The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated somewhere in the plains of the American Midwest, back in the 1950s.
But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is happening.
The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.
If the word fracking has carved out a spot in the lexicon of Americans as the nation advances toward energy independence, then refracking, as roughnecks have begun calling it, could be next. And for an industry that has been hammered by the 50 percent drop in crude prices over the past year, the finding on the technique’s potential — at a fraction of the cost of the initial well — provides a much-needed sense of hope.
The risks abound — from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir — and the sample size so far isn’t big enough to be conclusive, but oil giants like Marathon Oil Corp. and ConocoPhillips aren’t waiting to incorporate refracking into their shale operations.
The Octofrac
Mike Vincent, a well-completion engineer who teaches the technique to industry workers, said he’s been overwhelmed by the sudden interest in the class. He even had to abandon plans he had been making to spend a week fly-fishing in the Rocky Mountains over the summer. “I’m booked every week teaching refrack classes out to November,” said Vincent, who runs a Denver-based firm called Insight Consulting. “It’s amazing how much passion there is.”
Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.” When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held in the well. Vincent said it’s common to see oil recovery climb 60 percent or more.
“I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.
100,000 Wells
A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30 percent more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.
While these kinds of increases are important to traditional drillers, they’re crucial in the shale industry, where output can start falling within days of a well being tapped. Companies such as EOG Resources Inc., the largest shale oil producer, have long acknowledged that they generally are recovering just a small fraction of the oil and gas in place in the biggest and most prolific reservoirs.
“We’ve seen big changes in completion technology, and it looks like that’s only going to continue,” said R.T. Dukes, an upstream analyst at Wood Mackenzie in Houston. He estimates that there are about 100,000 horizontal wells that could be restimulated. “At that point, it becomes significant.”
Many Risks
So far, a few hundred refracks of shale wells have been done in the U.S., a figure that Vincent predicts will grow to at least 3,000 over the next two years. And IHS Inc. forecasts they will come to make up as much as 11 percent of all hydraulic fracturing activity in the country by 2020.
The process to refrack a well isn’t that different than the original frac. Water, sand and other chemicals are pushed down the well, beyond the previously tapped areas, to create new fissures or to re-open clefts in the rocks that have closed.
It’s easy for things to go wrong. If poorly executed, the maneuver could take oil from the producing zones of other wells, or worse yet, ruin a reservoir. Then there’s the concern that some industry analysts have that a refrack only accelerates the flow without increasing the actual total output over the life of the well. EOG is among the drillers that remain reluctant to start using the procedure.
Refracking is still in its “early days,” said Robin Mann, global leader of the resource evaluation and advisory group in Deloitte LLP’s Houston office. “There’s always a risk you’re going to damage the reservoir or create interference between wells.”
‘Compelling Prize’
But in an industry that is desperately trying to cut expenses after oil fell below $60 a barrel from over $100 a year ago, the technique’s low cost has great appeal. Because the first step in the fracking process is already done — the drilling of the wellbore — the outlay is just a fraction of the $8 million or so it costs to tap a new well.
West Texas Intermediate for August delivery added 69 cents to $53.22 a barrel in electronic trading on the New York Mercantile Exchange at 9:16 a.m. London time.
Sanchez Energy Corp., a Houston-based oil producer, expects to spend between $1 million to $1.5 million per well when it starts carrying out its first horizontal-well refracks later this year. The extra oil and gas it will pull out from each one as a result, meanwhile, could have a value, when measured in today’s dollars, of as much as $2.5 million, according to Chris Heinson, the company’s senior vice president and chief operating officer.
“It’s a compelling prize,” Heinson said in an interview last month. “There were a large number of wells out there that we know were originally completed with something that we could do better today. That’s really exciting.”
shortonoil on Wed, 8th Jul 2015 12:22 pm
WTI $51.15
Davy on Wed, 8th Jul 2015 1:59 pm
Short, commodities are set to get hammered for the need for cash just like back in 08. This time is probably a little bit different because the whole system is now controlled and rigged. What cannot be controlled is sentiment but they can still regulate it in regards to what it can do to the markets to a point. Anyone here who says we still have free markets is a numb-nut
Apneaman on Wed, 8th Jul 2015 2:06 pm
I guess everything really is bigger in Texas – won’t change anything because were doing it for the children………………………………………
Methane Emissions in Texas Fracking Region 50% Higher Than EPA Estimates
Environmental Defense Fund-backed studies of 30,000 Barnett Shale wells shows the EPA has vastly underestimated emissions.
