Oil & Gas RecoveryOil & Gas Recovery

Thomas McKeownThomas McKeown

Franklin Hamilton LLCFranklin Hamilton LLC

Methods of RecoveryMethods of Recovery

Oil extraction and recoveryOil extraction and recovery Primary RecoveryPrimary Recovery Secondary RecoverySecondary Recovery EOR- Enhanced Oil Recovery- Terciary EOR- Enhanced Oil Recovery- Terciary

Primary RecoveryPrimary Recovery Drilling- The oil well is created by drilling a hole into the earth with Drilling- The oil well is created by drilling a hole into the earth with

an an oil rigoil rig. A steel pipe (casing) is placed in the hole, to provide . A steel pipe (casing) is placed in the hole, to provide structural integrity to the newly drilled wellbore. Holes are then made structural integrity to the newly drilled wellbore. Holes are then made in the base of the well to enable oil to pass into the bore. Finally a in the base of the well to enable oil to pass into the bore. Finally a collection of valves called a "collection of valves called a "Christmas TreeChristmas Tree" is fitted to the top, the " is fitted to the top, the valves regulating pressures and controlling flows.valves regulating pressures and controlling flows.

Grounds for Primary RecoveryGrounds for Primary Recovery If the underground pressure in the oil reservoir is sufficient, then this If the underground pressure in the oil reservoir is sufficient, then this

pressure will force the oil to the surface. Gaseous fuels, natural gas or pressure will force the oil to the surface. Gaseous fuels, natural gas or water are usually present, which also supply needed underground water are usually present, which also supply needed underground pressure. In this situation, it is sufficient to place a complex pressure. In this situation, it is sufficient to place a complex arrangement of arrangement of valvesvalves (the (the Christmas treeChristmas tree) on the ) on the well headwell head to connect to connect the well to a the well to a pipelinepipeline network for storage and processing. network for storage and processing.

Usually, about Usually, about 20%20% of the oil in a reservoir can be extracted using of the oil in a reservoir can be extracted using primary recovery methods.primary recovery methods.

Secondary RecoverySecondary Recovery Secondary or enhanced oil recovery (EOR) methods are needed because only a Secondary or enhanced oil recovery (EOR) methods are needed because only a

small fraction of the oil in a reservoir can be produced by primary means (the small fraction of the oil in a reservoir can be produced by primary means (the reservoir's natural drives).reservoir's natural drives).

Initial recovery ranges from only about 5 per cent (Lloydminster-area heavy oils) Initial recovery ranges from only about 5 per cent (Lloydminster-area heavy oils) up to about 20 per cent (better quality oils like those produced in the province's up to about 20 per cent (better quality oils like those produced in the province's southwest and southeast). These methods must, naturally, also be both economic southwest and southeast). These methods must, naturally, also be both economic and effective, or companies may not bother trying to coax more oil from the and effective, or companies may not bother trying to coax more oil from the reservoir. reservoir.

Over the lifetime of the well the pressure will fall, and at some point there will be Over the lifetime of the well the pressure will fall, and at some point there will be insufficient underground pressure to force the oil to the surface. If economical, as insufficient underground pressure to force the oil to the surface. If economical, as often is, the remaining oil in the well is extracted using secondary oil recovery often is, the remaining oil in the well is extracted using secondary oil recovery methods methods (see: (see: energy balanceenergy balance and and net energy gainnet energy gain))..

Secondary oil recovery uses various techniques to aid in recovering oil from Secondary oil recovery uses various techniques to aid in recovering oil from depleted or low-pressure reservoirs. Sometimes pumps, such as depleted or low-pressure reservoirs. Sometimes pumps, such as beam pumpsbeam pumps and and electrical submersible pumpselectrical submersible pumps (ESPs), are used to bring the oil to the surface. Other (ESPs), are used to bring the oil to the surface. Other secondary recovery techniques increase the reservoir's pressure by secondary recovery techniques increase the reservoir's pressure by water injectionwater injection, , natural gasnatural gas reinjection reinjection and and gas liftgas lift, which injects , which injects airair, , carbon dioxidecarbon dioxide or some other or some other gas into the reservoir.gas into the reservoir.

Together, primary and secondary recovery generally allow Together, primary and secondary recovery generally allow 25% to 35%25% to 35% of the of the reservoir's oil to be recovered.reservoir's oil to be recovered.

