technology unlocks mature reservoirs

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Technology unlocks mature reservoirs

Article by Bernard J. Duroc-DannerApril 1, 2002

Technology creates value in effective reservoir management.

The question of technology is a generic one. When we examine it, we notice that 50 years ago, technology wasimportant but not critical. Five years ago, technology was increasingly critical. Today it is essential. It will become

even more essential for our clients every month and every year that goes by. The reason for that is geological -everything begins and ends with the reservoir.Accelerating decline rateReservoirs are like biological beings. Their life spans are similar - the second half less robust than the first. Bothalso share the sad fact of deteriorating performance over time. Geologically, this means smaller reservoirs, tighterformations, remote and deepwater locations and greater production complexities. Decline rates, the naturalpropensity for reservoir decline over time, also accelerate. In addition, moving into deepwater is an engineeringstretch. Although it is the last remaining frontier, it is hard to drill and even harder to maintain. The result? Clientshave to run to stand still.The blended average decline rate for oil and gas is about 6% per annum. This indicates decline rates have doubledin the past 10 years. What that really means is the rate of acceleration of decline rates is running at 4% per annum.

Reservoir recovery rates are less than 35%. The goal of many of our customers is to advance recovery rates to 60%.Deepwater projects often are plagued with delays, which average about 4 years due to the difficulty involved froman engineering standpoint. During the past 40 years, average new field sizes have declined by several orders ofmagnitude. These all are essentially the result of the same phenomenon of aging.Zero-sum gameWhat are the implications of these changes? Those in the oilfield service business are vendors. Therefore,accelerating decline rates are good for them since more products and services will be needed. One could argue thata 4% accelerating decline rate plus the annual growth of gross domestic product represents the real growthopportunity for oilfield service companies. On the other hand, from the clients' standpoint, decline rates are bad.Decline rates mean they have to spend more on products and services to stay in place, resulting in a zero-sum game.Zero- sum games between clients and vendors are unhealthy.

So what are the remedies? Clients have several choices. One, particularly effective for large clients, is to exactpricing concessions. In other words, squeeze the vendors. Typically, when markets go down, prices go down; whenmarkets go up, prices go up. This price leverage approach has been at work for the past 50 years. It is not new, andit is not satisfactory for client or vendor.A second, more substantive approach, is client mergers. Mergers create consolidation economies, which is a goodthing. Mergers may delay some project work, but the more efficient clients become, the more they will focus onproduction. Mergers and pricing pressures reflect the maturation of the oil field and the need to create wealth tocompensate for the increasing cost structure driven by the aging process.The third method by which clients can resolve the zero-sum game is technology; this is why technology is essential.As such, it will force the rate of technological innovation and the speed of acceptance to go up. Today the rate ofmarket acceptance for new technologies is surprisingly fast, not because clients are more risk-prone, but because

they do not have any choice due to the natural aging drivers at work in the reservoir. A corollary to the growingneed and acceptance for incremental technology is that the search for game-changing technologies is intensifying.Our clients are testing, proving and accepting incremental and step-change technologies with far more gusto thanever because they need them.

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Game-changing technologiesWhat are the technology priorities? Reservoir productivity and the need to minimize formation damage andoptimize reservoir production are clear. In addition, advanced well architecture that improves productivity throughbetter ways of sweeping the reservoir and new intelligent technologies that help minimize intervention costs,particularly in deep water, are vital.Technology falls into two basic categories - incremental and step-change. Client needs are driving the push fortechnology, so their priorities are paramount. While the terminology they use may vary, their technology needs aresimilar. They include expandable tubulars (solid and slotted), intelligent wells, underbalanced and dual-gradientdrilling, ultra-extended reach, third-generation rigs and 4-D seismic. Some are incremental, like ultra-extendedreach. Others are potentially game-changing, like expandables, intelligent wells and underbalanced systems.The key issue for technology is productivity. Costs are wonderful to reduce, but ultimately the money is in reservoirproductivity.ExpandablesExpandable technology offers increased reservoir productivity and sharply lower construction costs. It includesslotted and solid expandable tubulars, related tools and accessories, and specialized expansion systems. All sharethe ability for expansion after downhole installation. The functions include sand control, zonal isolation, completionaccessories, liner hangers and borehole stabilization. The downhole expansion of oilfield tubulars allowssignificantly better hydrocarbon production rates from the reservoir and provides significant reductions in well cost

