The Unrecoverable Oil Blog -

Why, despite the application of horizontal drilling, water injection and a host of gadgets and techniques, does the majority of oil remain in a reservoir when the wells are shut down for the last time? No pressure, no pay-day.

After a sustained period of low oil prices and the related impact on many mature oil basins from the North Sea to the Niger Delta, you may well ask ‘why should we care about unrecoverable oil?’

Under the present paradigm the response is largely ‘we don’t’. However what if technology are driving winds of change.

Why oil flows and then stops

Going back to first principles, oil is trapped in sedimentary layers below the earth’s surface. The weight of these layers stacked on top creates pressure in the oil reservoir. If the pressure differential between the reservoir and the earth’s surface is sufficient, the oil flows upward for production. As the oil is produced there is less material in the reservoir and the pressure decreases until a point is reached where it ceases to flow or the quantities produced no longer satisfy the accountants.

The amount of pressure needed reduces if the oil flows more readily from the pores that have been its home for the last million or so years. Opening the pores make this journey easier (fracking), lubrication can grease this journey (traditional MOER) and pressure provides the driving force (gas and water injection).

So once nature’s pressure bubble has been burst what viable means of pressure replications exist? There are a number, some tried and tested, some new and potentially more profound.

Feeling the force

Water injection is a long established technique, introduced at pressure through injection wells it pushes the oil from its pores toward oil production wells. It works until a saturation point is reached when the reservoir become water saturated and oil is longer pushed toward production wells in sufficient quantities.

In heavy oil fields pumps are used to suck oil to the surface. Heavy oil fields tend to be at shallower depths making this feasible although the overall recoveries are consequently substantially below those for conventional oil. This is used with standard cold production or even with thermal recovery depending on how heavy the heavy oil is.

Another form of pressure introduction relates to gas injection. This can be natural gas or Carbon Dioxide. The injected gas creates pressure in the reservoir. The impact varies according to how the gas dissipates and the extent to which it is absorbed into oil and/or water. Injection of gas has to be undertaken repetitively as renewed oil production will reduce pressure again. The quantities required can be substantial to pressurize an entire reservoir which can make it logistically and economically unfeasible. This is because natural gas is a valuable commodity plus infrastructure is required to capture and transport the gas for injection. This is the case unless there is a source of gas in the proximity of the reservoir or infrastructure already connecting such a source.

The environmental benefit of capturing CO2 and injecting it out of harms way for the economic benefit of increased oil are obvious. The trouble is the reality frequently fails to match the beauty of the headline. CO2 is a smaller molecule compared to natural gas meaning it is absorbed into the liquids of the reservoir to a greater extent, reducing pressure impact. Being a molecule minor also makes it prone to dissipating into the reservoir meaning the pressure impact is harder to harness and difficult to control. Finally to use large scale CO2 sources requires collection, storage and transportation infrastructure. Unfortunately lashing a pipe to the exhaust of every truck and Ferrari is not without challenge and power stations tend to be located for convenience to the electricity grid and power source not for oil fields that have lost their fizz.

New force

Today’s artificial pressure sources for our tired oil fields all have merit and in the correct projects can bring worthwhile benefit to oil recovery and the associated economics. Arguably the major potential prize of pressurization still remains evasive, namely a source of pressure to restore reservoirs to their former production glories in a sustainable manor allowing the majority of the remaining at production decline to be profitably extracted. New technologies that boldly go where other pressure pretenders have failed to tread perhaps hold the keys to the oil chest right under everyone’s nose.

Mature conventional oil fields with high production costs are exactly where you don’t want to be. Least of all when they carry nasty decommissioning liabilities and logistical headaches.

There is already too much crude in the bunkers and now it is about low cost production fields and, consequently, a bias toward large reservoirs. Investment capital is understandably concentrated on those fields where the scale and costs of production produce highest returns.

On the face of it, a sensible approach. However what about the impact of unanticipated disruptive technology? Looking back, in a few short years the fracking revolution and the enormous shale reserves they uncorked are largely responsible for the present drastically altered oil landscape. How much of the present global oil environmental can anyone truly state they anticipated before the full details of fracking and scale of suitable shale oil & gas reserves were realised?

Surely mature conventional small oil fields have had their day, especially given:

the vast quantities of shale oil being quoted;
the large middle east reserves contained in huge fields with low production costs;
environmental targets creating a situation where much of existing oil reserves may never be produced; and
mature small conventional oil fields and heavy oil fields tend to have among the highest production costs pushing them to the front of the queue for oil reserves to remain in the ground.

So mature conventional oil fields, especially smaller ones, have had their day. Get out the welders, cut up the rigs and stop bleating about the decommissioning. At least you can get some scrap value.

Changing the rules

Let’s examine this from a disruptive perspective. Tight oil requires a lot of wells, the oil can only travel in sufficient quantity a limited distance to reach the production wells. Engineering advances in fracking and similar technologies can improve this flow and supply chain efficiencies bring economies to such repetitive injection and production well drilling. However this does not and will not alter the reality that tight oil has high ratio of wells to the oil produced. This puts a glass floor on how low the cost of production for such reserves can driven.

Conventional oil resides in rock with larger pores, with sufficient driving force the ratio of wells to oil produced is significantly less than conventional oil. There are obviously many more considerations that impact on production costs such as permeability, sweet or sour oil, location and infrastructure according to the geography (flat desert or mountainous seas, proximity to export infrastructure), and much more.

What happens if new disruptive technologies return mature conventional oil reservoir pressures to their former glories? Or such technologies pressurise local areas of reservoirs to extract pockets of residual oil cheaply?

The Power of Synergy

Reducing the interfacial tension between the pore and the oil it contains means the same increase in pressure increase should have a greater impact on production rates and volumes. Improved fracking or fracking alternatives increase effective pore width, aiding oil flow. What if it is possible to lower oil viscosity inside the reservoir? This may dramatically improve oil flow to the production well for the same driving force. Used in tandem with a renewed pressure generating technology the synergies of these approaches could be transformational.

Technology disrupts but the repercussions require careful scrutiny to fully appreciate (see fracking). Technology development and implementation is a unpredictable journey with unseen bumps and bends but will early adopters become a generation of Getty’s for the new century.

Bottom line, on a level playing field, small conventional oil fields can reach economic sweet spots that shale oil can never tread. Small mature conventional oil fields are common, unwanted and often occupy the negative side of the balance sheet.

Maybe this is where they belong or maybe the next tidal wave of disruption is brewing. Will you surf it or will it swamp you?

Unrecoverable oil – the road to recovery

Mature Conventional Oil Fields – an unlikely renaissance?