A Conference Note From Jon Gates

Houston, Texas - March 16-19
Background: Attendees included several hundred representatives from oil and gas companies, oil field service companies and technology suppliers engaged in the North America and international shale oil and gas industry. The conference featured 14 thematic panel presentations with more than 40 speakers from a mix of global, as well as regional, companies. The event also included an exhibitors display hall and more than 30 ePoster sessions, featuring new studies and technologies from industry experts. The OTR Global notes on the event are a combination of presentations and numerous off-mike conversations during the event.

Shale Oil 2015: Back to the Future
As the shale industry slows, experts at the ASME conference predict a new round of innovation to begin reshaping the shale sector. Panel presentations pressed for more integrated operations between drilling and completions/production departments, rejuvenation of older wells (re-fracs), and advancing new high-tech solutions to drive efficiency and improve accuracy in shale operations.

One of the key areas mentioned in presentations and off-mike conversations was the expected move to re-frac older wells. Two participants -- a major oil company’s head of completions and a completions service company executive -- noted that there are 4,500 to 5,000 wells that have been drilled with the initial completion stage of liners and cemented well casings in place but no late-stage completion or pressure pumping initiated. Those plans are increasingly on hold as operators and service companies re-evaluate alternative spending targets that have greater relative payback in the current sub-$50 oil world.

Some conversations focused on the more than 100,000 existing wells, especially those completed beyond three years ago. The industry left a lot of untapped resource in those early fracs, and today’s technology and recovery capability is much greater than the early frac days. Companies are finding they can get more bang for their buck in re-frac. A Halliburton Co. presenter talked about going after older assets with a more integrated technology driven feedback loop instead of just brute force. He expects a move toward more re-fracs through merging surface data, geomechanics and sub-surface micro seismic information because “we left 60% of the target behind.”

Some rough estimates at ASME showed re-frac jobs may run $2 million or less per well, with a much faster relative payback from increased IP rates versus more expensive new well completions. An ASME presentation by Southwestern Energy Co. showed a video shot inside a horizontal well, identifying along the lateral where the operator could improve production. The video and well corrections (non-frac) cost about $300,000, but the resulting IP rate nearly doubled, recovering $1 million quickly.

A major service group completions engineer said the industry is quickly moving to identify which older wells would be the best targets for rejuvenation. He said, “Some [operators] are contacting us, and we’re looking at public data and approaching some E&Ps.” Another source from an unconventional completions side of a major oil company told OTR that new businesses are popping up and coming to owners of older wells and saying, "We’ll give you $1 million for access to these 50 wells, and we’ll split the profit in the end.”

More Integration of Technologies and Processes
ASME presentations focused on more integration of Big Data and real-time analytics, linking surface and sub-surface micro seismic data and predictive analytics. The move toward integrating real-time data across the operation is up against a legacy of silo-type communications, in which drilling does not communicate with completions and vice versa. A Schlumberger Ltd. presenter said that the company is addressing the silo problem by moving production and completion design back into the drilling phase with an increasing number of clients. Another engineer said at the closing of the ASME event, “[We need] more automation. Removing people from operations is the only way we will reduce costs.”

The Xact Downhole Telemetry Inc. presentation -- well received by ASME attendees -- targeted the point from which industry sources think the next step in efficiency gains will come: automation. The company’s Acoustic Telemetry Network product registers downhole data measurements via a sophisticated string of nodes and transmits it to the surface in real time, linking wirelessly to surface computers and data centers.

Improved Fracturing Accuracy
Schlumberger and NCS Multistage highlighted their own designs for more efficient completion technology, which in both cases, significantly reduced the need for pressure pumping horsepower, frac sand and water.

Schlumberger’s HiWAY product is evolving with new technical capabilities and was used in 25% of the company’s completions globally in 2014 (40,000 treatments in 3,000 wells). Production increased 20%, with 25% less water, 40% less proppant (23 billion pounds of proppant saved).

NCS Multistage's presentation
Photo: OTR Global

NCS Multistage's product pinpoints frac accuracy by using coil tubing in a cemented lateral to activate sliding sleeves in isolated segments. This technology makes re-frac attempts less costly, as well as allows the operator to re-enter and service an existing well.

Other ASME Spotlights

• Well Design Proppant Reduction: According to a pressure pumping executive, some E&Ps are starting to reduce the volume of frac sand per stage in order to cut well production costs (an Area to Watch in OTR’s Jan. 28 Pressure Pumping and Completions report).
• Frac sand volumes may be down 35% yy in 2015, according to three participants at ASME: an oil company head of unconventional completions, a completions service company and a pressure pumping group. Those estimates align with the Jan. 28 Pressure Pumping and Completions report, in which 17 E&Ps estimated 2015 frac sand volumes would be down 33%-38%.
• Tesla of Shale? US Well Services LLC introduced Clean Fleet Technology at the ASME, a radical electric power step away from diesel frac fleets. Clean Fleet frac fleet technology features on-site turbines powered by field gas, which replace over 20 diesel frac truck units. The turbines power electric frac pumps. The system lowers emissions by 99%, cuts noise pollution by 69% (crickets are louder), reduces energy costs by 80%, as well as eliminates scores of truck deliveries and lowers maintenance costs. It was estimated that the turbine service life is 30,000 hours. USWS has run 500 stages with its electric turbine fleet with zero maintenance so far. It has one Clean Fleet operating at Antero Resources Corp. (AR) with another about to come on line.   
• A Jereh Oil Field Services group subsidiary, American Jereh International Corporation -- a China-based shale fracturing equipment manufacturer --  made an entry splash at ASME with a sizable booth and media display of equipment. A Jereh sales rep said the company is establishing a second headquarters in Houston, Texas to serve the Western Hemisphere and will import their top-selling hydra frac equipment -- frac pumps, blenders, coil tubing units, cementing equipment and data vans -- to launch their sales effort. (Also see OTR’s Jan. 7, China Shale Oil and Gas Services report.)
• Frac Facts
  • The end life of frac fluid ends averages about 350 hours -- Baker Hughes Inc. study at ASME
  • Caterpillar Inc. frac fleet engine telemetry data presented shows the impact of pressure pumpers moving to 24/7 pad operations; as of 2015, frac fleets are averaging 2,500-3,600 hours run rate (up to 5,000 hours in some cases), a major increase from 500-1,000 hours in 2005. Fleets now operating 55% on load, 45% at idle versus 70% idle and 30% on load in 2005.
  • Operators save $500,000 per well using on-site field gas versus diesel delivered; there were 16 million gallons of diesel and gas displaced by natural gas in 2014.
• ESP (electric submersible pumps) and artificial lift technologies got a lot of attention as lower cost ways of rejuvenating well productions. Baker Hughes highlighted its ESP as the first design to sustain a 22-25 degree turn to enable the ESP to enter the lateral section of a well. 
• Emphasis on Water: A Baker Hughes well completion executive noted that the shale oil industry creates more water than oil, with 24 billion gallons of fluid generated in 2014 (5 million truck loads).  Southwestern Energy Co., Pioneer Natural Resources Co.’s Pioneer Water Management LLC  and Antero Resources Corp. all highlighted large shale water infrastructure developments ranging from 150 miles of pipelines to over 500 miles, including major storage.
• Methane Gas: A presentation by Ohio State University Prof. Thomas Darrah showed solid scientific evidence that methane gas leaks in the atmosphere and water supplies in a research-targeted Pennsylvania region are likely not due to hydraulic fracturing but more to a natural leaching process from shale formations, much like gas and oil that migrates upward in conventional pools.