Will the Oil & Gas Industry Survive?

Will the Oil & Gas Industry Survive? The Automation is the answer.

Worldwide, total oil demand keeps growing. Low prices are fueling this trend. To remain competitive, oil companies need to reduce their production costs. Oil Industry needs electrification, compressors and rotating equipment, automation, and digitization along the entire production chain — from oil drilling to processing in refineries.

Oil prices have plummeted in the space of just a few months. In the summer of 2014 a barrel (159 liters) of “black gold” cost over $100. In January 2016 a barrel cost less than $40. So What exactly happened? On the one hand, more oil had reached the market; on the other, demand had decreased. It was not the first time oil prices took a hit.

The low price of oil is both a challenge and an opportunity for the industry. Well-run oil and gas (O&G) companies that are strong today are likely to emerge even stronger after prices rebound. While the availability of oil fields and the associated equipment is always paramount for them, during a slump they have every reason to also focus on cost-effective production. Often this means bringing in new technologies and further improving processes.

Lowering production costs is not just an imminent need of the industry. It is also a long-term trend. Most of the “easy oil” has already been extracted – oil that can be produced cheaply because it is onshore, close to the surface, and conveniently spilling out of the ground under high pressure when first tapped. In the future, oil will increasingly have to be extracted from deposits that are deep underground or offshore. Gas will have to be transported from remote locations via pipelines or as liquefied natural gas (LNG) by LNG tankers. That will be a much more tricky task for production engineers.

On the whole, it is becoming harder to produce oil and gas. But there is also good news: this needn’t make oil and gas more expensive, as long as production methods are being continuously improved. In the past, technological innovations and more efficient processes have made production cost-effective under increasingly challenging conditions.

A number of trends are already taking shape like, 

• In the future, existing fields will operate longer and their yield will be increased by injecting water or gas, such as CO2, which boost the pressure of the reserve.
• Unconventional extraction methods such as the hydraulic fracturing of stone formations containing oil or gas (fracking) are likely to spread beyond the U.S.
• The production of heavy oil from oil sands will become more environmentally friendly and less energy-intensive.
• The global market for liquefied natural gas (LNG) will continue to grow strongly. As a result, the gas that is being flared, and thus wasted, today can be used and marketed in the future.
• One day the vision of automated oil fields at the bottom of the sea, working maintenance-free over decades at depths of several thousand meters, may be realized.

At the same time, alternatives to oil and gas are becoming increasingly viable. Electric cars may become more commonplace in the future. And renewable energy sources such as wind power are becoming more economical and could partially crowd out fossil fuels. According to British Petroleum (BP), four-fifths of the current growth of worldwide energy consumption is taking place in emerging economies. But even these countries’ growing appetite for energy may subside at some point.

With less “easy oil” available and interesting alternatives to oil and gas becoming more viable, the way forward is clear: O&G companies need to reduce their production costs. Some are leading the way by bringing more automation to oil fields and using data analysis in smarter ways. Simply put, in the future more valves will be opened and closed by machines than by people. And it will more often be machined, not humans, that decide when to open or close the valves. Flying workers to offshore oil platforms in helicopters may one day be the exception rather than the rule.

The automated equipment produces a constant stream of data — measurement data that can be mined, aggregated into big data and transformed into smart data through intelligent analysis. And smart data helps us to understand production processes better.

For example, visualization Softwares are already making it possible for users to immerse themselves in a virtual 3D model of a drilling platform. For instance, the crew of an offshore oil processing platform in Africa was able to begin its training on a virtual model while its future workplace was still under construction. Virtual training sessions reduced the time needed for training sessions on board, and as a result, the oil platform entered service two months earlier than planned.

Another opportunity to reduce costs opens up when mechanical and electrical drives become smaller and lighter in response to the scarcity of space on oil platforms and pipeline stations.

Why We Will Still Need Oil and Gas in the Future

Will the price of oil remain low, possibly for years to come? No one knows. But there is one lesson that the history of the oil and gas industry has taught us: Although the price of oil can swing wildly, the growth of demand is surprisingly stable. There have been price peaks above $140 and troughs below $20, but over the long term average global energy consumption has grown steadily between one and two percent annually. In addition, roughly five percent of existing production capacity has to be replaced every year in order to offset the decreasing yield of aging oilfields. Meanwhile, new oilfields are being developed and the output of existing fields is being increased through the injection of gas.

Automation and digitalization are expected to keep oil and gas competitive in the decades ahead. Whether we like it or not, every year the human race is likely to burn a bit more oil and gas than it did the year before. In absolute numbers, our demand for energy is growing. However, the proportion of oil and gas in the total amount of energy consumed could decline.

