Image: A natural gas flare on an oil well pad burns as the sun sets outside Watford City, North Dakota January 21, 2016. Persistent low oil prices have lead to slower business in much of North Dakota’s Bakken oil fields. The collapse of U.S. oil and gas investment could have further to fall and Americans are showing signs they spend less of their windfall from lower gasoline prices than in the past, darkening the outlook for the U.S. economy. REUTERS/Andrew Cullen – RTX23LBT
By Ernest Scheyder
GRAND FORKS, N.D. (Reuters) – In a basement lab of a North Dakota research center, Beth Kurz and an assistant are peering through a scanning electron microscope, studying samples from the state’s vast Bakken shale oil formation.
Kurz, a hydrogeologist, is part of a team, which looks at using carbon dioxide to coax more oil out of wells that have already been hydraulically fractured, or fracked, in the process of extracting oil from shale rocks.
“No one is sure just yet how this process can work in the Bakken,” said Kurz. “We’re hoping to crack that riddle.”
While energy firms around the world slash spending and cut jobs in response to crashing oil prices, research institutions and companies across North America are not letting up in their efforts to make production more efficient.
In fact, demand for money-saving solutions is greater than ever and research centers, helped by multi-year budgets and grants, are doubling down – hiring more staff, building new laboratories and launching new studies.
The University of North Dakota’s Energy and Environmental Research Center (EERC) where Kurz works has hired 20 more researchers and lab assistants over the past year, a 10 percent increase.
“At $100 per barrel oil, you just produce as much as you can, with cost as a secondary concern,” said Tom Erickson, the Center’s head. “But at $30 oil, you need to innovate, or else you’re just losing money.”
The center, which has an annual budget of more than $30 million funded by the federal government and industry partners, including Marathon Oil Corp and Continental Resources, also works on alternative fuel and coal technologies, but the CO2 project is among the biggest.
While carbon dioxide from coal-fired power plants has been used for years to extract oil from older, conventional wells, it has yet to be applied commercially in shale drilling. Unlike spongy conventional oil reserves, shale is a rock and the scientists are now trying to find the best way for CO2 to flow through it and help bring oil to the surface.
Elsewhere, efforts range from aggregating reams of data from field sensors to using medical scanning equipment or reducing the amount of water used for fracking.
“We think this slowdown will actually be a plus for technology research and development,” Jon Olson, head of the Petroleum and Geosystems Engineering Department at the University of Texas-Austin, told Reuters.
Whether any breakthroughs can come soon enough for scores of companies that are losing money and fighting for survival is anyone’s guess. But if successful, new technologies could help restore profitability to the industry battered by more than 70 percent crude price plunge since mid-2014.
The use of CO2 in fracking, for example, could cut production costs in North Dakota’s largest oil-producing county by about 10 percent. That, according to Reuters calculations, would bring costs to around $24.30 per barrel, below current market prices.
So far, the process has worked in laboratory conditions, but not yet in field trials, so it is unclear how quickly it could be commercially deployed.
Oscar Abbink, an oilfield technology expert at IHS Energy Insight, which is not involved in the North Dakota research, called the study promising and noted how the industry’s interest in innovation has soared during the downturn.
“A few years ago, it was all about pulling more oil out of the ground. Now, the cost is much more important.”
Scientists at privately held WellDog Inc and Blackbird Energy Inc are also looking into the carbon dioxide use.
WellDog, which markets spectroscopy technology to shale clients to help them distinguish between types of natural gas, last December launched a new service that helps customers measure CO2 levels in older oil wells and could also serve to control volumes pumped into new ones.
“This is a growth area,” said John Pope, WellDog’s president.
PUMPS, SCANNERS AND SUPERCOMPUTERS
So far, ConocoPhillips is the only large oil producer to cut research spending. Others could follow suit as cheap crude keeps exerting pressure on budgets, but for now several continue with their own research.
Hess Corp , North Dakota’s third-largest oil producer, is studying how it can lengthen the horizontal wells and use cheaper materials in fracking.
Services giant Schlumberger NV, licensed a new process last fall that slashes the number of pumps needed to frack a well.
Rival Halliburton Co is also marketing its expertise in helping customers become more efficient, for instance, by using machines with fewer moving parts.
At Penn State University, petroleum and natural gas engineering professor Zuleima Karpyn is using medical CT scanners to analyze how fluid flows through shale samples to help producers better control the process.
John England, U.S. oil and gas specialist at consulting firm Deloitte said he was confident there were more efficiency gains ahead. “As we apply more technology, there’s still a long way to go in terms of cost reduction.”
Data is one area where some major players expect the fastest progress and the highest rewards.
Petroleum Geo Services ASA says demand for services of its Houston supercomputer from oil companies crunching seismic data to locate underground reserves has been rising in the past 18 months even as the oil downturn continues.
General Electric Co is on track to open a $125 million global oil and gas research center in Oklahoma City this year. The company employs about 80 employees at a temporary site now and plans to hire 45 more.
The conglomerate is hoping it can aggregate data on temperature, pressure and other features from thousands of oil wells to help producers pick best locations, limiting costly misses. GE scientists are also looking into waterless fracking and other methods.
“There is a technology lever in the oil and gas industry that hasn’t been pulled as strongly as it could have been in the past,” Mike Ming, general manager of GE’s new Oklahoma City center, told Reuters.
(Reporting by Ernest Scheyder; Editing by Tomasz Janowski)
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