The Focus of Industry
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- Printing Instructions:
- “Announcing a Lease Sale”
- one document, 8 pages, letter size, B&W
- “Announcing a Lease Sale”
- Pen or a pencil (for taking notes); Colored pencils: red, yellow, blue, green and #2 (graphite); Eraser
- This unit is on the Focus of Industry
- How many – by show of hands - have had some interaction with an oil company – internship, research funded by, etc.
- Industry's scope runs from finding oil and gas reservoirs to getting refined products to our customers
- Let me define what a fully-integrated company is
- It is one that does everything - from finding oil & gas reserves to sales to customers
- There are many companies that only cover certain components e.g., WalMarts sells, but does not explore or refine
- Examples of a fully-integrated companies are: ExxonMobil, Shell, and BP
- We break up the entire process into two main stages:
- Upstream covers everything to getting raw material to a refinery
- Downstream is everything from refining to sales
- Easy question: Where (which stage) do we employ geoscientists? Obviously in the Upstream
- The UPSTREAM can be further subdivided into 3 main parts
- One part is focused on finding oil & gas 'pools' – EXPLORATION
- The second part is focused on how to get oil & gas out of what has been discovered – DEVELOPMENT
- The mission of the third part is to get the most out of the ground and to the refinery - PRODUCTION
- Oil companies, and each of their departments, establish certain targets
- For example, these might be some targets within an exploration group/company,
- To replace production with new reserves on a yearly basis – like a bank account where to be financially healthy you want deposits > withdrawals
- To keep the finding costs below a target, such as $1/barrel – sum of all exploration costs divided by total number of discovered barrels on a yearly basis
- Development and Production departments would have similar targets
- We always need to drill wisely
- Wells can be very expensive - some exceeding $200 million. That is a lot of money, even for ExxonMobil or Shell
- We want to place each well in the best possible location - we can't afford to trust in 'dumb luck'
- Many times the oil & gas occur at several depth levels. We are not limited to drilling straight holes
- So we also need to carefully design the well path so that we can tap into several 'pools' in the best possible locations
- Much of the technical work done in the upstream is directed towards determining where to drill and predicting what we will find BEFORE we start drilling
- This leads to the need for all types of scientists and engineers working in the Upstream
- Their goal is to image and interpret the subsurface so we can maximize oil & gas production while minimizing costs
- In exploration, geoscientists are needed to answer questions such as:
- Which basins …………
- Which blocks ……….
- Where on ………………
- What should ………….
What is a condensate? Temperatures & pressures in subsurface reservoirs are much higher than at the surface
We can have a hydrocarbon that is in a gaseous phase in the reservoir, but as it is brought to the surface, the temperature & pressure drops and the gas CONDENSES into a liquid.
In terms of value, oil is supreme, condensate is second, and gas is third, but gas is still a viable target in many parts of the world
- This is a simple flow chart of the work done in exploration
- We will talk about much of this in subsequent units
- First we have to identify opportunities – areas with high potential that we can get rights to – like in a lease sale
- We have to capture those opportunities – win bids on blocks we want to explore
- Once we have a block, we may want to acquire better seismic data
- Those data have to be processed and then interpreted
- As we interpret the subsurface, we will see 'features of interest' – places where HCs may be reservoired
- More detailed work on some of these features may give us a prospect – a target we want to drill
- We have to assess each prospect – predict what we will find – e.g., at 10,234 ft we expect a 200 ft thick channel complex holding 10 million barrels of oil
- We convince management to drill a wildcat – the first well in the area to test our predictions
- If we find HCs, we may need to drill one or more confirmation wells – to verify there is enough HC for it to be an economic success
- If we have enough HC, we call it a field and pass it to the Development or Production department
- It goes to Development if a lot of money is required to build facilities, e.g. a huge offshore platform and a long pipeline
- If the new field is in an area with a lot of facilities already, it would go to the Production department – e.g., a new field in South Texas that only needs a ¼ mile extension to an existing pipeline
- We will consider a hypothetical example – The Bonanza Basin
- We have done regional analyses which indicates that this basin has high potential for HCs
- 8 blocks are being offered in a lease sale
- Our company won the bidding on two of the blocks that we wanted – block 7 and block 8
- We acquired good quality seismic data, had it processed and interpreted
- The interpreter(s) saw 8 features of interest – what we call leads
- All 8 leads were worked in more detail and an estimate of the volume of oil and gas potentially in each was made
- Out of the 8, only 3 were predicted to have enough HC that they could be economical – value of HC > total cost
- We have 'matured' 3 leads into PROSPECTS
- The best is the Alpha Prospect, predicted to have a gas cap (red) and an oil leg (green)
- A major fault cuts the NE portion of the prospect
- Our company drills a wildcat on Alpha – and we find oil down to 4500 m
- Why did we NOT drill on the crest of the structure?
