Manning believes everyone will be using brackish water or a combination and filtration will be used at the local level. “I don’t see much freshwater ever being used in the future.”
Denson pointed to the high cost of freshwater, which Hunt Oil was paying $2 per barrel for in some areas. That’s expensive, compared to the 45 cents per barrel that King said brackish water costs per barrel.
Earlier, Denson shed light on the bottom line.
“Technology is critical; there is a big but there. Everybody here in the room says the goal is to make money,” said Denson. “Private companies really mean that. … They have their own money involved,” adding oil and gas and costs are the levers buy “it’s the money-making that’s important.”
Private companies, mostly private-equity funded, are driving most of the unconventional plays, Denson said, noting over 35% of the nearly 5,000 wells drilled in the Permian area in 2017 were drilled by private companies.
But private equity-backed companies have a short lifecycle, he said. Innovation is key early in the lifecycle, but cost control, repeatability and preparing to sell are important latter stages, he said.
Still, all seemed to agreed that technology is an ingredient for success.
Velda Addison can be reached at email@example.com.