PTTC Tech Talk

E&P technology transfer is America’s secret weapon—its energy “magic bullet.”

Hyperbole? Maybe, but bear with me.

There is a revolution under way today in U.S. oil and gas exploration and production, and that is not hyperbole. Advances in horizontal drilling efficiencies and hydraulic fracturing methods have opened up vast new recoverable resources of unconventional gas and oil. This is proving to be a game-changer in the context of America’s energy picture. The boom in development of ultra-prolific gas shales has revolutionized the gas industry: In just a few years, the U.S. gas E&P industry has gone from drilling twice as many wells as in the past just to keep production flat to drilling half as many wells to deliver even more production—and in the process jump reserves life from a couple decades to more than a century.

A new way of thinking

More importantly, the unconventional oil and gas boom has shifted the industry’s thinking about E&P in a dramatic new way. Today we are developing hydrocarbons from source rock—pretty much unthinkable on a broad commercial scale not that long ago—and thinking of that effort not in terms of E&D success ratios and portfolio risk management but in terms of a manufacturing process with essentially zero exploratory risk. Even now, the revolution is shifting to oilier shales—the Bakken, Eagle Ford, Niobrara—and spreading to other gas shales worldwide. Some speculate that the unconventional component of gas resources outstrips the conventional component by several orders of magnitude—and that’s even before we get to methane hydrates. As a nation, we are on track for unconventional gas accounting for more than half of our gas supply within a generation.

Mitchell: Father of Shale

When shale pioneer George Mitchell “built a better mousetrap” in the Barnett Shale, did he think those efforts would lead a revolution in the nation’s gas E&P business? You’d have to ask this living legend of the industry, but rest assured the response would be blunt, honest, sprinkled with a little salty language, and delivered with a twinkle in his eye. What brought Mitchell Energy success in the Barnett Shale was dogged persistence and willingness to experiment—spending millions to try different drilling methods, new frac fluid mixtures, better redrills and recompletions, just to learn and gain enough knowledge to “crack the code” in the Barnett. This wasn’t about an individual well’s ROI or the end of the quarter’s results; it was about gaining knowledge and applying that knowledge. The result: Barnett success = a company-maker. Then when Devon Energy acquired Mitchell Energy, Devon applied its knowledge about horizontal drilling and adapted it to Mitchell’s Barnett business model—and took the venture to the next level. Mitchell spent nearly two decades trying to solve the Barnett puzzle, but that effort was not a labor of love, not just stubbornness, it was a learning process. And the knowledge gleaned from that process—the know-how, the best practices, the missteps avoided—is filtering throughout the industry.

DOE role

It’s also safe to say that U.S. unconventional gas development would not be delivering more than 40% of the country’s gas production today were it not for the pioneering research into unconventional gas by the U.S. Department of Energy from the mid-1970s to the mid-1990s. When that research started, unconventional gas accounted for only 7% of U.S. gas output. The tax credits and occasional higher gas prices also helped, but without the DOE-funded R&D, where would unconventional gas be today?

According to DOE’s National Energy Technology Laboratory (NETL), accomplishments from that effort include:

• The first use of nitrogen foam to effectively stimulate production of gas from shale wells,
• The discovery of how natural gas is stored in coal seams and fractured shales,
• Recognition of the importance of interconnected natural fractures in the production of gas from such reservoirs,
• The first use of directional drilling in shale reservoirs to improve productivity by intersecting fractures,
• The creation of advanced tools and methods for measuring the properties of unconventional reservoir rocks, and
• The early development of micro-seismic monitoring techniques for mapping hydraulically created fractures.

NETL contends that the payoffs from these early investments are reflected in the commercial technologies that are making the current expansion of unconventional gas production possible.

Lessons learned

Despite some of the recent concerns voiced about declining discovery volumes, in fact, the world’s reserves and production continue to be sustained through the phenomenon of reserves growth. To fall back on an old saw, oil (and gas) is where you find it. Scarcely a tenth of the world’s endowment of oil has been produced. Who knows what the upper limit  on the global cache of gas is now? In the U.S., 218 billion barrels of technically recoverable conventional oil at depths shallower than 5,000 feet remains unproduced. Why can’t the same revolution in unconventional gas occur for improved and enhanced oil recovery? Why can’t marginally economic conventional gas benefit in the same way?

The lessons to be learned from the Mitchell and DOE examples are that step-changes in oil and gas E&P results—in U.S. oil and gas reserves and production growth—are possible. But they’re possible only with a dogged willingness to experiment (even if the results don’t show up on the bottom line right away), a commitment to research for the sake of gaining knowledge about the resources at hand that are ripe for the plucking, and a means for transferring the lessons learned, the new technology, the know-how, and the best practices to all oil and gas companies.

That’s what we’re all about at the Petroleum Technology Transfer Council. This new, biweekly blog is part of a broader effort, including our retooled website, to keep the U.S. oil and gas industry abreast of that mission. And that greater awareness in turn helps us carry out that mission. Just as DOE’s unconventional gas R&D helped spawn a sea change in America’s energy outlook through technology transfer, the next E&P revolution might be just around the corner.

I welcome your comments in the Comment space below. Let’s work up some great conversations about E&P technology advances, know-how, and best practices and keep the dialogue going!

Lance Cole
PTTC Operations Manager

E. Lance Cole, PTTC Operations Manager, an Oklahoma resident since 1978 and a registered professional engineer in Oklahoma, has served PTTC since 1996, beginning as Project Manager and then as Executive Director until AAPG assumed PTTC management responsibility. As National Project Manager, he was responsible for technical oversight of PTTC’s regional lead organizations and contract reporting for the national office, and served as a technical adviser on all aspects of the program. As Executive Director, he had primary staff responsibility for the overall PTTC organization. Mr. Cole received a B.S. in chemical engineering from South Dakota School of Mines and an M.S. in management from Southern Nazarene University. His professional experience encompasses reservoir and corrosion engineering, as well as reserve estimation and appraisal. He has worked with a major oil and gas company, a large integrated independent, and in engineering-oriented consulting companies. Mr. Cole is a member of SPE, AAPG, SEG, and SIPES and, in the past, has been involved with the SPE/DOE IOR Symposium in Tulsa for several years. Email Lance Cole at lcole@pttc.org