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Strategies Glean New Prospects

Geology Trumps ‘Gadgets’

The oil and gas industry and petroleum geology face three major challenges today:

First, finding high-potential and accessible frontier targets for exploration.

Second, using technology to optimize production while maximizing field life.

Third, developing viable new prospects in known or mature areas.

Of the three, the last may have the greatest effect on near-term world energy supply.

Successful frontier exploration is the industry champagne and caviar that grabs media headlines, but generating new prospects in known areas remains the industry’s bread and butter for exploration, said Robin Hamilton, regional framework studies team leader for Shell International E&P in Houston.

“The happy hunting ground for new plays,” Hamilton said, “is not as romantic as the undrilled basin.”

‘Intellectual White Space’

AAPG’s upcoming Annual Convention in Long Beach, Calif., will offer a rare look into Shell International’s play methodology.

Hamilton and four of his colleagues have prepared the presentation “Identifying New Material Hydrocarbon Plays: The Challenge and an Approach,” describing Shell’s prospect-generation process.

That approach includes similarities to the methods used by smaller independents in mature producing areas. There’s at least one big surprise in the common approach to generating new plays. It’s not a gadget-driven, 3-D-seismic, high-tech pursuit.

“People are running to it as the silver bullet in so many cases, but over-reliance on technology, I think, has stifled our abilities,” Hamilton said.

At one point, Shell examined a large number of successful plays that had each found 500 MBoe or more, according to Hamilton.

“We took 80 plays we knew of and sat down and said, ‘Okay, of the material plays we know about, what’s been the initiator in getting these plays up and running?’” he said. “What was the critical success factor?”

New technology didn’t make the top of the list.

“By far the predominant factor across the board was the development of a new geological model,” Hamilton said.

And the second was serendipity – plain luck, he noted.

When Shell International’s basin framework group develops new play concepts, it considers gaps in knowledge – what isn’t known about a focal basin or petroleum system, Hamilton said.

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The oil and gas industry and petroleum geology face three major challenges today:

First, finding high-potential and accessible frontier targets for exploration.

Second, using technology to optimize production while maximizing field life.

Third, developing viable new prospects in known or mature areas.

Of the three, the last may have the greatest effect on near-term world energy supply.

Successful frontier exploration is the industry champagne and caviar that grabs media headlines, but generating new prospects in known areas remains the industry’s bread and butter for exploration, said Robin Hamilton, regional framework studies team leader for Shell International E&P in Houston.

“The happy hunting ground for new plays,” Hamilton said, “is not as romantic as the undrilled basin.”

‘Intellectual White Space’

AAPG’s upcoming Annual Convention in Long Beach, Calif., will offer a rare look into Shell International’s play methodology.

Hamilton and four of his colleagues have prepared the presentation “Identifying New Material Hydrocarbon Plays: The Challenge and an Approach,” describing Shell’s prospect-generation process.

That approach includes similarities to the methods used by smaller independents in mature producing areas. There’s at least one big surprise in the common approach to generating new plays. It’s not a gadget-driven, 3-D-seismic, high-tech pursuit.

“People are running to it as the silver bullet in so many cases, but over-reliance on technology, I think, has stifled our abilities,” Hamilton said.

At one point, Shell examined a large number of successful plays that had each found 500 MBoe or more, according to Hamilton.

“We took 80 plays we knew of and sat down and said, ‘Okay, of the material plays we know about, what’s been the initiator in getting these plays up and running?’” he said. “What was the critical success factor?”

New technology didn’t make the top of the list.

“By far the predominant factor across the board was the development of a new geological model,” Hamilton said.

And the second was serendipity – plain luck, he noted.

When Shell International’s basin framework group develops new play concepts, it considers gaps in knowledge – what isn’t known about a focal basin or petroleum system, Hamilton said.

“In our experience, new plays grow best in areas of intellectual white space, or even technical white space where you don’t have sufficient data,” he explained.

That includes taking a big-picture look at the existing technical understanding of a working petroleum system in a basin.

“One idea that we try to use is looking at petroleum system analogs and not just play analogs,” Hamilton said.

“Another way to do this is to look at well drilled petroleum systems and compare them to petroleum systems where you don’t have that entropy,” he added.

A Forensic Approach

Shell’s empiric approach questions the specific unknowns in a system and searches for overlooked possibilities.

“You don’t just cookie-cutter your way around the planet looking at petroleum systems,” Hamilton said. “It’s a way to force yourself to ask questions.”

He said certain “prompts” help seed new play ideas for Shell.

“One is literally, Go Deep. What’s there? What is the limitation?’” he said.

“You’re somewhat model-driven as you go deeper and your information gets skinnier,” he added.

Go Shallow and Go Lateral are other possibilities. As part of the evaluation process, Shell compares an area of interest to production in similar settings.

“Almost by definition, there are some plays that have worked well in those settings and you say, ‘Why not here?’” Hamilton explained.

“It’s in a way a more forensic, first-principles approach,” he continued. “For instance, if you’re in a deltaic situation, what’s the maximum depth of the commercial porosity?”

Not every play turns into an instant success, so Shell aims for speedy evaluation of generated prospects.

