As developers apply techniques used in unconventional zones to conventional plays the once-distinct lines between the two areas of production will vanish, writes Kevin Godier
A slow fusing of the lines between the conventional and unconventional oil and gas arenas has been underlined by a new study, which suggests that the tight conventional domain will increasingly benefit from the export of lower-cost technology used to unlock unconventional zones.
Released in mid-July by data and business research provider IHS Markit Energy, the report examines how unconventional technologies can be applied to the redevelopment of conventional wells in the top 39 established US tight conventional plays, where major shale plays are also being developed.
Entitled Horizontal Drilling in US Tight Conventional Plays, the study is timely, coming as it does during a period when the global oil industry is seeking and deploying all forms of cost-cutting in a push to implement the efficiencies and savings that can ensure its survival through a period of lowered oil prices that has lasted for over two years.
The report draws its findings from an assessment of nearly 46,000 US horizontal wells completed between 2010 and 2015, 10% of which were in tight conventional plays. Identifying formations being drilled today, plus opportunities in other formations with little drilling to date, the report concludes that “there are significant potential benefits of applying some of the same drilling and completion techniques that have been used so successfully in the US shale oil plays to increase recovery in these tight, US conventional plays,” according to IHS’ director of North America well and production content, Steve Trammel.
The key plays identified in the study that have the greatest potential to leverage horizontal technologies include the Williston, Powder River and Denver basins in the Rocky Mountain region, the Permian Basin and Eagle Ford play fairways in Texas, and the mid-continent region, including the Anadarko Basin.
Low costs, good infrastructure
The average global recovery factor for a conventional oil reservoir is 34%, leaving slightly less than two-thirds of the oil in the ground, according to IHS Markit. However, a number of tight conventional oil reservoirs show recovery factors of 15% or even less (tight conventional reservoirs are defined as those within the 0.01 to 2.0 millidarcy permeability range, which have typically tended to be sub-commercial in the conventional domain).
The good news is that the average initial potential (IP) test rates for the leading tight conventional plays that it scrutinised compare favourably with the IPs of established shale oil plays. In addition, said Trammel, leveraging unconventional technologies should prove attractive to operators because the overall breakeven costs to develop these projects are much lower and delivery infrastructure is already in place.
Trammel noted that: “These tight conventional resources are in reservoirs with older vertical wells that can be re-entered by horizontal drilling. The rock properties do not require the size and cost of a hydraulic frack job needed for an unconventional zone, and therefore these are much more economic for operators in the current low oil price environment.”
Another bonus, he stressed, is that the use of horizontal wells to test tight conventional plays further in several US oil zones has resulted in the establishment of stacked plays with major resource potential. “The plays in the Rocky Mountain region, in particular,” he said, “have the majority of the highest-ranking tight conventional plays of those we studied in our IHS Markit Energy report, but tight conventional plays in Texas, including the Permian Basin and Eagle Ford fairway, also fared well, in terms of potential for redevelopment.” Trammel also flagged up the potential for shallow conventional plays to offer opportunities for operators to leverage unconventional technologies in the ongoing oil price environment.
One key inference from the report is the gradual dwindling of the characteristics that have come to define and separate conventional and unconventional oil reservoirs. This trend is bolstered in other respects, including the reality that not all shales are found in unconventional reservoirs. Indeed, a majority act as overburdens and seals to conventional reservoirs.
But in terms of the methods developed to extract oil and gas from a virtually impermeable source rock, it is clearer than ever that these can be extended to more profitably develop marginal, near-conventional reservoirs that would not have been considered commercially viable two decades ago.
InnovOil believes that new approaches to tap more resources and to understand better the nature of high-quality conventional reservoirs will continue to see the light of day in the years ahead, driven by economic necessities and technical opportunities arising from the cross-pollination of ideas.
Where geophysicists work on problems and challenges linked to unconventional reservoirs, the results of that research will spill over into more precise understanding of conventional and near-conventional reservoirs, resulting in a concomitant ability to model and optimise well and reservoir performances for all types of asset structures.
In oil markets where the sheer pace and scope of change from the “shale gale” over the past decade have dramatically challenged hydrocarbons explorers and service companies of all sizes, an obvious conclusion is that the skill sets that can determine rocks with production potential at a relatively low cost will continue to be in huge demand. Low oil prices have stretched operational practices for unconventional reservoirs to the limit, but the upside is that such reservoirs are now able to compete with conventional and near-conventional reservoirs for what remains a limited pool of development dollars.
Of course, if energy prices climb again over the next decade or two, other unconventional sources may make the jump into large-scale viability. The candidates here would have to include oil shale; methane hydrates; advanced biofuels derived from algae or waste, and fuels distilled directly from carbon dioxide (CO2) in the air using sunlight.
For the near term, however, industry eyes will be sharply focused upon the growing potential of tight zones which are bypass zones within a conventional reservoir, and which have traditionally been passed over as being sub-commercial without some type of stimulation. The advent of unconventional extended lateral drilling and multi-stage hydraulic fracturing has reduced the technical difficulty and cost of such operations, transforming some of these zones into palpable commercial prospects.
Given that this technology can extract fresh resources without any accompanying environmental cost or scarring of the landscape, InnovOil forecasts a big future for this interface between the conventional and the unconventional. Even a decade or two from now, conventional-unconventional distinctions may have become outdated, with the “unconventional” moniker being used to describe the world’s more speculative energy resources.