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US: New technology is reviving old oil wells, but there are limits - article

28 Jan 2005

Thanks to new technology, smaller oil producers, left to shoulder the burden of boosting domestic US oil production, are breathing a little new life into very old fields. As oil prices hover near $50 a barrel in a post 9-11 world that has made diversity of energy supply a matter of US national security, greater attention has been paid to getting more oil from onshore wells in the Lower 48 states, which doesn't include production from Alaska or the Gulf of Mexico. But while enhanced recovery technology is being widely used to increase and extend the life of aging US oil fields, there is little that can be done to significantly boost production in the world's largest oil consumer. "Production in the mature basins in the lower 48 is really becoming very, very critical from the point of view of energy security. It is really our last line of defence," says Pete Stark, a geologist and vice president of industrial relations at IHS Energy. "But there is no silver bullet." Any extra oil from US fields won't come cheap or easy, says Iraj Ershaghi, an executive director of the Center for Interactive Smart Oilfield Technologies, or CiSoft. He says many of the smaller companies working onshore fields are risk averse and don't count on the huge capital expenditures required. Key senators in January asked the White House to seek increased funding for domestic oil and gas research and development programs in the upcoming budget request. Last year, the Bush administration's budget request sliced nearly $17 million from the energy department's natural gas technologies program, $20 million from its oil technologies program and $3.5 million from the Bureau of Land Management's onshore oil and gas leasing program. But Congress voted to significantly increase that funding. With help from the federal government in the form of funding for new technologies, US production could easily get to 10 million barrels a day if it were done methodologically, Ershagi says. California alone sits on 50 billion barrels of recoverable reserves "that has been sitting in the ground," he says. "What with the disappearance of the major companies and the fact that smaller companies do not have research facilities and support means we have given the trust of the national fields to a handful of people who do not always know what they are doing," said Ershaghi, who is also the director of the petroleum engineering program at the University of Southern California. But geologist Stark notes that enhanced oil recovery techniques are ubiquitous in US oil fields and are no longer sufficient to offset production declines in the large newer fields in Alaska and the offshore Gulf of Mexico. Outgoing US Energy Secretary Spencer Abraham said last week that the US needs to continue to diversify its energy supply sources, work on curbing consumption and find an alternative to the internal combustion engine and its reliance on gasoline. He noted that government forecasts predict the US will be relying on imported oil for 68% of its daily demand by 2025. "We are never going bring to bring this number of 68% dependence down by finding more oil," he said. "There isn't enough oil in the United States to put us back to the days where we produced 60% or 70% of the oil we needed. We have to find alternatives." The US ranks among countries with the highest oil reserves but great swathes of the nation are cut off to oil and gas companies by federal bans of drilling. The remaining oil reserves are increasingly costly to produce, because much of the easy-to-find oil has already been recovered, which is why most of the majors have abandoned the US in favour of the Mideast, Russia and Africa. "Even though oil production is observed to increase, there are few remaining old oil fields with huge untapped reserves or oil in place where enhanced recovery methods have not already been deployed or where there is high potential to significantly boost production," Stark says. But there are more reservoirs or prospects that are now commercially attractive because of prevailing high oil prices, says Frederick J. Lawrence, director of economics and international projects at the Independent Petroleum Association of America. "We have higher price levels, we have new technologies, we have companies that are much better at doing what they do than they may have been in the old days," says "But new technology is very front-loaded. You still have to put the millions and millions of dollars into finding the commercial prospects, and that is still a very formidable task." While geologists don't expect a sudden production boom to rival Saudi Arabia, they do believe new technologies could play a major role in at least stemming the decline and extending the life of U.S. crude production while playing a vital role in America's struggle to wean itself from foreign oil. "Companies do not forget about the advantages in the U.S. We do have mature reservoirs but the whole point is we are re-working these reservoirs," said IPAA's Lawrence. "There is a whole gamut of new technology to go back into these holes and re-work them, taking advantage of reservoirs that may not have been commercial or geophysically attractive decades ago." In October, U.S. oil production fell below 5.2 million barrels a day, the lowest in 50 years, and 40% less than its 1970 peak of 9.6 million barrels a day, according to the American Petroleum Institute. About a fourth of U.S. production comes from offshore, much of it in the deep waters of the Gulf of Mexico. Six of the Top 20 oil fields in the U.S. are in the deepwater Gulf of Mexico. Many of the Top 100 fields are very mature, with the oldest being California's Coalinga, which was discovered in 1887, says IPAA's Lawrence. The wells working onshore in the 23 oil-producing states outside of Alaska and Hawaii yield on average just 8.1 barrels a day, qualifying them as "stripper" or so-called marginal wells. Many of these stripper wells are operated by "mom-and-pop firms" or much larger independent oil companies, non-integrated firms that receive almost of its revenue from production at the wellhead. These companies drill 85% of the wells in the US, produce about 75% of the country's natural gas and 40% of the country's oil and 60% of the country's onshore oil. Examples where new technologies have clearly boosted oil recovery over time include the Austin Chalk play in Texas, which has enjoyed three boom periods over a 50-year time span due to price and technology drivers, says geologist Stark. "The latest boom at Austin Chalk was due to horizontal well drilling and completion technologies," Stark said. "This boom has recovered more oil from supposedly 'depleted' reservoirs than did the original boom periods." Horizontal drilling is increasingly used to increase recoveries from tight and fractured reservoirs like those found in Texas and Montana and is used in conjunction with steam in the heavy oil fields in California and Canada. Horizontal wells are also used to modernize and rejuvenate oil production in older fields in Russia and Saudi Arabia. Barnett Shale in north Texas is another mature oil play that has received a big boost from new technology in the form of innovative well frac techniques that have enabled the recompletion of older wells, leading to the recovery of as much oil as the original well completions. California's heavy oil thermal recovery projects also are a clear winner thanks to technology, Stark says. "Wells that would have been abandoned years ago still produce at well above the 15 barrels a day marginal well threshold and result in California ranking fourth in US oil production," he said. The next technological wave can be referred to as the "smart field", says Gregg LeBlanc, product manager and technical strategist for OSIsoft, a California-based IT firm that monitors, analyzes and integrates data like oil quality, plant machinery, market prices and even weather conditions so that companies can optimize oil production and sales. "All are our customers are trying to make production less of an art, more of a science, make it repeatable," LeBlanc said. "Oil at $50 a barrel may be transient. But if you can squeeze out a percent or two more, you are going to make a lot more money."

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