We are all facing a difficult time with the current oil war and accompanying price fall. In the past week we have seen several posts talking about the impact on shale profitability at $30 or less and what this could mean for U.S. oil. This is a problem that we at ESal have been thinking about for the past three years. Our first observation is that things are different this time. We are facing peak demand with projections out to 2040 flat or even declining. Capital is moving towards alternative energy development. Climate change is driving choices.
The oil industry is built on the ‘green field’ paradigm. The basic idea that maintaining or increasing supply requires the familiar process of exploration, drilling and development. This idea has served the industry since the start. Shale was the ultimate expression of this idea, the combination of horizontal drilling and hydraulic fracturing making oil and opening significant new resources. Shale production offset the decline of older conventional fields and added significant barrels to US production.
But shale also contributed to the increasing capex required to get a barrel. The compound annual growth rate (CAGR) of oil went way up as we moved exploration into more remote and expensive areas and drilled more and more unconventional wells. Before 2000 CAGR was only 0.9% but has since increased to 10.9%. Higher costs per well, and in the case of shale, having to drill more wells to offset the rapid decline rates and lower recovery are challenges we have not yet overcome. (rate and recovery).
For instance, we need to drill 7000 new shale wells a year at a capital cost of $70 billion to maintain current U.S. production. History teaches us that the new technology to increase shale well recovery and lifespan will come along, including our own contribution, but for now most shale wells are not profitable at $30. We need another arrow in the quiver.
The average conventional recovery factor is 35%. That means 65% of all the oil ever pumped is still in the ground and we know where it is! That is about 2 trillion barrels in the ground! We suggest that we use our hard-won knowledge to get more oil out of those fields. That’s what we are doing. Same wells, same fields, same pumps and pipelines – same jobs.
Flattening and reversing decline curves is what we do! Check us out.
For recovering more oil from new well completions to secondary recovery to EOR, The Secret is in The Water. Our Engineered Salinity™ solution can increase oil production by as much as 50% on average at a cost of less than four dollars per incremental barrel by optimizing the salinity of water used in oil and gas processes. Engineered Salinity works without any investment in new equipment typically, downtime or chemicals. Our proven screening process can identify candidate fields usually in less than six weeks at a very affordable cost. ESal has offices in Fort Worth, Texas and Laramie, Wyoming.
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2601 Scott Avenue
Fort Worth, TX 76103
Phone: (682) 499-5887