by reducing the amount of consumables required by traditional techniques. Downhole expansion tools and systemsalso provide new possibilities for previously unreachable or uneconomic reservoirs.The first commercial application of expandable sand screens is being rapidly adopted in its first full year ofcommercial use. The importance of this application from a client standpoint has to do with cost and, particularly,reservoir productivity. Average production increases as high as 70% have been noted vs. traditional technology.The future for expandables will consist of refinement of sand control applications and the development of a range ofapplications for solid expandable tubulars. That range will include completion accessories like packers, liners andhangers. It will include remedial tools like cladding and straddles to restrict production from problem areas of thewell. Finally, it will encompass the monobore well. Together, these tools will revolutionize well architecture,sharply reducing well construction costs and providing the system needed to produce much of the world'sdeepwater reservoirs.

Underbalanced drillingThe underbalanced drilling system (UBS) is a process in which the hydrostatic pressure at the bit is less than thenaturally occurring reservoir pressure. So instead of killing the well, the operator allows the formation to flow orproduce. If the well is allowed to flow while drilling, the formation is not damaged. By avoiding formation damage,well productivity increases exponentially, raising reservoir productivity and ultimately recoverable reserves.Underbalanced drilling, like directional drilling, is a system - not simply one particular product or service. It is theability to successfully integrate project engineering, well control, separation systems, compression, fluid chemistryand data acquisition into one system. This young technology is challenging the tradition-bound operatingprocedures the industry has used for more than half a century. In a short period of time, UBS has drawn significantand specific interest from producers, particularly in international markets.Why has it grown so fast? UBS does not damage the formation. Again, the productivity theme reigns.

An example of UBS potential exists in a series of wells drilled in a mature area of the North Sea. The averageproduction of wells in the field using traditional drilling techniques had been 50 b/d. The wells drilledunderbalanced came in at more than 3,000 b/d. More importantly, the wells continue to flow at 2,700 b/d.As a result, underbalanced activity is moving internationally much faster than expected. This is a clear indication ofclients willing to accelerate testing and commercialization of promising new technologies. While the percentage ofwells drilled underbalanced is small, it is advancing rapidly. Its full potential could be 25% or more of developmentwell activity.Intelligent wellsThe third game-changing advance is intelligent completions. Although the concept of intelligent wells waspopularized in the 1990s, progress has been slow due largely to the limitations of primarily electronic sensingsystems. This is changing quickly with the successful development of fiber-optic systems.

Fiber optics work well in the downhole environment. If sensing works, then intelligent completion will work.Pressure, temperature, phases and seismic activity can be sensed and measured with fiber optics. The key driver forintelligent wells is the imperative to minimize intervention costs and better manage reservoir production anddevelopment. By improving the flow of the reservoir, you solve the cost issue. Once again, it is a reservoir


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productivity issue.Fiber-optic technology is an improvement over electronics for several reasons. Fiber-optic equipment operates athigh temperatures, and it has greater versatility and multipoint sensing capability than traditional technology. Thecoming of age of fiber optics will provide a real boost to the future of intelligent wells.Where does the focus on technology lead us ultimately? Through the years we have tried to create wealth throughconsolidation, because consolidation was the one thing we could do, other than simply riding the cycles, to createan extra layer of wealth for shareholders. As the industry has matured, it is much harder to find good consolidations,which is normal because most of it has happened. Interest in technology has been spawned in part becausesignificant wealth generation from consolidation has nearly dried up. Only by looking at secular trends can wecreate significant new wealth. Technology coupled with the secular aging trend of producing formations is thesingle biggest event to affect this industry. It is the key to future wealth generation. Undoubtedly, up and downcycles will continue. But behind all this is a secular shift: the maturation of hydrocarbon reservoirs. The need fortechnology is a survival need. That need will grow.


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technology unlocks mature reservoirs

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