Smart spending can enhance production from existing infrastructure

The hunt for oil is often focused on exploration activity. But what if additional hydrocarbons could be found right where there is existing infrastructure? It is a strategy that offshore operators are increasingly taking; the smart dollars are being spent on getting more out of existing fields, using techniques like well intervention.

The huntFOR OIL is often focused on exploration activity. But what if additional hydrocarbons could be found right where there is existing infrastructure? It is a strategy that offshore operators are increasingly taking; the smart dollars are being spent on getting more out of existing fields, using techniques like well intervention.

At the European Offshore Well Intervention Conference, in April 2018, McKinsey & Co’s Energy Insight’s team noted that, based on a benchmark of 46 offshore assets, one in eight wells were shut in. Add underperforming wells to that number and multiply to reflect the global potential and you get a very big number indeed. There is undoubtedly a prize to be had.

So why have operators not been doing more? They face a number of challenges, including broader business drivers, production teams not having buy-in from the decision makers, limited budgets and, perhaps, having had a costly intervention project backfire in the past.

Some oil companies are seeing the benefits. Equinor, for example, has been using light well intervention (LWI) vessels – instead of large expensive rigs – for many intervention projects since 2000, supported by long-term contracts with suppliers and vessel owners. Others like ExxonMobil and Chevron also have LWI departments and we have seen an uptick in other operators engaging in this space over the past year.

So, what is changing? The pain of the oil price has had a lot to do with it. Oil companies are having to be more innovative with how they spend their dollars, while finding new ways to improve their production profiles. That means looking at some of the more symptomatic problems they have. This could be an increasing amount of water cut in produced hydrocarbons, wax or scale deposition, or even unknown problems where a well just is not performing. These are issues that also have a direct impact on infrastructure. Pipelines not being used to capacity that are partly blocked with wax – where what is going through is mostly water – do not make good business sense.

As an operator, your pipe is a certain size and, ultimately, has a choke point. The quality of produced hydrocarbons, how much you can fill your pipe with, and for how long, are three key components. You can affect all of these with some form of LWI, from putting proppant into the reservoir to improve the quality of what you get out, dosing a well with chemicals to de-water, or sliding sleeve to improve production.

Where before the industry tended to focus on minimizing uplift costs by taking out what were perceived as ‘unnecessary services,’ things are changing. The industry is still in a period where the oil price is at the right level to drive innovation around value add, with a keen interest in proven solutions that move the needle.

As well as technology, commercial innovation is also important. In the past, service companies have typically stayed on one side of the fence, and operators on the other. Today, we are increasingly seeing these parties align to an agreed outcome. Consider one scenario, for example, where an operator’s upfront costs are funded by using existing equipment to design, plan, and execute a well stimulation program, with payback based on the volume of incremental production achieved. Or take that a step further still, with a scenario in which the service company agrees to enhance an operator’s production by, say, 10,000 b/d over a certain period. Those would be smart dollars.

‘Pain-gain’ commercial models like this mark a strategic change in the interaction between oil company and supplier. Are you a service supplier, or a service partner? If you are a service partner, you put skin in the game and work in a highly incentivized manner. The appetite for outcome- or solution-oriented deals is there but it is dependent on open dialogue and continued momentum.

The icing on the cake is that this approach does not stop at production enhancement. Well intervention work adds to the service sector’s understanding of each operator’s wells, which helps de-risk the final task eventually facing them – well plug and abandonment (P&A). This is estimated at nearly half of the cost of the entire decommissioning scope, so it is not an insignificant consideration.

Considering that, let us take things another step forward. What if your supply chain partner could help you maintain your production levels at an agreed rate, and use the knowledge gained during well intervention activities to drive efficiencies in your P&A scope. The extra cash generated from production enhancement could then be set aside to pay for that P&A program. We think that could be a compelling proposition.

Of course, there are barriers. There is always the race to be second and the challenge to shift industry perception. And while technology will help us unlock more reserves, it will only go so far. Combine technology with the right skills across the full stream, together with new business models, and we have an opportunity to shift the needle with a truly disruptive offering that can bring value to everyone involved. •

Carl Roemmele, Integrated Services Solutions Leader
Paul Stein, Production Enhancement Solutions Leader Baker Hughes, a GE company

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