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Reserves Growth: Torturous and Tortuous

At the World Petroleum Congress in 2000, the U.S. Geological Survey (USGS) presented its World Oil and Gas Assessment, showing a global conventional reserves growth estimate (Table 1). The greatest significance of this estimate was the size. The U.S., in particular, is highlighted because the reserves growth estimate is more than twice the remaining reserves and at least comparable with the undiscovered resource estimate. As noted in the assessment, “In the U.S., which is one of the most intensely explored countries in the world, reserves growth is widely considered to be a major component of remaining oil and gas resources. It is hypothesized that reserves growth of similar proportions also could occur worldwide as exploration for new fields matures and the intense exploitation of existing fields becomes an increasingly viable approach to developing new reserves.”

A number of arguments have been made regarding the potential weakness of that hypothesis, but the significant impact of reserves growth is becoming more accepted. Notable in this assessment, as in all resource assessments, is the lack of discussion of the technologies and practices required to develop these resources in a timely manner. The challenge lies in the details of how we get there.

The Torture

Despite the upside potential of reserves growth, the process of developing that potential can be quite painful without adequate technology to support development programs. Fig. 1 is a plot of development program costs in one of the most challenging environments in the world, the deepwater U.S. Gulf of Mexico (GOM), during the period before 2004 when oil and gas prices were beginning to rise. The driver for the cost estimates and overruns came from the days when deepwater drillships cost between U.S. $300,000 and $400,000 per day.

Fig. 1—Development program costs for deepwater GOM.

As bad an impact as an average 60% overrun might be on a $44 million AFE project, the real inhibitor of resource development in the GOM is the potential for spending more than three times the anticipated average AFE cost. This magnitude of risk might be referred to as “elephant torpedoes” in the deepwater search for elephant reservoirs with regard to the impact on exploration budgets. Today, those same deepwater ships cost closer to $500,000 per day, and the industry is charging forth again into deep water based on a $60+ per barrel “war chest,” but with only limited advancements in new technologies since the early 2004 time frame to aid in risk reduction. Success this time obviously will depend on lessons learned and human resources.

There is a perception that onshore E&P requires less risk. But operators often find the prize to be smaller and/or more fragmented. The industry again is experiencing a paradigm shift. At one time, reservoirs were categorized as conventional and unconventional, and a subcategory under unconventional was “compartmentalized reservoirs.” As noted in a recent SPE Distinguished Lecturer Series presentation by Stephen Holditch, unconventional reservoirs are being categorized by recovery requirements. “These are the reservoirs that cannot be produced at economic flow rates or that do not produce economic volumes of oil and gas without assistance from massive stimulation treatments or special recovery processes and technologies, such as steam injection,” he said. It now appears that the subcategory of compartmentalization might better fit on the conventional (or at least typical) side of the ledger as the realization becomes more established that almost all reservoirs are compartmentalized. It is simply a matter of degree of compartmentalization.

Reservoirs once thought to be relatively homogeneous often display their true characters when operators attempt to initiate enhanced oil recovery (EOR) pilot programs. Reservoir heterogeneity is then recognized by wells within the planned pilot area that either are not in communication or have some form of flow impediment between them that limits sweep efficiency and ultimate recovery. Having the ability and technology to adequately characterize this compartmentalization before the initiation of the pilot could prove critical to accelerating reserves growth.

The Tortuous Path

Historically, the path to increased exploration efficiency usually has led through the development of new technologies, and the reserves growth path most likely will be no exception. But the challenges are legion, with some of the key issues being:

• High capital and operating costs.
• Limited ability to image the reservoir and the fluid processes within the reservoir.
• Harsh drilling and production environments.
• More complex and smaller reservoirs.
• Limited to no ability to image or predict drilling hazards ahead of the bit.
• Limited deepwater predrill site characterization capability.
• Limited conformance control for EOR programs.
• Increased pressure to minimize surface disturbance.
• Drilling/production footprint requiring expanded use of extended-reach drilling.

These challenges would not be as daunting if the resource development could be accelerated by a more integrated pathway for the creation and use of game-changing technologies.

A number of organizations promote joint industry projects (JIPs) to develop technologies that are near commercialization and that enable the use of existing commercialized technologies. Some of these organizations are the Drilling Engineering Assn. (DEA), DEA Europe, the Completion Engineering Assn., Deep Star, and Deep Look. While these ad hoc groups provide a critical need for focus and synergy to solve engineering problems, the very nature of their organization often results in a limited focus. In looking for groups with a wider scope for resource development within the U.S., the “uninformed” often get directed to either university program JIPs or higher-level policy organizations such as the Cambridge Energy Research Inst. More integrative organizations, both industry and university driven, do exist; however, they are often challenged in developing many strategic, “mid-/long-range” JIPs because of the industry’s lack of interest in anything but short-term commercialization and inadequate attention to funding for technology transfer.

One interesting industry-driven program for oil and gas technology development is the Petroleum Technology Alliance Canada, which offers both short-term and “fundamental” research focus areas. The alliance’s claimed benefit is that it “brings many more prospective participants to the table and brings a structured approach to collaboration.” While this appears to be a successful model, it might be limited in its outreach to synergistic solutions from other industries because of its oil and gas roots.

A program that is just developing is “Secure Earth.” This group strives to be a diversified consortium that will “redefine the ways that subsurface science research is conducted and, ultimately, how research leads to improvements in understanding and prediction.” While the overall focus of Secure Earth is limited to subsurface imaging, it could be a model for other programs in its inherent potential for synergy with related programs outside the oil and gas industry.

Another path for a successful technology-acceleration model could come from something closely affiliated with SPE or other professional organizations in the geosciences, such as the American Assn. of Petroleum Geologists, Soc. of Exploration Geophysicists, Geological Soc. of America, American Assn. of Drilling Engineers, and others. The path to accelerating key reserves-growth technologies may depend highly on tapping the expertise within these organizations to streamline an effective process for accelerating early-concept technological development from available sources and industries.

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