Current Conditions Allow ‘A Time to Regroup’

Less drilling, more research

Are current conditions in oil and gas creating a big opportunity for petroleum geologists in the Rocky Mountain region?

Some experts say today’s drilling slowdown gives geologists time to catch up on recent advances in science, providing a less-hectic opportunity to analyze data, study reservoirs and create improved models.

But industry geologists appear to be doing less of that than you might think, and one word explains why:

Uncertainty.

“When things slow down is a great time to catch up on the science. Sometimes the drilling activity can outstrip the science,” said AAPG Honorary member and past AAPG president Steve Sonnenberg, professor of petroleum geology at the Colorado School of Mines in Golden, Colo.

Sonnenberg noted that a wealth of data has accumulated from recent drilling activity in the Rockies, especially in unconventional plays. Geologists can now use that data to develop a deeper understanding of everything from porosity throat sizes to reservoir flow paths.

He called today’s downturn a “time to regroup.”

“My feeling is that people have been so busy trying to stay ahead of the rigs, people now need to go back and look at the data,” Sonnenberg said.

Also, he added, “There are a lot of known oil and gas fields, and a lot of those need to be studied for secondary and tertiary recovery possibilities.”

Hanging Tough

There’s no doubt that industry activity has slowed significantly in Rocky Mountain-area plays.

The number of deployed drilling rigs has dropped by 50 percent or more in many places. According to the Baker Hughes rig count, the number of rigs running in the Williston Basin fell from 183 in May 2014 to 79 in May this year.

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Are current conditions in oil and gas creating a big opportunity for petroleum geologists in the Rocky Mountain region?

Some experts say today’s drilling slowdown gives geologists time to catch up on recent advances in science, providing a less-hectic opportunity to analyze data, study reservoirs and create improved models.

But industry geologists appear to be doing less of that than you might think, and one word explains why:

Uncertainty.

“When things slow down is a great time to catch up on the science. Sometimes the drilling activity can outstrip the science,” said AAPG Honorary member and past AAPG president Steve Sonnenberg, professor of petroleum geology at the Colorado School of Mines in Golden, Colo.

Sonnenberg noted that a wealth of data has accumulated from recent drilling activity in the Rockies, especially in unconventional plays. Geologists can now use that data to develop a deeper understanding of everything from porosity throat sizes to reservoir flow paths.

He called today’s downturn a “time to regroup.”

“My feeling is that people have been so busy trying to stay ahead of the rigs, people now need to go back and look at the data,” Sonnenberg said.

Also, he added, “There are a lot of known oil and gas fields, and a lot of those need to be studied for secondary and tertiary recovery possibilities.”

Hanging Tough

There’s no doubt that industry activity has slowed significantly in Rocky Mountain-area plays.

The number of deployed drilling rigs has dropped by 50 percent or more in many places. According to the Baker Hughes rig count, the number of rigs running in the Williston Basin fell from 183 in May 2014 to 79 in May this year.

Pioneer Natural Resources Co., Newfield Exploration Co., LINN Energy LLC and WPX Energy Inc. all have announced office closings in Denver.

American Eagle Energy Corp., a small Denver-area oil company, filed for bankruptcy protection in May. Denver-based Whiting Petroleum Corp. put itself up for sale, but then gave up on finding a buyer.

Considering today’s conditions in oil and gas, it’s ironic that negativism isn’t keeping geologists from research. Instead, companies seem to be positioning themselves to leap back into action.

“The rig count has dropped significantly, so people are being selective in what they drill. But there’s still a lot of optimism,” Sonnenberg observed. “It’s more of them drilling to hold the land (leases), and then optimism about the price coming back.”

Oil and gas price movements have created what one industry observer called a “knife-edge situation.” If prices move 5 to 10 percent higher and look like they might inch up from there, operators may return to more robust drilling programs.

But if prices fall 5 to 10 percent, with the possibility of oil sliding back under $50 a barrel, companies are ready to make further reductions.

Right now, optimism is winning out.

There’s still enough activity in the Rockies oil patch to hold geologists’ attention. Work in parts of Utah continues to simmer even if plays are no longer at their hottest, said AAPG member Tom Chidsey, senior scientist for the Utah Geological Survey in Salt Lake City.

“I recently spoke to the American Petroleum Institute Uinta Basin chapter,” Chidsey said. “There were about 30 people there. Just from talking to them, they still seem to be fairly busy.”

Chidsey said he ended his presentation with a picture of a crystal ball. And in the Rockies the crystal ball seems to be a popular image – as in, we don’t have one.

It’s the same old story of cycles: Everybody can tell you that the oil and gas industry will have a resurgence, but nobody can tell you exactly when that’s going to happen.

“The nature of our business, it’s always been cyclical. What companies need to do is to be positioning themselves in these plays,” Sonnenberg said. “It’s also a great time to be looking at all your competitors, to maybe be looking at selective acquisitions.”

Prime Time for Research

So who’s doing research in oil and gas?

Maybe not too surprisingly, the researchers.

Chidsey said his office had just completed a revised and updated Utah oil and gas map.

“There’s a lot of information packed in the brand-new map. The last one was 2004, so it was time to update that,” he said. “It’s all on digital, too.”

Companies also are part of the research process, partnering with the survey on subjects of interest to the industry.

“We’re doing a study on the tight oil potential of shales. Then we’re also finishing up on a project on what to do with wastewater,” Chidsey said. “We have industry partners on a lot of these projects, what we call technical advisory board members.”

University research programs are benefiting from abundant data from tight sands plays and other unconventional resources efforts, often conducting studies with the cooperation of industry consortia. Sonnenberg leads two major projects in the Rockies.

“I have a big research project in the Niobrara and that’s gone on for five years,” he said. “And we have a project in the Bakken, and that’s been going on for six or seven years.”

Of course, research funding does become tighter as industry revenues fall. Chidsey said the survey has been hard hit by lower royalty revenue on federal lease lands. And spending cutbacks by the U.S. Department of Energy have cut grant opportunities, he noted.

But there are bright spots for the nonprofits in the current downturn.

“In the academic world, we are probably going to see an increase of applicants for graduate school,” Sonnenberg said.

As companies search for ways to save money, Chidsey hopes they will consider donating core to the survey’s collection.

“If companies are looking to cut back and they’ve been paying to store core, if they want to save money we’d be happy to take it,” he said.

The UGS core research center in Salt Lake City holds core from more than 2,100 wells – “That’s a lot for out West here,” Chidsey said – and cuttings from over 4,900 wells.

Those core samples are accessible for public inspection and research, so “once it’s here it becomes available for anyone to look at,” he noted.

Chidsey himself went through a layoff experience in the oil and gas industry in1989. He had three children, the youngest six months old at the time his job disappeared.

Chidsey described it as a period to step back and look at very clear choices in his life.

He ended up joining the geological survey, starting a 25-year tenure at the job and “loving every minute of it.”

“It turned out to be the best thing that’s happened to me in my career,” he said.

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