The Time For New Shale Technology

Portfolio managers, former producers and advanced proppant makers reveal a growing mood on new technology implementation and explain how they've entered the market.
By Luke Geiver | October 12, 2017

Following a decade of acreage grabs, HBP’ing and new asset development, shale-energy executives may be on the brink of a major shift in strategy, says Shawn Reynolds, portfolio manager for VanEck’s Natural Resource Equity Group. Reynold’s, formerly an exploration geologist and energy analyst, believes shale leaders could or should shift their normal mode of business for two reasons: geology allows for it and investors want it. New strategies deployed across the country’s many tight oil and gas plays could put an even greater emphasis and importance on any technology linked to greater well-site operational efficiency or down-hole production increases.

A Shifting Model?
Citing the sentiment of his investor clients and the lingering mood at a major energy investor-based event he attended earlier this year—along with moves that a handful of shale players have made regarding to shareholders—Reynold’s believes the old business model could be changing. “The traditional business model was the exploration model,” he says. “It was high risk, high return and it was all about the next discovery. Every day you woke up and your reserves and the value of your company was less than it was the day before unless you found a way to replace your reserves so you were always on this scramble to find out where the next barrel was coming from.”

In that old model, the greatest risk for operators was in the geology—there was always a chance a well could be drilled but come up dry. Today, in shale, the hit-rate on most wells is nearly 100 percent. Because the geologic risk of operating in shale is now gone, producers can now become entities that mimic industrial manufacturing firms constantly looking to lower costs and improve efficiencies. Reynold’s said most of his investors are happy with that approach to shale development now and are less concerned with the vastness of an operator’s portfolio. “What investors want is moderate growth with good returns generating cash,” he said. “Investors want to see free cash returned them,” and not, he adds, used to buy more acreage.

If operators are going to implement that mindset into their day-to-day operations, a greater focus will be on extracting more from what they have and to do that, new and better technology will be needed now more than ever.

Blueprint For Bringing New Tech
HEAL Systems, a Calgary-based artificial lift technology developer, offers a unique example of how and why operators are adding new technology at the well site. The HEAL team was formerly a Bakken oil exploration and production company focused on the Canadian Bakken. Production engineers on the team continued to deal with issues producing the wells efficiently once they were completed. The team was trying to minimize pressure at the bottom of the well. “We were trying to maximize drawdown,” says Jeff Saponja, CEO. The lower the pressure, the more oil and gas the company could recover in a faster time. “We found that the more drawdown we achieved, the less reliable the lift system became,” he says.

After exhausting all of the available technology on the market, Saponja and his team began experimenting with new solutions in their own wells. “We discovered we weren’t dealing with the root issue,” he says.

Flows coming out of horizontal wells are typically considered to have slug flows, characterized by periods of inconsistent ratios of oil and gas. Pumps don’t like inconsistent flow, Saponja says. “What we found in the industry was that they were just trying to make bigger pumps or trying to handle inconsistent flows.”

Saponja’s team created the horizontal enhanced artificial lift (HEAL) system to stop the slug flow and make it more consistent before it ever reached the pump. The result of their new lift design system—which features no moving parts—thrust the team into a new direction. After deploying the system in all of their own wells, and wells for peers and other producer friends, major industry players began taking note. Since the team obtained the intellectual property in 2015, they’ve installed the system in more than 200-plus systems in Canada and the U.S. This year, Saponja and his team of 40-plus turned their field-level, personalized case studies with a new system into a global collaboration with Schlumberger. HEAL signed a joint venture with the world’s largest oilfield services provider so that Schlumberger could have access and the ability to better deploy the benefits of the HEAL system (HEAL’s team has multiple products now). Saponja and his team get the benefit of a greater reach that includes the entire globe, along with better manufacturing ability. The team is now hiring in Denver, Calgary and Houston. “Our core values are very orientated to thinking and knowing and understanding the producer side of the business,” Saponja says. “With the producer background, we understand the idea of net present value of the wells.”

Ron Coulter, vice president of marketing for SUN, a drilling fluid additive manufacturer that recently began pushing its advanced proppant technology, has also come to understand what producers want. While many were concerned about cutting costs and implementing the lowest-cost option for materials, services and technologies, some are now realizing the benefit that new technology can bring.

The SUN team has developed an ultra-lightweight proppant that improves long-term production curves and helps to maintain the fracture network or prop on the high side and far field of the fracture network that sand alone can’t typically reach or maintain over time. Although the pricing and type of proppant is different than the basics, operators have started using the solution in their wells to decrease production decline curves. “One of the things that is constant throughout all shale plays,” Coulter says, “is the proppant transport issue. Operators just can’t get proppant out far enough into the frack matrix. They are pumping more and more sand but in each individual-stage the sand can only go so far. Mother nature always wins. Gravity wins—the sand is going to settle.”

The willingness of the operators to implement SUN’s new product is growing every day, according to Coulter. The main hurdle now for the company is obtaining more data on the performance of the product in the field. Coulter and his team are happy that many peer-reviewed papers have been authored on the use of ultra-lightweight proppants because many times, clients prefer to keep their field data proprietary. In many cases, Coulter and his team are happy with the response they are getting from clients—clients that are more focused now on enhancing what they have and not looking to spend more on expansion into other areas. “It worked they tell us. It worked really well,” he says, “and they want to buy more.”

Author: Luke Geiver
Editor, North American Shale magazine

Article from Issue 5 of North American Shale magazine