- Expect gas and perhaps gas is not what we would produce from this region
- May need to have oil at least this far down from the crest to be economically viable
- May want to be sure to hit the oil/water contact so we know how much oil is present
- There is at least 1 main source of uncertainty about how much oil we have in Alpha
- How much oil is on the NE side of the fault?
- There could be NO oil if the fault seals and the oil came in from the W, SW or S
- There could be oil down to 4500 m – as in the well – HC ‘in communication’ across the fault on a geologic time scale
- There could be oil below 4500 m
- To answer this, the exploration department may have to drill a confirmation well
- A confirmation well was drilled in the NE portion of the prospect
- Oil was found down to 4500 m – there is pressure communication across the fault zone (on a geologic time scale)
- We were able to get an EUR of 200 million barrels of oil and 0.95 trillion cubic feet of gas
- This is BIG enough to pass the Alpha FIELD to the development department
- The EUR for Alpha is twice the economic threshold – the minimum needed to cover costs
- Therefore the field is turned over to the development department
- In development, geoscientists are needed to answer questions such as:
- Can we...
- Is the reservoir...
- How many...
- What sort...
- How can we...
- What uncertainty remains
- To answer development questions, we need more detail on the reservoir, its properties, and the distribution of oil & gas
- We want to understand where to place wells to get the most for the least cost
- For exploration, we can live we a ‘broad brush’ picture of the reservoir
- For development, we need considerably more detail
- As shown on the right, we may drill some more wells during development – before placing a production platform
- Why might they have drilled the western development well?
- Confirm the oil-water contact
- See if reservoir quality changed (better or worse) at the western edge of the field
- Why might they have drilled the eastern development well?
- The oil is isolated from the rest – probably have to develop as a separate compartment
- Is there enough oil to merit producing it – or is it cost-prohibitive
- See if reservoir quality changed (better or worse) at the eastern edge of the field
- Data quality that was adequate for exploration may not be adequate for development issues
- The seismic data may need to be reprocessed – using more sophisticated, expensive, time-consuming methods
- We may have to reshoot a new survey to get acceptable data quality
- Data on the right is ‘sharper’ and has better verticl resolution (red & black bands are thinner -> more stratigraphic detail)
- The development department has a platform built, installed, and start to produce oil at Alpha
- The initial production rates (barrels/day) are about what they predicted
- Now the field is turned over to the production department
- In production, geoscientists are needed to answer questions such as:
- How should we...
- Can we...
- What about...
- Is there...
- Can we build...
- A very useful tool for production people is a reservoir simulation
- A detailed geologic model of the reservoir is built – rock type/lithology, porosity, permeability, etc.
- Then fluids are placed within each cell of the geologic model along with fluid properties
- The reservoir simulator models how the fluids move through time
- Until recently, the first simulation would be run after about 5 years of production time
- The simulation would be calibrated by doing a history match - comparing the simulated production (red curve) with the actual production data (blue boxes)
- If a reasonably good history match is obtained, the model is taken to be fairly accurate
- Then we can simulate future production – 10, 20, 30 years into the future
- We can do some ‘what if’ scenarios – e.g., if we placed 3 additional producers at these locations and 5 injectors at these locations, how much additional oil would we produce?
- If the cost of these 8 wells is less than the value of the additional oil, we might do it
- Obviously if the cost of the 8 additional wells would not be recovered, we would not do it – look for other ‘profitable’ scenarios
- We can also look for portions of the reservoir that are not swept of oil (in the simulations) and target these locations with additional wells – if profitable
- So geoscientists can have great value to an energy company
- They can:
- Do work that leads to added HC reserves – making new discoveries, getting more from producing zones, or finding additional zones to produce
- They can get more reserves at lower costs
- Investing in...
- Drilling in...
- Correctly assessing...
- For example, say that:
- I am on a team of 4 working production at the Alpha field
- The initial plan was to drill 10 wells
- Average cost for a well is $75 million
- Through our team effort, we determine that we can get the same amount of oil with only 8 wells drilled in optimum locations
- The team of 4 saved the company $150 million (cost of 2 wells)
- That would be enough to pay each person for 50+ years – they have certainly earned their keep!