March 2015

What's new in exploration

To oil, or not to oil (and gas), that is the question
William (Bill) Head / Contributing Editor

Why do we even bother to believe our E&P methods work? After all, most exploration wells are dry holes. Depending on who is bragging, about one in 10, or four in 10 exploration wells become commercial. Of those [one or four], only half have any kind of production life.

A RPSEA study (07121-1701) told us that no producer has ever had a life-of-field that matched its exploration estimates. Nor, for that matter, were its first production-to-final production estimates matched. Given that every technology we use has problems—some severe—and their composite use is, statistically, a resulting technical failure, why are we in the oil business? Assuming the best data as a comparison, would a rational person buy 10 trucks, and drive them to the job for a gold delivery, knowing that he or she will crash six out of every 10 times after leaving home? Then repeat that experience over and over? Worse yet, repeat the fun, when not too many of those crashes were caused by the same set of circumstances? Well, whoever said an explorationist was rational.

An answer? When we get it right, about two out of 10 times, we really get it “right” and can make a whole lot of cash, usually enough to cover all 10 attempts. A mistake would be to believe we used the technology correctly, simply because enough oil and gas flowed to make a profit. Want to still argue? Every field that RPSEA has studied shows significant left-behind oil. Estimates range from 30% to 70%. At the Midland, Texas, CO2 conference a year ago, I heard numbers as high as 93%! I understand, if I am so smart, why I am not rich, but if “we” are so smart, why did “we” leave behind more than we could take? Explore there.

What’s new. “To oil, or not to oil (and gas), that is the question.” Philosophically based actions again come to the front. While we must, and are, waiting a bit on price, exploration cannot wait forever. Congratulations go to Shell for even thinking of restarting its Arctic exploration program. Of course, the uninformed enviros are already threatening to file more litigation. Why “uninformed“? Because Shell has not actually done anything yet—just thinking “oil and Arctic” at the same time appears to cause trauma for some folks.

Taking on the front-end issues of a mega-project now is a great exploration strategy. Why wait on litigation, when oil is $120/bbl.? You cannot wait on litigation, when supply is desperate and price is above $140. But, you can take your time and get costly legal battles out of the way, when you don’t really have a market to sell into at $47. Delay is “Lost Opportunity Revenue” (LOR) at any price, but today LOR is less than half of what it would have been just last year. We can thank a few over-suppliers for at least that benefit.

Are there other places to invest, and additional ways to strategize exploration while prices are lower? I keep hearing that technology is “the” answer. Ok, who then will create or innovate that technology? Until SKYNET takes over, we will have to rely on knowledgeable people—your people, maybe even you.

New tech toys? With the news that the U.S. Government will pretend to lease more tracts offshore the East Coast and Alaska, if we pretend to want to explore there in our lifetimes, the importance of seismic energy sources, other than an air gun, has taken on a new sense of urgency.

While my old firm, PGS, will soon test its existing, marine vibrator design with new output requirements, and the same licensed, but modified, marine vibrator is being tested elsewhere for OBC applications, a JIP of operators and Texas A&M has been testing quarter-scale prototypes, finding encouraging results. Encouraging enough, at least, to now build full-scale prototypes for testing output and dependability. That JIP will not be ready, anytime soon, to tell us what they have, nor will they be able to demonstrate the impact of the new vibrators on marine mammals without some yet-to-be-defined, extensive bio experiment.

RPSEA also proposes a JIP to test the modified PGS design this year, in addition to testing, next year, one created by air gun inventor Steve Chelminski. The $3.5-million JIP would combine output results with marine mammal impact testing, plus one other important aspect. Now, assume that any device works, and assume that mammal impact can be measured (very debatable). Then, we are still left with the significant operational problem of “where are those mischievous mammals hiding under the water?” This part of the RPSEA study would use state-of-the-art acoustics to work on just what is the detectable limit, regardless of the current safe zone, or any future safe zone. Is this transparent, objective research? Yes. Did I mention that the Environmental Defense Fund has a rep on the RPSEA Strategic Advisory Committee? Or that BSEE was sued by the environmentalists, not the industry, and could use factual relief from actual measured data?

Some new exploration/engineering technology would be significant, recent improvements to borehole cement—really! I would venture that more than 20% of exploration wells have been labeled commercial failures, because of poorly cemented completions. Offshore, that is an enormous cost, in both expense and lost opportunity. You do not have to look too far, to see career and company injury from poor completions. RPSEA projects, by CSI, covering reverse cement practices [12121-6503-01/], and by the University of Houston in so-called “smart cement” [10121-4501-01/], are two innovative examples. These projects address problems resulting from age-old arguments about using water-based mud or oil-based mud, and the impact of either on cement bonding. Another issue behind looking at borehole cement methodology is where, and how effective, is cement bonding on reservoir perforation choices and flow. wo-box_blue.gif

About the Authors
William (Bill) Head
Contributing Editor
William (Bill) Head is a technologist with over 40 years of experience in U.S. and international exploration.
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