That will probably hold true until, one day in the future, it will be more economical to leave the remaining oil in the earth’s crust rather than extracting it. The necessary adjustments during this long period of transition will in any case bring great business opportunities for those who have the courage to innovate and try out new ways to produce and use oil and gas.

“When you look at the growth in consumption, it quickly becomes clear that oil and gas will remain very important for the next few decades at least, and Of course we also need renewable energy sources. At least for the time being, we simply need everything we have. And that includes oil and gas.

Two Minutes with Oil & Gas Professional - Alvin Chia

I met this amazing guy Alvin Chia, when I was at Bangkok, Thailan. Who is Strategic Planning & Marketing Manager at Weatherford. There are things we, as young engineers, can learn from professionals already working in Oil Industry.

With an impressive background and countless achievements under his belt, what can this guy teach us? What lessons can we get from him that we can apply in our engineering careers?
I talked with him about a lot of things like, Current Scenario of Oil and Gas Industry, Job Market, and Online Marketing but here are some advises. Quite possibly the best advises. I’ve ever heard about selecting the career, that literally changed the way I used to think about the Recruiting Process.

Sir... I was about to say other words, but he stopped me by saying, don't call me sir, My name is Alvin, you can call me that (with a smile).

Okay Alvin! I've just graduated what would you suggest me to do? Something, maybe I don't know.

Alvin: Ahhhh! Well, Don't look for salary, or maybe company, look for a boss, you're about to make the biggest choice of your life. Do yourself a favor choose a good boss. By focusing on who your boss will be above most other criteria (e.g. total compensation, responsibility, advancement opportunities, location) changes how you pursue jobs and how happy you’ll be once you select one.

Me: but Alvin this is challenging because the process we use to find the work is designed to work the opposite way; the boss picks us and you only get to talk to your boss during the interview process, how can one predict? what he/she will actually be like?

Alvin: There is where the Internet and Social Media comes my brother. Do research, find out who is interviewing you rather than finding how much they're going to pay.

Me: Would you tell me why graduates fail to get a nice job? Even when they're deserving? Where do things go wrong?

Alvin: I'm not an expert on that but I'd tell you what I do myself and it has worked for me yet. I never apply online. What's even a point to apply online? They get Resumes daily like, 30 or more. I go by myself and hand it over to the HR or Manager myself.

Me: Why not applying online? Does it makes a difference?

Alvin: They only see your CV for like, 6-10 seconds. If you're applying online that will only put your application into a Black Hole, and that is the worst place for it to be.Use online platforms, like, LinkedIn. To find job openings but don’t apply for those jobs directly through them. If you can't visit them then call them, make sure they know you with your name. Make sure your CV is attractive

Me: Okay One last question. You said something about "making your CV attractive" How to do that?

Alvin: First of all go through the formal CV patterns, don't make it too short and don't make it too long. They don't have the time to go through all the details. Make sure the whole stuff is on one page. Just include the most important things they wanna see, it means it shouldn't be irrelevant. Try to give a slightly change to your CV everytime you for a job. Print it on a good quality paper. So, If I'm the manager, I won't throw that paper away, because it looks so good. So I'm just gonna put it somewhere in my drawer or desk. So, even if they aren't selecting me for the job but still I'd be somewhere on the desk. That's gonna give me another chance for the future opportunities. Maybe they'll consider my application at that time.

I've learned a lot from this 2 minutes conversation with Alvin Chia. I hope you got something to learn from his experience. I couldn’t be more excited about the future after meeting him.

Key Technologies Rejuvenating Arab Oil King

A founding member of the Organization of Petroleum Exporting Countries (OPEC), Saudi Arabia continues to dominate over other oil-producing countries, contributing approximately 10% of world oil production. 

Figure1: Map of Ghawar field at the Arab-D reservoir level [1]

A huge contribution to the kingdom’s output of oil is from Ghawar field. The massive Ghawar structure is so productive that it contributes more than half of Saudi oil production and is responsible for 6% of global oil yield. In peak times, it has produced 6.5 million barrels per day. This elephant (Fig. 1) occupies an area 250 km long and 26 km and is divided into five units (Ain Dar, Shedgum, Uthmaniyah, Hawiyah, and Haradh). The nation claims that the field has 50 billion barrels left to extract. Current production stands at 5 million barrels of oil and 2 Bcf gas a day, and this level is expected to continue for several years [2].

Since the field’s discovery in the early 20^th century, world-class and cutting-edge technology has been applied to the field. Integration of multilateral wells, extended reach drilling, geosteering, gas injection, water injection, smart well monitoring and control systems, and maximum reservoir contact (MRC) wells has revolutionized the recovery from this old king. Ghawar has reportedly 3000 wells as of December 2012 [2].

