Financing E&P tech can be challenge: panelists

Financing E&P tech can be challenge: panelists

Megawatt Daily

By Markham Watson

Oil and gas exploration-and-production operations can be achieved about 10% less expensively each year indefinitely, attendees of the University of Texas Energy Week symposium were told Friday, but financing the technology that accomplishes those improvements can be challenging.

Claudia Hackbarth, Shell International E&P manager for research and development in unconventional gas and tight oil, said, “As a rule of thumb … we assume we can do it 10% a year cheaper endlessly, and it turns out to be true.”

“Crews can work faster, can eliminate unnecessary steps,” Hackbarth said. “There’s a lot of movement in automated drilling … [that is] really giving the human drillers a run for their money.”

When asked how oil and gas companies’ technology investments are being affected by the current low oil price environment, Hackbarth said that if the technology is expected to cut expenses in the short term, “everybody is all for it.”

But she said, “If it costs more and I say, ‘I promise in five years you will produce more,’ it doesn’t fly.”

Neil Modeland, Halliburton tech team manager for southeastern US land operations, said that his company “can put our money where our mouth is” to encourage E&P companies to adopt a more effective technical solution.

“We may sponsor a discount for a first trial and really let the technology speak for itself,” Modeland said.

Hackbarth said unconventional oil and gas exploration and production is “extraordinarily complex, working with ultra-low-permeability rock, which nobody actually knows how molecules flow through.”

“The fundamental truth is, what is happening down there has to be consistent with all the data,” Hackbarth said.

The massive amounts of data that are being generated by hydraulic fracturing activities require rigorous analysis, which is “a big challenge” under researchers’ time constraints, said Amit Singh, Chevron stimulation specialist.

However, Hackbarth said her “optimism is huge” about the benefits of “better models and better diagnostics.”

Processing water at well possible

While Hackbarth expressed appreciation for incremental improvements in E&P technology, she said, “when I get excited is with radical improvements.”

For example, she has learned that in Texas’ Permian Basin, for every barrel of water that is sent downhole, nine gallons of water are produced.

Processing that water could produce “something beneficial” for society as a whole, she said.

“For example, do we want to clean it up to agricultural standards and grow timber in the desert of West Texas?” Hackbarth said. “Why not?”

However, financing such efforts may be problematic, audience members were told later, because they might involve activities not qualified as natural resource development activities that can be supported by master limited partnerships.

For example, when asked why natural gas that would normally be flared could not instead be used to generate electricity on site to conduct E&P activities, Rob Jones, a director of Shell Midstream Partners, said, “Capturing [the gas] does qualify, but converting it to something else doesn’t qualify.”

US shale tech may not work elsewhere

An audience member asked how likely it is that the methods used on shale plays in the US will be employed elsewhere.

Hackbarth began working on unconventional plays’ research and development in 2006 in the Haynesville natural gas play, where she stayed until moving to work unconventional E&P in China in 2009, where the subsurface geology was substantially different.

The Barnett Shale in Texas had been quite successful, and as people suggested doing similar work elsewhere, they often said it was “exactly like the Barnett Shale,” Hackbarth said.

“It turns out that the only thing that is exactly like the Barnett Shale is the Barnett Shale,” Hackbarth said.

Some obstacles to the proliferation of hydraulic fracturing efforts are natural. For example, the US benefits from the relative stability of most of its land area’s geology, while tectonic convergence of the Indian subcontinent with the Chinese area of Asia has resulted in the breaking up of the subsurface geology, which creates problems for horizontal hydraulic fracturing operations, Hackbarth said.

Other obstacles may be cultural or political. For example, some countries’ governments view data about their geology as valuable resources that cannot easily be exported, Hackbarth said. But those same countries may also lack the technical expertise to analyze that geology in every possible way.