By John Kemp
LONDON, Feb 20 Hydraulic fracturing has
already transformed the North American gas industry, and has the
potential to revolutionise gas production and eventually oil
So far the approach has been based on brute force: employing
ever-increasing amounts of horsepower, fracking fluid and sand
to wring natural gas and oil from previously inaccessible tight
rock formations in a manner that is wasteful, expensive and
maximises the environmental impact.
However, in a speech last month, Schlumberger Chief
Executive Paal Kibsgaard previewed a smarter approach in future
that will cut costs, improve recovery rates and reduce negative
effects associated with high water consumption and large numbers
of truck movements ("Kibsgaard speaks at the 40th annual Howard
Weil energy conference" March 26).
"We see hydraulic fracturing ... moving away from the
current approach of trying to achieve more production with more
resources, towards achieving more production with less
resources. This will be essential to lower well costs and to
reduce the operational footprint," according to Kibsgaard.
In effect, the Schlumberger chief executive sketched out a
roadmap for the next phase of the shale industry, as it scales
up from a niche business to a world-class one.
Until recently, fracking has proved highly profitable for
both resource owners and the service companies contracted to do
the drilling and frack jobs. But the existing model is now being
squeezed by decade-low natural gas prices and the entry of a
host of new firms able to do basic fracks.
"In North America, hydraulic fracturing and profitability
have soared, purely as a function of the undersupply of
horsepower, but they are now quickly coming under pressure as
horsepower supply and demand approaches equilibrium," Kibsgaard
"The barrier to entry remains low, as seen by the number of
smaller players in the market that buy generic frack fleets from
third-party manufacturers and only pump basic fluid systems ...
The pressure pumping industry is generally focused on the
ability to do bigger and more resource intensive fracturing
jobs, and on the ability to do jobs faster."
Drilling and fracking fees have been under pressure for the
last six months, according to Kibsgaard. The downward trend is
now starting to spread to liquid-rich basins, as oil and gas
developers shift their focus from low-priced gas basins to areas
yielding more crude and condensate.
Future profitability depends on cutting costs. Kibsgaard
outlined three wasteful practices that need to be eliminated:
(1) Many wells are drilled in areas of shale plays with poor
production potential and subsequently poor production results.
(2) Horizontal wells are completed along their entire
lengths even though significant parts of the horizontal section
are in zones with little production potential.
(3) Excessive amounts of horsepower and water are applied in
"massive frack" jobs, creating fracture networks much deeper
than can be propped open and where the unpropped part of the
network makes little or no contribution to production.
SMARTER USE OF TECHNOLOGY
In future, fracking will make better use of seismic
technology and computer-aided reservoir modelling to focus
drilling on the parts of the shale formation which have most
production potential. Only those parts of the horizontal section
that cross zones with significant potential will be fracked. And
massive fracks will be replaced by smaller, more targeted ones.
In an indication of how far the industry could improve
efficiency, Kibsgaard said one customer in the Marcellus shale,
in the north-eastern United States, had achieved 40 percent
higher production compared to standard wells on the same pad by
perforating the well casing and fracking only intervals around
the best shale quality, instead of spreading them evenly along
the whole horizontal length.
Schlumberger says its new HiWAY technology, introduced in
the last year, uses 40 percent less proppant and 25 percent less
water than conventional frack treatments. Proppant is sand or a
similar substance mixed with water and used to hold open
fissures in the shale created by fracking.
HiWAY has already been used in 5,000 fracks by 40 customers
in 10 countries. "To date, HiWAY technology has eliminated the
use of 6 million barrels of water and 340,000 tonnes of proppant
... HiWAY has saved more than 33,000 water and proppant hauling
journeys to and from the well site," Kibsgaard said, reducing
fuel consumption and providing relief for local communities.
In an intriguing twist, Kibsgaard suggested Schlumberger
might reduce its involvement in pressure pumping, which is fast
becoming commoditised, to specialise more in the more
technically complex and higher-value added aspects of the
business like the provision of advanced fracking fluids and
reservoir modelling capability.
Kibsgaard highlighted the new frac fluid delivery model,
recently introduced in North America, and used on 50 frack jobs
so far. In frac fluid delivery, Schlumberger provides
engineering and monitoring services, as well as chemicals and
proppant, while the raw horsepower is provided by a third party.
"Although it is still early, we see the coupling of our
unique Schlumberger fracturing fluid systems with
non-Schlumberger hydraulic horsepower as an innovative approach
that extends the reach of our technology without the investment
in additional pumping capacity."
FUTURE OF FRACKING, SHALE
Kibsgaard's roadmap will be critically important as the
tight gas oil industries seek to scale up from niche operations
in Texas, North Dakota and a few other parts of North America to
become world-scale industries supplying a significant proportion
of gas and oil needs.
By reducing the volume of materials used, smart fracking can
reduce the impact on local communities from shale gas and oil
development, which will become increasingly important if the
industry is to win acceptance and expand into more sensitive
areas outside traditional oil and gas producing heartlands.
By cutting development costs, smart fracking could
ultimately pull down the minimum gas and even oil prices the
industry needs to break-even.
Ultimately, a more efficient approach will help speed up the
industry's expansion by easing some of the current bottlenecks.
Fracking has already taken many outside observers of the oil
and gas industries by surprise. But Kibsgaard's speech suggests
the technology is still in its infancy, with plenty more
potential to slash costs and improve efficiency as the industry
replaces brute-force with a more sophisticated approach.