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Just when it seemed the Earth was serving up its last drops of oil, squeezing from tough spots such as the oil sands in northern Alberta and the deepest seas offshore Brazil, a new oil age is emerging.
Tight oil, a catch-all for oil trapped in shale, carbonate or sand formations recoverable with the type of drilling methods that revolutionized the natural-gas side of the business, is reviving the oil sector on a scale that only a couple of years ago would have been unthinkable.
“It turns out there are a lot of big piles of oil in North America,” said Denver-based John Schopp, vice-president for the North Rockies and new ventures at Encana Corp., one of the companies in a hurry to turn it into new revenue.
Calgary-based Encana, a pure natural-gas producer that is feeling the pinch of low gas prices, hopes its new oil thrust will make it a more balanced gas/oil producer.
“With shale gas it took a few years to get it to work for everybody,” Mr. Schopp said. “With oil, obviously we are in an earlier inning than we are with gas, but the rate of change is quicker because of all the tricks that we have learned.”
The full potential of tight oil is not yet known. What is known is that the sector is repositioning itself to make the most of it, encouraged by the performance of fields such as the Bakken straddling North Dakota and Saskatchewan, one of the continent’s most significant sources of oil. If new plays such as the Niobrara in Colorado, the Eagle Ford in Texas, the Cardium in Alberta or the Viking in Saskatchewan have similar encores, and if the same pattern is repeated around the world, oil could be with us for a long time yet.
“We are finding oil in a lot of places that frankly, we knew it was there, we just didn’t know how to get it out,” said John Richels, president and CEO of Oklahoma City-based Devon Energy Corp. “Taking this new technology … and applying it to many of these areas is opening some new doors. In a world scene where we are producing 86 million barrels a day, it probably doesn’t have the same kind of impact as it did in the natural gas business, which was more of a North American market, but it certainly has some big potential in the right areas.” Devon, previously a natural gas focused company, directed 90% of its capital to oil and natural-gas liquids targets in 2011.
Tight oil’s rise happened at uncharacteristic speed for the oil patch. For example, it took decades for the oil sands to catch on as an economic resource. But the oil community started converting to tight oil in a big way barely two to three years ago, with smaller companies in Canada and the United States leading the way.
What prompted it all? Natural gas prices were low and oil prices were high, said Dan Themig, president of Packers Plus Energy Services Inc. It helped that horizontal drilling/hydraulic fracturing technologies were performing well on tight oil, and that producers could squeeze oil or natural gas liquids from lands such as the Montney they had acquired to produce gas.
“And then it was up to a bunch of engineers coming up with crazy ideas like our system,” Mr. Themig said.
The Calgary-based private company helped fuel the revolution with technological advances such as its ‘ball drop.’
Mr. Themig, a professional engineer, invented it after leaving an international oil services company a dozen years ago.
The technology involves launching a ceramic ball the size of an orange with fluid into a horizontal well. When the ball reaches the bottom it activates a port and opens a sleeve. Sand is pumped down at high pressure to fracture the rock. When the fracturing is completed, another ball is launched to fracture the next stage. The same process is repeated at high speed multiple times, resulting in what is known as multi-stage fracking.
For the rest of this article, please go to the National Post/Financial Post website: http://business.financialpost.com/2011/12/29/tight-oil-rises-to-front-of-mind/