And we’re back.
With high oil and gas prices and strong demand driving renewed interest in production, the energy industry is returning to the unconventional resources business in a big way.
The upcoming Unconventional Resources Technology Conference is once again an in-person meeting, back in Houston this month, June 20-22, with a major emphasis on practical ways to boost output and introduce efficiencies.
Scott Singleton has no doubt about today’s biggest challenge facing professionals working in unconventionals:
Going back to serious work.
“The main concern that everyone has right now is just getting back to work. This (pandemic) is the second crash we’ve had in the past few years,” Singleton noted.
He described the industry’s big push as “getting everybody back to work and doing what we should be doing, which is efficiently producing unconventional resources.”
Singleton is a reservoir geophysics consultant in Houston on contract with NextEra Energy Services and a program chair for this year’s URTeC conference. He said the state-of-the-art in unconventionals essentially slammed to a halt in 2015.
Currently, specialists working in unconventional resources development “are kind of dusting things off. I’m one of those people, by the way. Now we’re picking things up, dusting them off and applying them to the reservoir,” he said.
The recovery in U.S. unconventionals is well under way. According to industry research firm Rystad Energy in Oslo, new horizontal drilling permits in the Permian Basin hit an all-time high in March, with 904 total permits awarded.
“This is a clear signal that operators in the basin are kicking into high gear on their development plans, positioning for a significant ramp-up of activity level and an acceleration in the speed of output expansion over the next few months,” said Artem Abramov, Rystad’s head of shale research.
“The surge in permitting activity positions the industry for continuous rig-count additions in the second half of 2022 and foreshadows a significant increase in supply capacity from early 2023,” he said.
The increase in drilling activity is no surprise to Singleton, who noted that operators in unconventional resources plays came out of the downturn with a large portfolio of drilled but uncompleted wells.
“That inventory is going, at a rapid clip, downward. So people think, ‘Oh, yeah, we need to be drilling more wells now,’” he said.
Katerina Yared is a senior petrophysicist with SM Energy Company in Denver and 2021-22 president of the Society of Petrophysicists and Well Log Analysts. She also serves as a URTeC program chair-elect, so she’ll be delving into topics for next year’s conference.
“There’s quite a few unchecked question marks we still have to answer. In many ways, we are still approaching these unconventional resources with conventional tools. I truly believe these platforms like URTeC provide the way for us to increase our knowledge – these reservoirs are very complex,” Yared said.
“Another thing that URTeC can provide is learning from others and the understanding from shared knowledge. During the pandemic some of that was dampened a bit,” she added.
Yared and Singleton agreed that unconventional resources development has proved the need for multidiscipline teams and has benefited greatly from that interaction. The oil and gas industry generally took a siloed approach to development in the past, even though it promoted the idea of work teams for years, Yared said.
“That didn’t much happen before unconventionals forced everyone to work together,” Singleton observed. “I would like more geophysicists to be involved, but I think people are starting to understand” that specialists from all disciplines need to cooperate.
“Another big thing that came up was the integration of artificial intelligence and machine learning and how to use that for our best advantage. I guess that’s a new boundary, but we’re already halfway in it,” Yared said.
This year’s URTeC technical program includes multiple examples of data-driven development, and Singleton said, “That’s definitely one of the, what I call, ‘new-fangled’ techniques that not just us but everybody is doing. We’re some of the people that drove high-capacity data capture and storage.”
“We are big users of machine learning and it will never leave us. It’s coming to be ingrained as part of our workflow,” he noted.
For URTeC 2022, “we had to change the focus of the machine-learning theme. We looked at what happened last year when authors came with algorithmically-themed papers that were often only peripherally related to unconventional resources,” Singleton said.
With a new emphasis on production and efficiency, URTeC has transitioned back to a focus on practical applications in the field. Yared said that, “at the end of the day, production is what counts, so that is how the metrics are set.”
“The biggest challenge is still tying back to production, or going full circle, going from the geomodel to actual production from each well. That’s the secret sauce,” she said.
This year’s URTeC program does not have an abundance of session topics devoted to environmental concerns or the energy transition. Yared acknowledged that one of the things the energy industry can do “is putting our understanding of these reservoirs to use for things like carbon capture.”
But, she said, at this point there are already numerous specialized industry conferences on energy transition and the environment.
“The thought on that was we didn’t want to compete with, say, AAPG’s (Carbon Capture, Utilization and Storage) Conference and (meetings) like that,” she said.
Unconventional resources fell out of investor favor during the downturn, Singleton observed, “to the point where all of the investment people were saying, ‘Don’t even talk to me about having any energy companies in your stock portfolio.’”
“All the investos are interested in is free cash flow. That means you have to generate a profit almost immediately, which means everything – everything – has to be efficient,” he said.
Geoscientists can make a major contribution in that regard, Singleton noted, even though unconventionals have transitioned to more of a technical play, instead of a burgeoning, cutting-edge play heavily dependent on geological analysis.
“Then it became a production play, and the engineers came in and took it over and started pushing the geoscientists out. We’ve been telling people, ‘It is not a strictly production play,’” he said.
“As you move laterally to other parts of your property things will change and engineers will not be able to predict those changes,” he noted.
Singleton said he felt the same way after the CCUS Conference in March, when he saw how important the geosciences will be to future carbon capture efforts.
“We – meaning geoscientists – need to stand up and wave out arms and say, ‘You people need us!’ I’m telling everyone, ‘You guys need to stand up and be counted.’ We are essential to this,” he said.
Striving for Improvement
How much do Singleton and Yared believe high oil and gas prices are here to stay?
Not even for a nano-second. Both point to the strong likelihood of lower prices – maybe even sharply lower – in the future.
“Those prices are not going to stay up that high. We’re going to ramp up production,” changing the supply-demand picture and bringing back lower prices, Singleton predicted.
“People who are not practicing efficient production techniques now will not be following them then, and those will be the companies that go out of business,” he said.
Yared welcomed the return of in-person interaction at URTeC. She said a few people have asked about a virtual-attendance option, a question to be addressed for future meetings. For now, “I think people are tired of seeing other people in one-D and talking to a screen the whole time. In my opinion, it’s a big step,” she said.
Even though successful unconventional resources development has a 20-year history in the United States, improvements remain a serious challenge for the industry and “we still have work to do,” Yared observed.
“We’re still dealing with very low recovery factors in extracting these unconventional hydrocarbons. We’re definitely scratching the surface,” she said, adding:
“I don’t even know that we know what the limit is when it comes to development. It really is up to the imagination of scientists and technology experts and even operators.”