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Technology unlocks mature reservoirs

Article by Bernard J. Duroc-Danner
April 1, 2002

Technology creates value in effective reservoir management.

The question of technology is a generic one. When we examine it, we notice that 50 years ago, technology was
important but not critical. Five years ago, technology was increasingly critical. Today it is essential. It will become
even more essential for our clients every month and every year that goes by. The reason for that is geological -
everything begins and ends with the reservoir.
Accelerating decline rate
Reservoirs are like biological beings. Their life spans are similar - the second half less robust than the first. Both
also share the sad fact of deteriorating performance over time. Geologically, this means smaller reservoirs, tighter
formations, remote and deepwater locations and greater production complexities. Decline rates, the natural
propensity for reservoir decline over time, also accelerate. In addition, moving into deepwater is an engineering
stretch. Although it is the last remaining frontier, it is hard to drill and even harder to maintain. The result? Clients
have to run to stand still.
The blended average decline rate for oil and gas is about 6% per annum. This indicates decline rates have doubled
in the past 10 years. What that really means is the rate of acceleration of decline rates is running at 4% per annum.
Reservoir recovery rates are less than 35%. The goal of many of our customers is to advance recovery rates to 60%.
Deepwater projects often are plagued with delays, which average about 4 years due to the difficulty involved from
an engineering standpoint. During the past 40 years, average new field sizes have declined by several orders of
magnitude. These all are essentially the result of the same phenomenon of aging.
Zero-sum game
What are the implications of these changes? Those in the oilfield service business are vendors. Therefore,
accelerating decline rates are good for them since more products and services will be needed. One could argue that
a 4% accelerating decline rate plus the annual growth of gross domestic product represents the real growth
opportunity for oilfield service companies. On the other hand, from the clients' standpoint, decline rates are bad.
Decline rates mean they have to spend more on products and services to stay in place, resulting in a zero-sum game.
Zero- sum games between clients and vendors are unhealthy.
So what are the remedies? Clients have several choices. One, particularly effective for large clients, is to exact
pricing concessions. In other words, squeeze the vendors. Typically, when markets go down, prices go down; when
markets go up, prices go up. This price leverage approach has been at work for the past 50 years. It is not new, and
it is not satisfactory for client or vendor.
A second, more substantive approach, is client mergers. Mergers create consolidation economies, which is a good
thing. Mergers may delay some project work, but the more efficient clients become, the more they will focus on
production. Mergers and pricing pressures reflect the maturation of the oil field and the need to create wealth to
compensate for the increasing cost structure driven by the aging process.
The third method by which clients can resolve the zero-sum game is technology; this is why technology is essential.
As such, it will force the rate of technological innovation and the speed of acceptance to go up. Today the rate of
market acceptance for new technologies is surprisingly fast, not because clients are more risk-prone, but because
they do not have any choice due to the natural aging drivers at work in the reservoir. A corollary to the growing
need and acceptance for incremental technology is that the search for game-changing technologies is intensifying.
Our clients are testing, proving and accepting incremental and step-change technologies with far more gusto than
ever because they need them.