This article addresses the question: How the technology has added value to the rejuvenation of this Arab oil king?

 

Geosteering

Geosteering is a process specific to horizontal drilling. It enables real-time identification of reservoir layers, allowing directional drillers to adjust the well trajectory to maximize reservoir structural characteristics and, in effect, keep wellbores within the most productive region. Logging-while-drilling (LWD), measurement-while-drilling (MWD), and mud logging acquire geological information that is continuously monitored and integrated with engineering understanding and applied to ongoing drilling. With the availability of real-time data, the operator can save time on decision making and implementing changes, thus saving rig time.

The carbonate reservoir of Ghawar field has extreme ranges of porosity and permeability, both laterally and vertically [4]. Towards the flanks, the heterogeneity index becomes severe, and prediction of lateral continuity presents challenges to planning the trajectory of the lateral wells. Hence, an utmost need was to develop a workflow that can assist in making real-time decisions about the direction the well must penetrate to get the maximum production.

Resistivity images provide an important component of reservoir characterization and contribute to real-time geosteering decisions. The technology being used in Ghawar enables differentiation of borehole and reservoir features down to 0.4 in. [5]. This technology facilitates the objective of cutting perpendicular to the maximum number of fractures to obtain increased productivity from the improved connectivity of the formation to the wellbore. 

Multilateral Wells and Smart Systems

Multiple wellbores that extend from the main hole maximize the reservoir contact, provide more drainage area, and potentially reduce drilling risk and total cost. In fact, these are also called maximum reservoir contact (MRC) wells. These wells are drilled for reduced drawdown, increased productivity or injectivity, and improved recovery factors. (Fig. 2)

 

Figure 2: Basic multilateral configurations. From left to right: Dual opposed laterals, vertically stacked laterals, and fork or fanned laterals [3]

Multilateral configurations have evolved since the 1950s and currently are divided into three main categories (Fig. 2): 

1. Horizontal fanned
2. Vertical stacked
3. Dual-opposed

The laterals are completed as
Open hole

1. Cemented liners
2. Sand Screens
3. Smart devices

Multilateral drilling in Ghawar started in 2006; initially, 32 MRC wells were drilled in the Haradh area (Fig. 1). Each lateral has approximately 4,000 ft of reservoir contact, and average contact for each well is over 14,000 ft [6]. (Fig. 3)

Twenty-eight producers were completed with “smart systems.” These systems include permanent downhole pressure and temperature sensors, production packers, and hydraulically operated downhole valves that can be controlled from surface. The downhole valves are placed in the motherbore to control flow from each lateral.

Installation of smart systems enabled the operator to better manage the water injection sweep efficiency and maximize the project output (Fig. 3).

Figure 3: Schematic map of HRDH-III initial development plan that uses MRC wells [7].

ICD Completions

The purpose of inflow-control device (ICD) technology is to effectively balance the production or injection along the lateral throughout its operational life. Otherwise, in openhole condition, a historically practiced way of completing the well in carbonates, pressure drawdown in the heel region is more than in toe, and so is the production influx (Fig. 4).

The working principle of a nozzle-type ICD is based on following equation (Bernoulli’s equation):

 

So, with an increase in fluid density (oil to water), the pressure drop increases across the ICDs, which actually retards flow from that section. Similarly, higher velocities or rates (from higher-permeability streaks) cause extra pressure drop, which retards flow from that section. The principle that nozzle-based ICDs work on is independent of the viscosity of the fluid.

The main objective of applying ICD technology in the Ghawar carbonate wells is to limit inflow from high- or super-permeability streaks and limit production from each compartment based on offset from the water-oil contact to prevent premature water breakthrough.

Figure 4: In a typical lateral well, the ICD (blue curve) reduces higher flow rate from the heel region (circled region in orange). To supplement the decreased production, the inflow rate from the lower two-thirds of the well (circled in green) is enhanced [8].

In 2006, the first test well equipped with ICD technology was recompleted in Ghawar [9]. The design was based on production logging results (Fig. 5). As a result of the ICD, the completion design suggested there would be a 50% reduction in water cut for the same liquid withdrawal in the water breakthrough case.

 Figure 5: ICD completion with five packers and six compartments [8]

CO₂ Enhanced Oil Recovery

Saudi Arabia plans to demonstrate a CO₂ capture, injection, and storage recovery project, and work has been ongoing with the King Abdullah Petroleum Studies and Research Centre (KAPSARC) [10].

