Unconventional but Not Impossible
The Hugo Stolte A2 well in South Texas’ Live Oak County at sunset.
PHOTO BY PATRICK CURREY/COURTESY OF CONOCOPHILLIPS
Technological advances increase access to oil
Anthony F. Lucas ushered in the “oil age” in 1901 in Beaumont, Texas, drilling a well that blew oil 150 feet into the air at a rate of 100,000 barrels of oil per day. After one hundred years of operations, the US oil and gas industry found itself uncomfortably situated between increasingly obsolete drilling methods and the fear that oil production might soon reach its natural limit.
“If you look back probably to 2005—where we were as an industry within North America—it was a pretty dismal outlook. Total oil production was declining rapidly, and we were thinking we were going to be so reliant on importing hydrocarbons, both gas and liquids, from other countries to sustain our energy needs,” explains ConocoPhillips’ Director of Unconventional Reservoirs Excellence Nathan McMahan.
Instead of simply moving out or moving on, the US oil industry rose to the challenge of developing more affordable and efficient ways of extracting oil. And the industry succeeded, both in the United States and worldwide. Additional availability of oil, combined with a decline in worldwide demand, contributed to oil prices crashing from $100 per a barrel to $50 in 2015. Again the industry adjusted by finding or creating efficiencies and improved technology in the new low-price environment. Innovation takes substantial technological investments that are not guaranteed to work, and as such for some organizations the focus continues to be on operating costs rather than enhancement.
According to McMahan, the outlook for the industry has completely changed from a limited resource in the early 2000s to a “big abundance resource” in the last few years. McMahan believes that this change can largely be attributed to a paradigm shift in thinking. “Somebody believed there might be enough hydrocarbons down there to still be extracted and they asked the question, ‘Why haven’t we tried combining existing technologies?’”
Advancing Drilling Techniques
An early technology aimed at accessing unconventional oil resources was hydraulic fracturing, developed around the 1950s. In the 1980s, horizontal drilling began to see large-scale use. More commonly referred to as fracking, hydraulic fracturing is a well stimulation technique in which rock is fractured by a pressurized liquid to create cracks in the deep-rock formations through which natural gas, petroleum, and brine flow more freely.
Another technology, horizontal drilling, is a process of drilling a well from the surface to a subsurface location just above the target oil or gas reservoir and then deviating the well bore from the vertical plane around a curve to intersect the reservoir with a near-horizontal inclination. As most oil and gas reservoirs are much more extensive in their horizontal dimensions than in their vertical dimensions, horizontal drilling exposes significantly more reservoir rock to the wellbore than would be the case with a conventional vertical well. Simply put, when more reservoir is exposed to the wellbore, one is able to achieve more reservoir contact, increasing flow rates as well as ultimate expected recovery.
The ancillary benefits of the combined technologies are three-fold. First, operators are often able to develop a reservoir with a significantly smaller number of wells, as each horizontal well can drain a larger rock volume than a vertical well could. Second, a horizontal well can significantly delay the onset of production problems that engender low production rates and premature well abandonment. Third and finally, horizontal drilling can enable a well to produce during drilling operations, preventing much of the formation damage that normally occurs with traditional horizontal drilling techniques.
Although they have proven successful, horizontal drilling and fracking are only two of the innovations revitalizing domestic oil production. According to McMahan, today the oil industry is talking about drilling increasingly longer laterals, or superlaterals.
Superlateral drilling gives developers access to hard-to-reach wells such as those situated under a town, lake, or difficult-to-drill rock formation. The longest onshore lateral ever drilled in the United States belongs to Pennsylvania-based Eclipse Resources Corporation’s Purple Hayes well, which has a measured depth of 27,048 feet (5.1 miles) and lateral spans of 18,544 feet (3.5 miles). Remarkably, new technology enabled the site to be drilled in only 17.6 days. To help illustrate the rapid improvements in lateral drilling technology, one need only compare Eclipse’s initial horizontal plays in 2014 to their recent successes. Over the past three years, the company has steadily increased lateral lengths from approximately 6,000 feet in their first well to an average of 7,000 feet in 2014 and 9,000 feet in 2015. Additionally, their longest superlateral took 15 percent less time to drill than their 2015 plays.
Of course, superlateral drilling would not have been possible without reimagining the drill bit. According to Schlumberger, an international “provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry,” the five-blade, 8.5-inch bit used at Purple Hayes was designed specifically for drilling extended lateral sections. The improved drill bit was designed for “optimal performance and improved cleaning using modeling solutions, integrated dynamic design, and computational fluid dynamics,” states the company.