http://www.epmag.com/archives/print/3318.htm 3/2/2010
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Game-changing technologies
What are the technology priorities? Reservoir productivity and the need to minimize formation damage and
optimize reservoir production are clear. In addition, advanced well architecture that improves productivity through
better ways of sweeping the reservoir and new intelligent technologies that help minimize intervention costs,
particularly in deep water, are vital.
Technology falls into two basic categories - incremental and step-change. Client needs are driving the push for
technology, so their priorities are paramount. While the terminology they use may vary, their technology needs are
similar. They include expandable tubulars (solid and slotted), intelligent wells, underbalanced and dual-gradient
drilling, ultra-extended reach, third-generation rigs and 4-D seismic. Some are incremental, like ultra-extended
reach. Others are potentially game-changing, like expandables, intelligent wells and underbalanced systems.
The key issue for technology is productivity. Costs are wonderful to reduce, but ultimately the money is in reservoir
productivity.
Expandables
Expandable technology offers increased reservoir productivity and sharply lower construction costs. It includes
slotted and solid expandable tubulars, related tools and accessories, and specialized expansion systems. All share
the ability for expansion after downhole installation. The functions include sand control, zonal isolation, completion
accessories, liner hangers and borehole stabilization. The downhole expansion of oilfield tubulars allows
significantly better hydrocarbon production rates from the reservoir and provides significant reductions in well cost
by reducing the amount of consumables required by traditional techniques. Downhole expansion tools and systems
also provide new possibilities for previously unreachable or uneconomic reservoirs.
The first commercial application of expandable sand screens is being rapidly adopted in its first full year of
commercial use. The importance of this application from a client standpoint has to do with cost and, particularly,
reservoir productivity. Average production increases as high as 70% have been noted vs. traditional technology.
The future for expandables will consist of refinement of sand control applications and the development of a range of
applications for solid expandable tubulars. That range will include completion accessories like packers, liners and
hangers. It will include remedial tools like cladding and straddles to restrict production from problem areas of the
well. Finally, it will encompass the monobore well. Together, these tools will revolutionize well architecture,
sharply reducing well construction costs and providing the system needed to produce much of the world's
deepwater reservoirs.
Underbalanced drilling
The underbalanced drilling system (UBS) is a process in which the hydrostatic pressure at the bit is less than the
naturally occurring reservoir pressure. So instead of killing the well, the operator allows the formation to flow or
produce. If the well is allowed to flow while drilling, the formation is not damaged. By avoiding formation damage,
well productivity increases exponentially, raising reservoir productivity and ultimately recoverable reserves.
Underbalanced drilling, like directional drilling, is a system - not simply one particular product or service. It is the
ability to successfully integrate project engineering, well control, separation systems, compression, fluid chemistry
and data acquisition into one system. This young technology is challenging the tradition-bound operating
procedures the industry has used for more than half a century. In a short period of time, UBS has drawn significant
and specific interest from producers, particularly in international markets.
Why has it grown so fast? UBS does not damage the formation. Again, the productivity theme reigns.
An example of UBS potential exists in a series of wells drilled in a mature area of the North Sea. The average
production of wells in the field using traditional drilling techniques had been 50 b/d. The wells drilled
underbalanced came in at more than 3,000 b/d. More importantly, the wells continue to flow at 2,700 b/d.
As a result, underbalanced activity is moving internationally much faster than expected. This is a clear indication of
clients willing to accelerate testing and commercialization of promising new technologies. While the percentage of
wells drilled underbalanced is small, it is advancing rapidly. Its full potential could be 25% or more of development
well activity.
Intelligent wells
The third game-changing advance is intelligent completions. Although the concept of intelligent wells was
popularized in the 1990s, progress has been slow due largely to the limitations of primarily electronic sensing
systems. This is changing quickly with the successful development of fiber-optic systems.
Fiber optics work well in the downhole environment. If sensing works, then intelligent completion will work.
Pressure, temperature, phases and seismic activity can be sensed and measured with fiber optics. The key driver for
intelligent wells is the imperative to minimize intervention costs and better manage reservoir production and
development. By improving the flow of the reservoir, you solve the cost issue. Once again, it is a reservoir

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productivity issue.
Fiber-optic technology is an improvement over electronics for several reasons. Fiber-optic equipment operates at
high temperatures, and it has greater versatility and multipoint sensing capability than traditional technology. The
coming of age of fiber optics will provide a real boost to the future of intelligent wells.
Where does the focus on technology lead us ultimately? Through the years we have tried to create wealth through
consolidation, because consolidation was the one thing we could do, other than simply riding the cycles, to create
an extra layer of wealth for shareholders. As the industry has matured, it is much harder to find good consolidations,
which is normal because most of it has happened. Interest in technology has been spawned in part because
significant wealth generation from consolidation has nearly dried up. Only by looking at secular trends can we
create significant new wealth. Technology coupled with the secular aging trend of producing formations is the
single biggest event to affect this industry. It is the key to future wealth generation. Undoubtedly, up and down
cycles will continue. But behind all this is a secular shift: the maturation of hydrocarbon reservoirs. The need for
technology is a survival need. That need will grow.

http://www.epmag.com/archives/print/3318.htm 3/2/2010