“When you’re in the new play realm it would be glorious to hit the home run, whether that’s with your first well or the first test of the concept. What’s important here is to evaluate the play as quickly as possible,” Hamilton said. “There’s a speed and efficiency issue.”

Understanding the Geology

In Long Beach, AAPG’s George C. Matson Award for best oral presentation at the 2006 annual meeting will be presented to Steve Brachman, division geologist for Pogo Producing Co. in Houston and current president of the Houston Geological Society.

Brachman’s presentation described the discovery of new pay zones in northern Lafourche Parish, La., a 600 Bcf mature producing area.

“Between Pogo and its partners, we generated 13 to 15 prospects, out of which nine or 10 were drilled with pretty good success,” he said.

To generate prospects in a known area, Brachman begins with an understanding of regional and subsurface geology, using well data, logs, 2-D seismic and other resources.

“My criteria (for a potential prospect area) are a good deal of structural or stratigraphic complexity and potential reservoirs at multiple levels,” he said.

The geologic complexity provides a reason to shoot 3-D seismic, a near-final step in Brachman’s approach. And multiple potential reservoirs give Brachman additional chances for production.

A third consideration compares known production and projected potential

recovery to the cost of a drilling project. “Looking at the production in the area, the kind of prospects that we developed had to justify shooting the 3-D seismic and drilling some pretty expensive wells,” Brachman explained.

“The most important thing is that it has to make economic sense – to do a 3-D project requires a tremendous capital outlay prior to going out and looking for partners,” he said. “You have to convince your management that your prospect is economic enough.”

Pogo Producing had acquired 2-D seismic in the Louisiana prospect area, and Brachman said that was crucial to the program’s success.

“Interestingly enough, none of our 2-D leads panned out in the 3-D,” he noted.

“But without having done the subsurface and the 2-D, we would not have been able to generate many of the prospects. Understanding the 2-D was absolutely critical to understanding what the 3-D was telling us,” he said.

In Brachman’s approach, acquiring 3-D seismic is a late evaluation step prior to drilling, one that can contradict 2-Dbased interpretation.

“My biggest fear,” he said, “is shooting a dry 3-D.”

In Their Footsteps

According to Brachman, it can take three years from the start of the prospect generation process before shooting 3-D, and four to four-and-a-half years before drilling.

“Another type of project is buying existing 3-D off the shelf in areas that have been worked by others,” he added, “in many cases where 20 companies may have generated prospects.”

Blue Moon Exploration Co., another south Louisiana player, uses that approach to generate prospects in a known area.

“We generally don’t initiate a program to shoot data. Just about everything we do, we’re following somebody else,” said company president Michel Bechtel.

“We're not afraid to follow anybody, even on data sets that have been out there for 10 years,” he added.

Bechtel considers an understanding of subsurface geology the key to successful prospecting, combined with geologists capable of seismic and engineering evaluation.

“The approach we take is more the old-fashioned geology,” he said. “All the guys here were mentored the same way. We’re just as comfortable doing the engineering and reserve estimation as doing the geologizing.”

By utilizing existing seismic data Bechtel avoids the expense of funding an acquisition program, which can be daunting for prospect generators.

“With all the dollars on the front end, if you only come out with one sellable idea, you’ve got a lot of money in the front of that thing that one idea isn’t going to support,” he said.

Instead of starting with seismic data, his geologists start with well control and a knowledge of the subsurface, then extrapolate into interpretation.

“We’re trained as geologists but we’re very comfortable looking at data. We’re not so theoretical, and we’re not as high-tech as other shops, I imagine,” Bechtel said.

“We don’t just look at the geophysics. We look at the wells first, then try to fit the seismic into it,” he explained.

Like most good prospectors, Bechtel won’t let an old exploration idea go to waste. He said his company monitors lease sales on a monthly basis, looking for any known area of opportunity.

“If we’ve got some old ideas in that area, we’ll jump in there and see what we can do,” he said.

“Another thing I think is real important is being able to run down data on old wells,” Bechtel commented.

“We can track down the guy who logged a well and might have some information that could have been lost,” he said. “If you’ve got a lot of contacts, you can track down a lot of ideas like that.”

On a typical deal, Bechtel said, Blue Moon takes a quarter back-in after payout, “which we’ve done forever.”

“We don’t deal with unsophisticated investors – just about all the people who drill with us are sophisticated geologists, geophysicists or other industry people,” he said.

And like many prospect generators, Bechtel prefers to maintain focus and stay close to home when evaluating plays. He bent that rule somewhat by reaching from south Louisiana all the way into far eastern Texas.

“We went international – we crossed the Sabine River,” Bechtel joked. “In fact, we’re drilling a well right now in Orange County, Texas.”

It’s a Puzzlement

These companies generating prospects in known areas have reached a common conclusion:

The ability to devise successful, new geologic models trumps the use of 3-D seismic and high-tech approaches. “In my career, the geologist was always the lead guy,” Bechtel said. “The geophysicist and engineer and landman were the secondary guys. Now I see it switched in a lot of big companies where the geophysicist is the top dog.

“I just don’t get it,” he admitted.

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