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Schlumberger's clever frack takes aim at gas costs
Fri, Aug 31 07:30 AM EDT

By Andrew Callus

STAVANGER, Norway (Reuters) - Production costs of natural gas from unconventional fields could tumble in the United States if a new technique developed by Schlumberger lives up to its billing.

The world's largest oilfield services company by market value and others working in the industry have suffered this year because the runaway success of hydraulic fracturing (fracking) and horizontal drilling techniques to extract so-called unconventional gas has created a glut and caused a price slide.

But using a proprietary system called Hiway that only became commercially viable last year, Schlumberger's fracker in chief believes he has knocked a lump out of the infant industry's three major cost components; water, sand, and trucks.

Schlumberger is already using the system on nearly a third of all fracking jobs, and expects that to rise rapidly to 50-70 percent, according to Kyel Hodenfield, the company's vice president for unconventional resources.

"It can vary, but using Hiway we generally say you need 40 percent less proppant," (graded sand mixed with guar gum or lubricating chemicals), he told Reuters in an interview.

"Water is more variable, but it's somewhere between 20 and 50 percent less."

Less sand, less water and less pumping adds up to fewer trucks, Hodenfield explained on the sidelines of the Offshore Northern Seas (ONS) conference in Stavanger, Norway.

"Those are the big costs. Anything you can do to reduce the amount of sand, the amount of water, and the amount of horsepower is going to fall to the bottom line."

Fracking, often combined with modern horizontal drilling techniques, recovers previously unreachable gas by fracturing the rock that contains it and then pumping in fluid and mined or manufactured sand to hold open the cracks and force out the gas.

The process, pioneered in the United States, requires many more wells to be drilled than traditional oil and gas extraction. The fracking generally takes just a few days, even though some fracked fields will produce for years, so the infrastructure, materials and equipment need to be mobile.

At some sites, water is piped in, but usually, both sand and water are trucked to the site. More trucks are needed to provide the horsepower to pump the mixture into the cracks, and road regulations restrict their size, so the number of heavy vehicles per site can be considerable.

Schlumberger is the number-two in fracking services, as measured by the horsepower of its fleet, with a 12 percent share of the market in 2011, according to analysts at Global Hunter Securities.

It lies behind Halliburton and ahead of Baker Hughes in the ranking, although its exposure to the industry is relatively small in the context of its traditional oil and gas services business worldwide. Hodenfield would not reveal how much of Schlumberger's business is now in U.S. unconventionals, "but I can say it's grown, a lot", he said.

FIBRE INJECTION

So how does Hiway work?

Hodenfield, who grew up in North Dakota where the Bakken field is at the centre of the U.S. shale gas boom, brightens at the opportunity to explain a process that adds a proprietary fiber to the traditional sand and fluid mix, and uses a "pulsing" system to send globs of the fiber in between each injection.

The dissolvable fiber globs create more effective channels for the gas to flow, and the pulsing rhythm can be made to match the geological structure of the rock, also pushing the sand deeper into the cracks and resulting in more effective openings that conduct gas better for every liter pumped in.

Hiway is not the only new technique on the scene as oil companies look to use fracking to reach more lucrative oil as well as gas.

Schlumberger and other innovators are also using sophisticated seismic techniques, combined with data from pilot wells, to reduce the number of fracks along a drill pipe and target only the "sweet spots" in the field.

Together, these new techniques and smart rugged sensor kit from National Instruments can also reduce the production pace variability that plagues the unconventional industry.

And according to one senior executive at one of the world's major oil companies, these cost-saving innovations may only be the beginning.

"It's mostly brute force up to now," he said. "When the oil majors get serious about investment in fracking the cost could fall by half."

U.S. fracking expenditure is not pocket change. Hodenfield cites data from analysts Spears & Associates saying the total onshore oil and gas industry drilling and completions spend, boosted mainly by unconventional work, has soared to $150 billion a year from $20 billion in 2002.

This eclipses the offshore spend, which was at a similar $20 billion level 10 years ago and has only recently recovered to that level after the Macondo oil spill disaster of 2010.

Hodenfield says smarter technology is also the key to reducing the environmental impact of fracking in shale rock, tight gas, coal bed methane and other unconventional gas fields.

"We have a choice," he said. "We can take the brute force approach and drill a lot of wells and frack a lot of wells and live with the production variation and compensate that by drilling even more wells (with the consequent environmental footprint), or you drill only the best wells by defining the sweet spot and optimize the completion by technology."

(Additional reporting by Braden Reddall; Editing by Alison Birrane)


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