American Oil and Gas Reporter - January 2019 - 25

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Uncertain Times
May Portend A Return
To 'Tried & True'
Another year is officially upon us and as our industry moves
into 2019, there seems to be a general tone of quiet excitement
for the year overall, seasoned with moderate worries about the
first quarter. The underlying message seems to be that the only
certainty any of us have is that uncertainty runs rampant through
the upstream industry.
According to the Wall Street Journal, the United States
became a net exporter of oil and refined fuels in November for
the first time since 1973. The article cites the U.S. Energy Information Administration that during the week ending on Nov.
30, the United States exported 3.2 million barrels of crude oil a
day and 5.8 MMbbl/d of gasoline, diesel, jet fuel and other petroleum products.
Although it was only one week, according to the article, it
represents a symbolic milestone moving the United States closer
to energy independence. Only 10 years ago, energy independence
generally was seen as political jargon and seemed extremely unlikely, especially when folks were still talking about "peak oil"
on a regular basis. Now the idea of peak oil seems foreign and is
rarely mentioned these days, especially in light of the U.S. Geological Survey's estimate that there are more than 46.3 billion
barrels of recoverable oil in the Permian Basin alone.
This seems like great news until the price of Brent crude
drops from more than $86 a barrel to less than $60 in the same
month. Trading becomes volatile and geopolitical forces take
action in efforts to stabilize prices.
So, what does this all mean for the typical independent
operator working in the lower 48? For parts of the industry, it
may mean turning back to tried and true technology. The Kansas
Independent Oil & Gas Association invited Marty Dubois to
deliver a presentation at its annual meeting in August, looking
at the possibilities of carbon dioxide-enhanced oil recovery in
Kansas. Dubois highlighted federal tax incentives that made it
more economical to recover as much as 10 million barrels of incremental oil annually in the region. He suggested the most
likely geologic formations for these opportunities were Lansing-Kansas City waterfloods, the Morrow, Chester, and possibly
the Arbuckle.
In Texas, Denbury Resources announced in October its acquisition of Penn Virginia Corporation. Denbury, which is
known primarily for its work in CO2 EOR, generally operates
in the Gulf Coast and Rocky Mountain regions. It hopes to capitalize on its past success and increase its value by using its established best practices in drilling and engineering. Penn Virginia
makes a good fit with its development and production in the
Eagle Ford Shale in South Texas. The combination expands
Denbury's reach and provides short-cycle investment optionality
with future EOR potential, creating strong growth potential for
the combined companies.
Unfortunately, since the announcement, Denbury's stock has
declined pretty steeply. However, partnerships such as these
show a willingness by companies to take risk on more traditional
technologies and methods.

"In the face of uncertainty, the
upstream oil and gas industry continues
to bend and adjust.

An article in the Society of Petroleum Engineers' Journal of
Petroleum Engineering titled, "Waterflooding With Active Injection-Control Devices Improves Oil Recovery," describes a
successful optimization technique in unconventional reservoirs
that takes advantage of mechanical diversion and isolation of
sections of the wellbore to enable physical control of the flow
rates into different areas along the lateral wellbore.
According to the authors, the simplest way to waterflood a
multistage fractured well is to reverse the direction of the flow
and to "bullhead" water from the surface. Because the water
follows the path of least resistance, uniform fluid injection
becomes difficult to accomplish. In some cases, short circulation
of producing wells was seen. In this study, the operator tried
several techniques to redirect flow from the paths of least
resistance. These techniques include using various viscous
fluids and solid diverters with little luck. Once the operator
began using mechanical diversion and isolation along sections,
optimization increased.
Finally, in October, the U.S. Department of Energy's Office
of Fossil Energy issued a notice of intent to fund research
aimed at reducing the technical risks associated with EOR
methods and expanding their application. The funding will be
awarded to research partnerships generally that are composed
of a combination of universities and operators looking at EOR
in both conventional and unconventional reservoirs, with specific
emphasis on improving low recovery factors in unconventional
oil wells.
Once again, in the face of uncertainty, the upstream oil and
gas industry continues to bend and adjust with changing time,
technology and economic environments, as it always has. Looking
at ways to apply existing technology to tighter and tighter rock is
beginning to show some promise. I am hopeful for the oil and gas
industry during 2019, and look forward to seeing how companies
continue to innovate in the coming year.
r

JEREMY VISCOMI is a strategic

marketing expert for the oil and
gas industry. Among his many
roles, he serves as the MidContinent regional lead for the
Petroleum Technology Transfer
Council, providing independent
operators with access to emerging technology aimed at reducing
risk and growing profits.
JANUARY 2019 25

American Oil and Gas Reporter - January 2019

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