This CO₂-EOR demonstration project [11] will compress and dehydrate CO₂ from the Hawiyah natural gas liquids (NGL) recovery plant, then transport the CO₂ stream 70 km to the injection site (a small flooded area in the Uthmaniyah production unit). The injection strategy is planned to consist of

1. Injection of approximately 2,000 t of CO₂ per day
2. Four injection wells, four producer wells, and two observation wells
3. Alternating water and gas (WAG) cycle of 3 months CO₂ / 3 months water
4. Well spacing of approximately 2,000 ft
5. CO₂ switching between wells

The objectives of the demonstration project are described as

1. Determination of incremental oil recovery (beyond waterflooding)
2. Estimation of sequestered CO₂
3. Addressing of primary risks and uncertainties, including migration of CO₂ within the reservoir, and
4. Identifying operational concerns

The project duration is expected to be 4 to 5 years. The design is based on extensive reservoir simulation studies and includes a comprehensive monitoring and surveillance plan.

Ghawar’s Way Ahead

Though Saudi Arabia has over 300 recognized oil reservoirs [12], most production comes from five fields, and the largest of these is Ghawar. “Is Ghawar dying?” has been an ongoing debate for the past few years. Justin Williams [13] presented a great discussion on this topic and the attempts to maintain consistent production from this field. Despite the debate, the fact remains that the field has maintained production for last few years, and its role as game changer in the foreseeable future cannot be denied.

References

[1] Sorkhabi, R. 2010. Ghawar, Saudi Arabia: The King of Giant Fields. Geo ExPro 7 (3): 24-29.

[2] Duey, R. 2015. Ghawar: the Arabian Granddaddy. E&P 88 (1): 112-113.

[3] Fraija, J., Ohmer, H., Pulik, T. et al., 2002. New Aspects of Multilateral Well Construction. Oilfield Review 14 (3): 52-69.

[4] Ehrenberg, S., Nadeau, P., and Aqrawi, A. 2007. Comparison of Khuff and Arab Reservoir Potential throughout the Middle East. AAPG Bulletin 91 (3): 275-286.

[5] Al-Musharfi, N., Bansal, R., Ahmed, M., et al. 2010. Real Time Reservoir Characterization and Geosteering Using High-Resolution LWD Resistivity Imaging. SPE Annual Technical Conference and Exhibition, Florence, Italy. 19 – 22 September. SPE-133431-MS. http://dx.doi.org/10.2118/133431-MS.

[6] AlBani, F., Baim, A.S., and Jacob, S. 2007. Drilling and Completing Intelligent Multilateral MRC Wells in Haradh Inc-3. SPE/IADC Drilling Conference, Amsterdam, The Netherlands, 20-22 February. SPE-105715-MS. http://dx.doi.org/10.2118/105715-MS.

[7] Saleri, N.G., Al-Kaabi, A.O., and Muallem, A.S. 2006. Haradh III: A Milestone for Smart Fields. JPT 58 (11): 28 – 33.

[8] Ellis, T., Erkal, A., Goh, G. et al., 2009. Inflow Control Devices – Raising Profiles. Oilfield Review 21 (4): 30 – 37.

[9] Sunbul. A.H., Lauritzen, J.E., Hembling D.E. et al., 2008. Case Histories of Improved Horizontal Well Cleanup and Sweep Efficiency with Nozzle Based Inflow Control Devices (ICD) in Sandstone and Carbonate Reservoirs. SPE Saudi Arabia Technical Symposium, Al-Khobar, Saudi Arabia. 10 – 12 May. SPE-120795-MS. http://dx.doi.org/10.2118/120795-MS.

[10] Heidug, W. 2012. Joint IEA‐OPEC workshop on CO₂‐enhanced oil recovery with CCS, Kuwait City. IEA. 7 – 8 February. http://www.iea.org/publications/freepublications/publication/HEIDUG_Workshop_Report_IEA_OPEC_FINAL.PDF (accessed 7 January 2015).

[11] Global CCS Institute. 2014. Uthmaniyah CO₂ EOR Demonstration Project. http://www.globalccsinstitute.com/project/uthmaniyah-co2-eor-demonstration-project-0 (accessed on 7 January 2015).

[12] Burgess, L. 2006. The World’s Largest Oil Field is Dying: Has Ghawar Peaked?. 9 August 2006. http://www.energyandcapital.com/articles/ghawar-oil-saudi/253 (accessed on 1 February 2015)

[13] Williams, J. 2013. Ghawar Oil Field: Saudi Arabia’s Oil Future. 19 February 2013. http://www.energyandcapital.com/articles/ghawar-oil-field/3101 (accessed on 10 January 2015).

 Note:  The article was published in Petrozene in May 2016.