Technology has and will continue to transform the oil and gas industry in 2015.
U.S. unconventional oil and gas activity, which has transformed the United States into a potential liquefied natural gas exporter and a significant oil producer, has been made possible by innovations in hydraulic fracturing and horizontal drilling technology.
The oil and gas industry has faced a learning curve in terms of how to best produce shale oil and gas. The technology and learning curve effects that the operators, service providers and drilling contractors have put in place have achieved has substantially improved the breakeven point of shale plays, said Vance Scott, partner and leader of the Americas energy practice at global management and strategy consulting firm A.T. Kearney.
Technological advances have improved the breakeven economics on wells for both shale oil and gas wells, to the point where some companies are able to drill economic dry gas wells with break-even prices of between $2 and $2.50/Mcf. The economics have improved due to operators making better decisions on fluid choices, rigs and pressure pumping.
"It's not so much a single point technology as it is the integration of technologies and how they bring those together."
In 2015, more emphasis will be placed on technologies that reduce cost and improve efficiencies, Bill Kroger, co-chair of law firm Baker Botts' Energy Litigation Practice Group, and Jeremy Kennedy, partner in the firm's Global Projects Practice, told Rigzone.
"Energy technology companies may need to lower their prices in response to a drop in demand, which will offset some of the price declines in crude oil," Kroger and Kennedy told Rigzone. "The technology companies with strong balance sheets may see crude price declines as an opportunity to acquire companies and technologies at discounted prices."
In the exploration and production area, some parties may adopt a "wait and see" attitude in respect of some of these more expensive to develop shale plays. With well costs above $10 million in some plays, the desired rates of return are difficult for some higher-cost producers to achieve at current oil prices.
"For this reason, we may see CAPEX [capital expenditures] begin to decline until there is some stability with oil prices," said Kroger and Kennedy. "However, that will be offset somewhat by the fact that many areas have a current backlog in completed wells, and we are seeing completion (in respect of previously drilled wells) continue. We would expect that such completions will continue to help maintain cash flows."
A major focus of unconventional drilling now and in 2015 is the accuracy of where well laterals are being placed, R.T. Dukes, upstream analyst at Wood Mackenzie, told Rigzone. Measurement-while-drilling and logging-while-drilling tools are allowing oil and gas operators to better pinpoint where to place laterals – in some cases, 50 feet can make a huge difference. In plays such as the Delaware Basin in West Texas, this accuracy can make the difference between a well having a five percent return or a 40 percent return. This accuracy also is allowing companies to maximize resources in the upper and lower bench of the Eagle Ford shale play.
Technology is playing a significant role in drilling efficiency, especially in a sensitive price environment, Dukes noted. In 2015, the manufacturing approach to shale plays will evolve to a customization approach as operators seek to improve the performance of individual wells. In 2014, completion activity focused around bigger fractures. In 2015, companies will instead focus on being smarter with fractures, and seeking to understand the performance of individual stages in real-time.
"In a tough price environment, being able to push out every bit of optimization matters."
The idea of factory drilling and feeding the "rig monster" has been in the industry for decades, but drilling and completion technology has evolved over time and, in its latest rendition, has been applied to shale. The industry's focus on the size of acreage has created the need for lots of drilling; hence the idea of factory drilling, said Mike Mueller, vice president of technology development with MicroSeismic, in an interview with Rigzone.
The factory drilling approach has been a controversial topic in the oil and gas industry, Mueller said.
"Some totally believe in factory drilling and efficiency driven by statistical production results. Others are advocating a 'data-driven' approach where you drill smart, consistently achieving top quartile production results, not statistically, and hoping to not have too many poor producers."
"The shale plays have been classic acreage plays," said Mueller. "Once the shale concept took hold, independent exploration and production companies sent their landmen out to get the biggest acreage positions ahead of their competition (and for the smallest bonus payments to mineral rights holders they could get) and ahead of the technical work. The technology implementation always chases the landman. Always has, and always will in the United States, which has private mineral ownership."
The overall shale boom, which includes the dominant U.S. shale plays, has solidly left the exploration, access and appraisal phases and entered the development drilling phase of field/play life. The factory approach to field development is the most expensive part of the cycle. The development era could last for many years, given the huge acreage positions companies have accrued.
MORE WILLINGNESS TO INVEST IN NEW TECHNOLOGY
North America's unconventional, deepwater, tight and heavy oil resources have been the focus of much of the investment made since 2003 in oil and gas exploration and production technology, according to a recent report by Boston-based Lux Research. Since 2003, more than $7 billion has been invested in new technologies to enhance oil and gas exploration and production.
"Unlike in the past, the oil and gas industry now embraces emerging technologies from adjacent industries," said Daniel Choi, Lux research analyst and lead author of the report.
Initial investments focused on making unconventional plays more productive, such as hydraulic fracturing technology. Now, a group of companies are focused on giving operators more information on the actual production process, such as microseismic, chemical tracers, downhole fiber optic sensors and temporary insulation to bolster production recovery from wells, Choi told Rigzone in an interview.
PwC experts are seeing operators more willing to quickly introduce new technologies for shale in order to remain competitive in different oil price environments, unlike offshore conventional, where operators are more conservative about introducing new technologies. Onshore shale producers have more operational freedom in this respect due to greater number of wells and shorter life spans when compared with deepwater wells.
The next wave of investment in oil and gas technology will focus on improving recovery of tight oil production. Single-digit recovery levels are currently seen in tight oil wells, compared with recovery of between 20 to 70 percent from conventional wells, said Choi. Currently, many operators are opting to drill new wells rather than invest in currently producing wells to boost production.
