High Tech Comes To The Oil Patch

Dec. 21, 2004
A gusher of technology helps keep independents -- and the U.S. -- in the oil-and-gas business.

Robert Nance could well be flipping hamburgers or pumping gas now. President of Nance Petroleum Co., a small independent oil-and-gas exploration and production company in Billings, Mont., he's engaged in a classic risk-filled business that teeters on the edge of profitability. When oil and gas prices are low, as they have been in recent years, entrepreneurs such as him traditionally have struggled to stay in business. Yet, despite the protracted depression in energy prices that only now are beginning to climb again, Nance and thousands of other U.S. independent oilmen not only are surviving, but thriving. And because of their health, the U.S. remains a major oil- and gas-producing nation -- even though the most lucrative production resources and most promising opportunities for discoveries of new fields now lie outside the U.S. "The U.S. is a mature oil province -- the most thoroughly developed oil area in the world," observes Robert S. Kripowicz, principal deputy assistant secretary for fossil energy at the U.S. Dept. of Energy (DOE). He points out that the nation has been producing oil and its related product -- gas -- since the first commercial well was drilled by "Colonel" E.L. Drake in Titusville, Pa., in 1859. "But the industry is changing," he says. "As the U.S. [oil industry] matures, the major oil companies increasingly are focusing their attention on other areas of the world. U.S. production is shifting to the independents." Indeed, reports Guido DeHoratiis, DOE's director of oil-and-gas upstream technology, independents now account for fully 40% of U.S. domestic oil production. (The figure is 50% if Alaska, where the major companies still dominate, is excluded.) Independents produce two-thirds of the nation's gas and drill 85% of its exploratory wells. How have these little guys been able to prosper during a time of low prices? Technology is to thank for a massive influx of new exploration and production techniques, enabling independents to find oil and gas more easily and cheaply than ever before, produce it more efficiently, and coax more resources out of mature fields. Nance, for instance, describes how one of the newest advances -- three-dimensional seismic drilling -- has enabled him to keep producing oil from the North Bainville field in Roosevelt County, Mont. "The field was on its last legs," he says. "We might have had to abandon it by now. But with 3-D seismic, we've been able to drill six deep wells -- at more than 13,000 ft. That will extend the life of the field for 20 more years." Nance credits another technology -- horizontal drilling -- for making it possible for his firm to drill more than 100 wells in the Cedar Hills field in Bowman County, N. Dak. "The field couldn't have been drilled with traditional vertical wells," he marvels. Certainly, 3-D seismic and horizontal drilling are the "big two" of the new wave of oilfield technology. In 3-D seismic, oil explorers detonate underground explosions from which powerful computers pick up signals and use them to construct detailed "pictures" of subsurface rock formations. These pictures reveal potential oil and gas deposits that the earlier two-dimensional kind would not detect. In horizontal drilling, engineers drill wells that cut horizontally across pay zones, providing access to oil and gas on either side of the drilling rig. Traditional wells, drilled straight down, drain only reservoirs in the immediate vicinity of the drill hole. And there's an environmental payoff. "You don't have to drill as many wells," observes Mark Rubin, upstream general manager at the American Petroleum Institute, the oil industry's Washington-based trade association. "Where once you might have had to drill 30 wells to drain a field, now you may have to drill only five." That's especially important, he notes, in sensitive environmental areas such as national forests. In some cases, in fact, it's now possible to drill a well without a drilling rig. Another new technology -- coiled-tubing drilling -- allows drillers to re-enter a well with flexible steel tubing unreeled from a truck-mounted spool driven by a hydraulic motor. "It's a heckuva lot cheaper than drilling a new well," comments Rubin. "Ten years ago we couldn't have done something like this." There are scores of other technological advances. Particularly notable is high-resolution electrical logging technology, which helps geologists forecast more precisely how much a well will produce. Significant, too, are improvements in hydraulic-fracturing technology, in which oilmen pump a mixture of water and other material down a well under pressure to crack open more of a rock formation. That helps yield greater volumes of oil and gas. Without these and other technologies, "the oil-and-gas industry in the U.S. wouldn't have survived," flatly states Lance Cole, Tulsa-based national project manager for the Petroleum Technology Transfer Council, a Washington group partly funded by DOE that helps bring technology to the independents. Ironically, Cole points out, it was the drop in oil prices -- usually a death knell for many independents -- that created the technological boom. "In the mid-to-late '80s," he explains, "the prosperous times for the industry ended. A lot of companies were in dire financial straits. That made technology more acceptable to them. It became their only hope for restoring profitability." In many cases, Cole says, the new technology sprang from other industries -- mining and aerospace, notably -- and was adapted to oil and gas applications. The development work largely was performed by major oil companies and federal laboratories. "But communications and information technology made it possible for independents to have the same access to the technology as the major companies," says Cole. "In the past they may not have had that access." Even though oil and gas prices are on the rise, the technology boom isn't likely to end. Still other advances are in the pipeline. Some are expected to be in widespread use within five years, far less than the 15 to 20 years it historically has taken for new technologies in the industry to have commercial impact. Already, for example, 3-D seismic drilling is becoming old hat. Major companies are beginning to make use of 4-D seismic drilling, which incorporates the element of time. And at BP Amoco PLC's Houston facility, multidisciplinary teams of geophysicists, engineers, business specialists, and managers are able to "walk through" an oil-bearing rock formation on an 8-ft-by-25-ft 3-D cylindrical screen. Called the Houston Immersive Visualization Environment (HIVE), the virtual-reality method of interpreting data soon will be in use throughout BP Amoco worldwide. "It enables us to do things in hours that used to take weeks or months," says Morag Watson, manager of business information for the company's Gulf of Mexico Operations in Houston. And how's this for a breakthrough? Baker Hughes Inc., a Houston-based oilfield service company, is developing an oil-and-gas production system that combines such whiz-bang technology as fiber optics, robotics, and artificial intelligence to refine oil or convert natural gas into electric power actually within the well. The company, which has trademarked the name "Downhole Factory" for the system, hopes to have it operational in 10 years.

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