Another game changing innovation that has developed alongside superlaterals is multilateral wells. With several wellbores radiating from one main borehole, multilateral wells have the potential to optimize the extraction of oil from areas where subsurface productive intervals lie atop one another. Another way to visualize these intervals is to think of them like a stacked parfait in which each layer contains its own oil producing wells. While there is no guarantee that each interval will be productive, this strategy enables developers to extract more oil and gas from a given acre than they could in a single-zone scenario.
“We were finding that these horizontal wells don’t drain the full height of the reservoir because we took the conventional well from being vertical to horizontal. Then we discovered that we can access more layers of our horizontal wells to help drain some of these thicker reservoirs. Some of our assets have two-layer developments all the way up to potentially a four-layer development plan, depending on the thickness of the reservoir,” says McMahan of ConocoPhillips’ multilateral wells. “It’s an innovation we’re quite proud of and one that we’ve been on the top edge of developing.”
While the technology has many advantages, superlateral drilling has been met with opposition from smaller vertical producers who claim that expanding horizontal drilling could interfere with their wells and production. A handful of lawsuits in the Lower 48 have even been filed alleging “well bashing,” or that horizontal producers are encroaching on the existing production of vertical wells. Drilling longer, more complicated wells also poses the challenge of striking a balance between keeping a well simple and standardized and advancing technology to improve the costs and recovery for the well’s life cycle. Other concerns include the use of fracking, which many fear may cause climate change, water contamination, extensive land use, increased earthquakes, noise pollution, and adverse health effects on humans, just to name a few.
Developers are also combating resistance to change within their own industry. As innovations are being aided by the use of computer simulations, technology is developing at such a rapid rate that traditional research and development techniques are giving way to experimentation.
“We see that the progression is just rapidly taking off, but the learning curve is still there. We’re still exploring, trying to figure out the mechanism of why some of these trends work and others don’t. Really the drill bit has been leading our learning as an industry, and techniques and technologies to actually study and understand why are lagging and trying to catch up. So, a lot of experimentation has been taking place to account for that gap in learning,” explains McMahan.
As a market that is well-known for conventional vertical drilling, Alaska has been measured when it comes to adopting Lower 48 techniques to approaching unconventional resources. Many unconventional drilling techniques rely heavily on supportive infrastructure—in particular, the size of the land lease and its accompanying pad—that may be lacking in the 49th State. Additionally, while unconventional plays were being developed in the Lower 48, Alaska’s conventional plays were still running a high-yield and weren’t in a position that required innovation. Now that oil prices have plummeted, an investment in the experimentation of new unconventional techniques seems like too high of a financial risk for many Alaska oil and gas developers, and of course some Alaskans share similar concerns about the use of fracking and horizontal drilling.
Even with the risks and state-specific challenges, there is one Alaska company determined to bring exploration innovation to the Last Frontier. Kairos, a subsidiary of NANA WorleyParsons, announced in November 2017 that they patented the Mobile Arctic Production System (MAPS). Named after the ancient Greek word meaning the right, critical, or opportune moment, Kairos believes that its system can not only increase production but also leave a smaller environmental footprint, all while saving money.
Craig Morrison, President, Nana WorleyParsons (left) and Lori O’Malia, Business Solutions Manager for Kairos LLC, pose in front of a Mobile Arctic Production System (MAPS) display.
PHOTO BY O’HARA SHIPE
As its name implies, MAPS is a mobile production system that stands in sharp contrast to the expensive, more permanent facilities already established on the North Slope. Operating on a “design once, build many” approach, MAPS can be configured to do anything from separating gas from produced liquid to producing sales-quality crude oil. With its leased based system, MAPS reduces the initial capital investment that goes hand-in-hand with building a facility, allowing developers to incur a higher return on their investment while also minimizing their decommissioning costs.
“Ultimately, MAPS allows developers to explore without the fear of what happens if their well doesn’t produce. They can use our system to test the reservoir before building some huge, expensive facility and finding out it doesn’t produce,” explains NANA WorleyParsons President Craig Morrison. “Additionally, once commissioned, we can have a site built within twelve to eighteen months, which enables developers to quickly pivot and accommodate changes in drilling strategies.”
Although MAPS shows promise, Kairos has yet to build and install its first operational unit. Citing hesitation on the part of developers who have a “tried and true” mentality, Kairos may be facing an uphill battle, but they are confident all it will take is the investment of one developer to get MAPS off the ground.
While they hope to attract large developers, Morrison understands that their first takers may be smaller operations that want to try and make one last play on their existing wells. If history is any indicator of the future, it very well may be the risk-takers that reignite the Alaska oil market.
O’Hara Shipe is a freelance writer in Alaska.
In This Issue
The 2019 Best of Alaska Business Awards
Welcome to the fourth annual Best of Alaska Business Awards! As part of our continuing mission to support Alaska’s business communities, each year we look to you, our readers, to tell us which businesses excel in a range of diverse categories.