"Right now, it's all about making completions more efficient and understanding completions themselves," said Choi. "It's still the Wild West in terms of technologies to understand what makes a well more productive."
The recent decline in oil prices will not slow down investment in unconventional oil and gas technology, as the breakeven price for most shale plays is an average of $60/barrel. However, lower oil prices could hurt investment in the implementation of oil sands production technology, depending on the company, Choi said.
The decline in oil prices could result in companies going either toward doubling down on efficiency imperatives or focusing on technology investment, depending on the exploration and production company's culture, talent, leadership, play circumstances, and the regulatory regime under which they operate, said Mueller. Mueller noted that the rapid production declines of shale plays, which can range from 50 to 90 percent in the first year of production with lower decline rates in following years, means that redevelopment or refracking will start much sooner in shale plays than is typical in conventional plays.
Weaker oil prices will likely facilitate the more rapid adoption of new technology, such as fit-for-purpose rigs for onshore drilling, said Mueller.
"Efficiencies have a way of moving through the industry in quicker periods of lower prices," R.T. Dukes, upstream analyst with Wood Mackenzie, told Rigzone. "Companies are developing best practices at all times and those practices get implemented faster at lower prices."
A large portion of cost savings to date have come from drilling operations and time savings.
"We expect to see significant improvements in both completion effectiveness and efficiency in the near- term," said Christopher Kopczynski, upstream analyst with Wood Mackenzie.
WATER, BIG DATA TECHNOLOGY TO REMAIN FOCUS IN 2015
Water sourcing and usage will continue to be a cost driver for operators. For this reason, new technologies for recycling and use of produced water in hydraulic fracturing could help minimize these costs and provide environmental benefits as well, said Scott Janoe, a partner in Baker Botts environmental practice.
Besides costs for acquiring water, companies also will seek technology solutions to help reduce the amount of truck traffic on roads, which causes wear and tear on roads and creates safety issues, and concerns over the environmental impact of hydraulic fracturing, such as the draining of aquifers, Keith White, CEO and CTO of Ambient Water Inc., a provider of technology for harvesting water from the atmosphere. These concerns have prompted discussions in some states about banning hydraulic fracturing. The concerns expressed by communities and environmental groups will continue to grow over time, White noted.
Oil and gas companies will continue to seek out technologies that allow them to use less or no water in hydraulic fracturing. Mueller noted that one company has been experimenting with using butane in hydraulic fracturing instead of water.
The ability of oil and gas companies to align their water stewardship and business growth strategies will be critical moving forward, with a projected 40 percent average shortfall in global water supply versus demand expected by 2030 and the World Economic Forum in January 2014 ranking water scarcity as number three out of the top 10 trends in terms of impact likelihood. By comparison, food scarcity was ranked number eight, said Deloitte officials at the Deloitte Oil & Gas Conference in Houston in November. The fact that water already is scarce is some regions will drive the need for innovation and collaboration in the oil and gas industry.
The oil and gas industry will continue to delve into Big Data as a means of gaining greater value out of the massive amounts of data generated in oil and gas operations. The digital oil field was really one of the first places that Fast Data started to appear, but now it's in refineries, pipelines and transportation, right the way downstream to the trader and the gas station forecourt, said Steve Farr, senior manager of product marketing at TIBCO, in a statement to Rigzone.
"Let's take machine reliability – and that could be a rig upstream, a pump at the garage, a pressurized vessel at the refinery or even a truck," said Farr. "Sensors on that machine allow us to see everything that is happening – motion, vibration, current, pressures, temperatures etc. Now, using all this data, combined with historical records we can build a pretty picture of how reliable the machine is in given circumstances – how often it fails and what conditions cause it to fail more or less often."
This means that more robust maintenance strategies can be designed, but it's still essentially descriptive and doesn't help us when one of those conditions changes right now: there's a power surge, a temperature rise etc.
"So what we are now able to do is to monitor the stream of sensor data in real time and compare it to the reliability model we have built. And there have been some stunning results, we expect to see much more of this in 2015."
The Internet of Things (IoT) will gain a strong foothold across the industry, changing how companies utilize labor and allowing for more effective utilization of resources.
"The proliferation of sensors is going to keep exploding as we go forward. Infrastructures will need to grow to support the growth in data, both wired and wireless," Serhii Konovalow, global oil & gas and energy vertical lead with Cisco, told Rigzone in a statement.
Konovalow noted that 2015 will be a year of Industrial Mobility – finally, it will all came together: Wi-Fi technology and applications, strong business case and execution.
"We see major shifts as oil and gas is looking to decrease unproductive time, decrease cycle time and keep safety at top level – Industrial Mobility brings it all for upstream production and processing facilities as well as for refineries in downstream."
With the onset of additional IoT-enabled technologies and the growth of Industrial Mobility, cybersecurity will become as important to the industry as physical security. As more processes come online and become automated, the attack surface for oil and gas companies grows. Organizations will need to change their approach to security.
Leading operators and service companies will begin truly exploring potential of the emerging computing paradigm, Fog Computing, said Konovalow.
"As it brings new tools to manage growing amount of data at the edge of the infrastructure and deploy analytics applications at the remote site to improve speed of decisions and accuracy, oil and gas industry and suppliers are in the process of testing and crafting strategy on leveraging Fog Computing phenomena to bring new applications and capabilities faster and to build a great competitive advantage in processing data in Big Data age."
Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.
Posts
No comments:
Post a Comment