Pressured for profit, oil majors bet big on shale technology

NCS Multistage Holdings

28/11/2017 06:00

By Ernest Scheyder 
    HOUSTON, Nov 28 (Reuters) - Shale oil engineer Oscar 
Portillo spends his days drilling as many as five wells at once 
- without ever setting foot on a rig. 
    Part of a team working to cut the cost of drilling a new 
shale well by a third, Portillo works from a Royal Dutch Shell 
Plc  RDSa.L  office in suburban Houston, his eyes darting among 
13 monitors flashing data on speed, temperature and other 
metrics as he helps control rigs more than 500 miles (805 km) 
away in the Permian Basin, the largest U.S. oilfield. 
    For the last decade, smaller oil companies have led the way 
in shale technology, slashing costs by as much as half with 
breakthroughs such as horizontal drilling and hydraulic fracking 
that turned the United States into the world's fastest-growing 
energy exporter. 
    (For a graphic detailing the decline in drilling costs, see: 
http://tmsnrt.rs/2zCXvxE) 
  
    Now, oil majors that were slow to seize on shale are seeking 
further efficiencies by adapting technologies for highly 
automated offshore operations to shale and pursuing advances in 
digitalization that have reshaped industries from auto 
manufacturing to retail. 
    If they are successful, the U.S. oil industry's ability to 
bring more wells to production at lower cost could amp up future 
output and company profits. The firms could also frustrate the 
ongoing effort by The Organization of Petroleum Exporting 
Countries (OPEC) effort to drain a global oil glut. 
    "We're bringing science into the art of drilling wells," 
Portillo said. 
    The technological push comes amid worries that U.S. shale 
gains are slowing as investors press for higher financial 
returns. Many investors want producers to restrain spending and 
focus on generating higher returns, not volume, prompting some 
to pull back on drilling. 
    Production at a majority of publicly traded shale producers 
rose just 1.3 percent over the first three quarters this year, 
according to Morgan Stanley  MS.N .  
    But many U.S. shale producers vowed during third quarter  
earnings disclosures to deliver higher returns through 
technology, with many forecasting aggressive output hikes into 
2018.  urn:newsml:reuters.com:*:nL2N1N62KA 
    Chevron Corp  CVX.N  is using drones equipped with thermal 
imaging to detect leaks in oil tanks and pipelines across its 
shale fields, avoiding traditional ground inspections and 
lengthy shutdowns. 
    Ryan Lance, chief executive of ConocoPhillips  COP.N  - the 
largest U.S. independent oil and gas producer - sees ample 
opportunity to boost both profits and output. Conoco also 
oversees remote drilling operations in a similar way to Shell. 
    "The people that don't have shale in their portfolios don't 
understand it, frankly," Lance said in an interview. "They think 
it's going to go away quickly because of the high  production  
decline rates, or that the resource is not nearly that 
substantial. They're wrong on both counts." 
    Shell, in an initiative called "iShale," has marshaled 
technology from a dozen oilfield suppliers, including devices 
from subsea specialist TechnipFMC Plc  FTI.N  that separate 
fracking sand from oil and well-control software from Emerson 
Electric Co  EMR.N , to bring more automation and data analysis 
to shale operations. 
    One idea borrowed from deepwater projects is using sensors 
to automatically adjust well flows and control separators that 
divvy natural gas, oil and water. Today, these subsea systems 
are expensive because they are built to operate at the extreme 
pressures and temperatures found miles under the ocean's 
surface.  
    Shell's initiative aims to create cheaper versions for 
onshore production by incorporating low-cost sensors similar to 
those in Apple Inc's  AAPL.O  Watch, eliminating the need for 
workers to visit thousands of shale drilling rigs to read gauges 
and manually adjust valves. Shell envisions shale wells that 
predict when parts are near mechanical failure and schedule 
repairs automatically. 
    By next year, the producer wants to begin remote fracking of 
wells, putting workers in one place to oversee several projects. 
It also would add solar panels and more powerful batteries to 
well sites to reduce electricity and diesel costs.  
    Oil firms currently spend about $5.9 million to drill a new 
shale well, according to consultancy Rystad Energy. Shell 
expects to chop that cost to less than $4 million apiece by the 
end of the decade. 
    "There is still very little automation," said Amir Gerges, 
head of Shell's Permian operations. "We haven't scratched the 
surface." 
     
    TECHNOLOGY AND GEOLOGY 
    Much of the new technology is focused on where rather than 
how to drill.  
    "There is no amount of technology that can improve bad 
geology," said Mark Papa, CEO of shale producer Centennial 
Resource Development Inc  CDEV.O   
    Anadarko Petroleum  APC.N , Statoil  STL.OL  and others are 
using DNA sequencing to pinpoint high potential areas, 
collecting DNA from microbes in oil to search for the same DNA 
in rock samples. ConocoPhillip's MRI techniques also borrow from 
medical advances. urn:newsml:reuters.com:*:nL2N1GQ0XE 
    ConocoPhillips next year will start using magnetic resonance 
imaging (MRI) to analyze Permian rock samples and find the best 
drilling locations, a technique the company first developed for 
its Alaskan offshore operations. 
    EOG Resources Inc  EOG.N  last year began using a detailed 
analysis of the oil quality of its fields. The analysis, 
designed by Houston start-up Premier Oilfield Laboratories, 
helps to speed decisions on fracking locations and avoid less 
productive sites.  
    Premier has reduced the time needed to analyze seismic data 
to find oil reserves from days or weeks to seconds. Such 
efficiencies serve two purposes, said Nathan Ganser, Premier's 
director of geochemical services. 
    "It's not only removing costs that are superfluous," he 
said. "It's boosting production." 
 
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Technology helping U.S. shale get more oil, for less    http://tmsnrt.rs/2zCXvxE 
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 (Reporting by Ernest Scheyder; Editing by Gary McWilliams and 
Brian Thevenot) 
 ((ernest.scheyder@thomsonreuters.com; Twitter: @ErnestScheyder; 
+1-713-210-8512; Reuters Messaging: 
ernest.scheyder.thomsonreuters.com@reuters.net)) 
 
Keywords: USA OIL/TECHNOLOGY