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5th November 2014

Production systems – taking a look back to move a company forward

Exploration has always been the rock star aspect of oil and gas – media, investors, observers always tend to focus on the greenfield aspect as new developments have great risk, huge potential, new technology.

Aside from regular maintenance, monitoring and production management activity, little news comes from Brownfields, unless something goes wrong.  However, these fields are the lifeblood of the industry driving about 70% of daily oil and gas production worldwide. Brownfield sites are the primary source of energy consumed by the world’s population and are the primary source of free cash flow for any company invested.

In the last 5 – 10 years brownfields have attracted more and more attention from both operators and service contractors as there can be so much potential left in the ground – 65% in conventional plays with 80% and above in some unconventional. Increasing the production for the world’s assets by 1% would allow the world to be supplied with energy for a further 2 years with also a very high return on investment if they can be accessed.

This has been driven by a number of catalysts but the consensus within the industry is that shift in focus is due to the following major factors:

  1. NOCs own more reserves, as the initial production sharing contracts signed by NOCs and IOCs predominantly back in the 60s and 70s are now expiring.  Without IOC support, the NOCs are struggling to work these assets effectively.  With NOCs now owning 74% of the world’s oil and gas assets, there has been a concerted effort to increase production from mature fields.
     
  2. Economics
    Oil prices have remained relatively flat for 3 years, whereas exploration prices have increased exponentially.  Operators are refocusing and reallocating capital to improve returns for their shareholders – the margin squeeze in greenfields has forced operators to consider the most efficient methods to boost mature field output.

     
  3. Technology
    Solutions for reservoir development have progressed a long way in the last decade, so the appraisal methods used in the previous decade did not take into account the production optimisation technologies available today.

     
  4. Shift of ownership
    New entrants into the market see value in the steady cash flows that producing fields provide, and private equity investors may seek to package together mature fields. In some instances these new owners may not have the operational experience to run these assets effectively, so may look to service companies, to share the risk and invest.

 

These factors bring opportunities for service companies with varied product lines, such as Halliburton and Schlumberger, who also specialise in the Geological and Geophysical services.  The benefits of these opportunities are already apparent: in Q2 2014, Schlumberger reported its production management investments as a separate line item.

Halliburton has also identified this as a key strategic development area, especially as some 30 mature fields comprise 50 percent of the world’s oil reserves.

There is now a variety of services that these companies can offer in terms of Integrated Project Management (IPM) and Integrated Asset Management (IAM).  The former drilling and completion activity in mature fields is being outsourced as a package, where service companies execute a complete redevelopment plan—from building the location, procuring the rig, engineering the work, to operating the rig. Payment for such contracts is often performance based, with execution risk assumed by the contractors in the form of lump sum turnkey contracts or KPI measures.

In the latter, the service contractors typically perform the sub-surface analysis and take on reservoir risk by committing capital to the development programs alongside the owner. The service companies co-fund efforts to boost output alongside their operator customers. In this model, contractors assume a comprehensive responsibility set similar to that of an operator's partner.  As a result, they benefit by taking a fee for every incremental barrel produced as a result of their work, in addition to the payment for their services.

New Technologies

Many mature fields were initially developed with older completion and production technology, and have not benefited from newer technologies. By re-entering fields initially developed even as recently as five years ago with current methods, operators expect to enjoy almost immediate gains.

Technologies across the production optimization spectrum are dramatically changing the status of fields. Looking ahead, Paul Koeller, VP of Halliburton Consulting and Project Management, is particularly optimistic about the impact new fiber optic technology could have in brownfields. Koeller says, "we are using fiber optic technology now to identify where production is coming from by monitoring distributed temperature and acoustic measurements. At Halliburton, we are looking at identifying the distribution of production along a wellbore using fibre optics and developing focused solutions to improve overall well performance. This same fibre cable can then be used to define the effectiveness of restimulation or a number of other remedial solutions. This provides insight on immediate development solutions."

Source: OilPro

Acoustic fibre optic monitoring is gaining prominence as a complement to the more traditional near wellbore temperature measurements. With respect to acoustic monitoring, running a fibre optic cable in a well is effectively like deploying a string of virtual microphones. The acoustic signals can be recorded at every meter along the entire length of the fibre cable. In this sense, the fibre optic cable acts as a string of single component geophones which can either be deployed permanently to monitor acoustic response for the life of the well, or as a retrievable solution for temporary monitoring. This allows the fibre optic cable to be utilized for injection and production profiling, seismic acquisition and testing, as well as cross-well monitoring. The true value of fibre optic sensing is when additional sources of information are added to the solution such as pressure measurements and far field monitoring. This provides a more complete picture to understand the challenges faced in mature fields and the impact the recommended solutions have on well performance.

Fibre optic acoustic monitoring is just one example of new technologies being applied to declining fields, but it is one that will certainly help to provide improved recommendations in the years ahead. Technologies such as fibre optics have the ability to change the way the industry looks at mature field development and overall asset deliverability.

 

Read the full post on Oilpro.com

Special thanks to Joseph Triepke of Oilpro 

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