“The release of 11 research papers Tuesday marked another milestone in the Environmental Defense Fund’s ongoing effort to understand the natural gas industry’s carbon footprint. Overall, the studies found that emissions of methane––a greenhouse gas at least 34 times more potent than carbon dioxide––in the Texas Barnett Shale were 50 percent higher than estimated by the Environmental Protection Agency.”
http://insideclimatenews.org/news/08072015/methane-emissions-texas-fracking-region-50-higher-epa-estimates-oil-gas-drilling-barnett-shale-environmental-defense-fund
shortonoil on Thu, 9th Jul 2015 12:49 pm
“Short, commodities are set to get hammered for the need for cash just like back in 08.”
Unless some other energy source, or changes in life styles are occurring which are making up the difference, the world’s economy is now contracting at about 1% per year as a result of petroleum’s advanced depletion state. The 2008 crash occurred as a result of slowing growth, which caused the financial markets to take unnecessary risks in an attempt to make profits. The present situation is one of negative growth, not just slowing growth. The outcome is likely to be much different than 2008 when the CBs still had the capacity to boost the markets. For a contracting economy their money printing will not work. In a contracting economy asset values will fall no matter how much currency is put into circulation. In a contracting economy ROR must fall!
Northwest Resident on Thu, 9th Jul 2015 1:30 pm
Steadily contracting global economy combined with steadily increasing population.
Or put another way, steadily depleting resources combined with increasing demands for those resources which are needed not just for comfort, but for survival.
Hey, what could possibly go wrong?
A long time ago, two tribes of humans lived together in a geographical location amply populated with wildlife and forage. Peace and happiness prevailed. Due to the abundance of food and other resources, both tribes expanded their populations rapidly. In the times of plenty, glutinous feasts and excessive plundering of the resource base became the norm, driven in large part by those few humans who sought to gain power and prestige in their respective tribes. In the process, a funny thing happened. Shortages of wild game, fish and vegetative forage began to occur. The abundance began to disappear, slowly at first and then rapidly. Hunger and disease became common. Fighting broke out between the two tribes, incidental at first, but as the shortages began to really cause suffering and fear, the fighting between the two tribes became more organized and deadly. Eventually the fighting and killing went into overdrive. It became vicious and cruel, wanton slaughter was an everyday occurrence. Over a few years time, the warring tribes’ numbers had been reduced to a small percent of what they had previously been. The survivors were so worn out and tired of the fighting that they withdrew to opposite ends of the geographical location to lick their wounds and mourn their dismal fates.
This story played out a million times in a million places over the relatively short history of human’s existence on planet earth. It is a short story that illustrates primitive and innate human nature that is genetically encoded. It is playing out again, today, on an epic and global scale. There will be no happy ending.
Never forget, this is God’s creation. Against the backdrop of death and suffering and evil on a monumental scale, there will be opportunities for courage, for sacrifice, for courage, for nobility. Like Maximus said in “Gladiator”, remember that what we do in this life echoes in eternity. As the coming months roll past us, we will be tested, each one of us, in different ways. Stay strong, keep a hope burning if not for yourself then for your children and their children. Accept the fact that great suffering and tribulation will soon be upon us, and prepare to meet it as best you can. Keep the faith that despite all that happens, a better human existence can be accomplished if we all stay true to our ideals, against all odds.
Northwest Resident on Thu, 9th Jul 2015 1:50 pm
Substitute “clever underhanded dirty tricks” for one of the instances of “courage” in that last paragraph.
Davy on Thu, 9th Jul 2015 4:51 pm
N/R, I am feeling that “epic” way too. What is coming is going to be tragic and heroic. Mostly it will be painful for everyone. My only issues is timing. With the issue of time I must dwell in a world of people that have no connection to the massive shift coming. It is truly surreal or maybe I am just surreal to live in a world of denial.
I hope I am just a lunatic nutter and all this doom will pass unnoticed. In any case this could drag on for a while making me look nuttier by the month with family and friends. Their tune will likely change when shit hits the fan. I am just following my nature and my nature is a doomer and prepper searching for the truth. I claim no superiority nor do I expect to be spared life’s judgments. I am the provider in my family and it is my duty to practice risk management for the sake of the family.
Northwest Resident on Thu, 9th Jul 2015 6:24 pm
Davy — My advantage is that I am a doomer cleverly disguised as a cutting edge software developer for a major financial software services provider. Nobody suspects me of being a nutter. I’m even admired for my large “garden”, but what they don’t know and I don’t tell them is that the “garden” is just a part of my doomer survival plan. I wouldn’t worry about what “they” think. If you’re self-sufficient then you’re far better off than them — they just don’t know it, yet.