Examples of Secondary Examples of Secondary RecoveryRecovery

Water FloodingWater Flooding: Water flooding is utilized primarily as a secondary : Water flooding is utilized primarily as a secondary recovery technique, where the primary drive mechanism used to recovery technique, where the primary drive mechanism used to produce the oil (dissolved gas) is depleted. Water is recovered from produce the oil (dissolved gas) is depleted. Water is recovered from the water table and injected into the reservoir, displacing the oil the water table and injected into the reservoir, displacing the oil towards the target production wells. Because of the limited amount of towards the target production wells. Because of the limited amount of dissolved gas remaining in solution, pumps are used to bring the oil to dissolved gas remaining in solution, pumps are used to bring the oil to surface.surface.

Sand Frac (beam pump, electrical submersible pump):Sand Frac (beam pump, electrical submersible pump): Sand Fracs Sand Fracs are used where porosity development or permeability is low (the are used where porosity development or permeability is low (the formation is tight). This treatment is done under high pressure, the formation is tight). This treatment is done under high pressure, the formation is fractured, and a sand/gel mixture is pumped into the formation is fractured, and a sand/gel mixture is pumped into the fractures. Once the fractures are allowed to settle, trapping the sand, fractures. Once the fractures are allowed to settle, trapping the sand, the well is produced with a significant increase in production, because the well is produced with a significant increase in production, because the pathways towards the well-bore have been opened up. Almost like the pathways towards the well-bore have been opened up. Almost like changing a single lane highway into a six lane highwaychanging a single lane highway into a six lane highway

Tertiary RecoveryTertiary Recovery Tertiary oil recovery reduces the oil'sTertiary oil recovery reduces the oil's viscosityviscosity to increase oil production.to increase oil production. Thermally enhanced oil recovery methods (TEOR)Thermally enhanced oil recovery methods (TEOR) are tertiary recovery are tertiary recovery

techniques that heat the oil and make it easier to extract. Steam injection is the techniques that heat the oil and make it easier to extract. Steam injection is the most common form of TEOR, and is often done with a:most common form of TEOR, and is often done with a:

1) 1) cogenerationcogeneration plant plant. In this type of cogeneration plant, a . In this type of cogeneration plant, a gas turbinegas turbine is used is used to generate to generate electricityelectricity and the waste heat is used to produce steam, which is and the waste heat is used to produce steam, which is then injected into the reservoir. This form of recovery is used extensively to then injected into the reservoir. This form of recovery is used extensively to increase oil production in the increase oil production in the San Joaquin ValleySan Joaquin Valley, which has very heavy oil, , which has very heavy oil, yet accounts for 10% of the United States' oil production.yet accounts for 10% of the United States' oil production. [[citation neededcitation needed]]

2)2) In-situ burningIn-situ burning is another form of TEOR, but instead of steam, some of the is another form of TEOR, but instead of steam, some of the oil is burned to heat the surrounding oil. Occasionally, oil is burned to heat the surrounding oil. Occasionally, detergentsdetergents are also used are also used to decrease oil viscosity as a tertiary oil recovery method.to decrease oil viscosity as a tertiary oil recovery method.

3)3) carbon dioxide floodingcarbon dioxide flooding.. Tertiary recovery allows another 5% to 15% of the reservoir's oil to be Tertiary recovery allows another 5% to 15% of the reservoir's oil to be

recovered.recovered. Tertiary recovery begins when secondary oil recovery isn't enough to continue Tertiary recovery begins when secondary oil recovery isn't enough to continue

adequate production, but only when the oil can still be extracted adequate production, but only when the oil can still be extracted profitablyprofitably. . This depends on the This depends on the costcost of the extraction method and the current of the extraction method and the current price of crude oilprice of crude oil. When prices are high, previously unprofitable wells are . When prices are high, previously unprofitable wells are brought back into production and when they are low, production is curtailed.brought back into production and when they are low, production is curtailed.

ViscosityViscosity ViscosityViscosity is a measure of the is a measure of the resistanceresistance of a of a fluidfluid which is being which is being

deformed by either deformed by either shear stressshear stress or or extensional stressextensional stress. . In general terms it is the resistance of a liquid to flow, or its In general terms it is the resistance of a liquid to flow, or its

"thickness". Viscosity describes a fluid's internal resistance to flow "thickness". Viscosity describes a fluid's internal resistance to flow and may be thought of as a measure of fluid and may be thought of as a measure of fluid frictionfriction. .

Example: Example: waterwater is "thin", having a lower viscosity, while is "thin", having a lower viscosity, while vegetable oilvegetable oil is "thick" having a higher viscosity. All real fluids (except is "thick" having a higher viscosity. All real fluids (except superfluidssuperfluids) ) have some resistance to have some resistance to stressstress, but a fluid which has no resistance to , but a fluid which has no resistance to shear stress is known as an shear stress is known as an ideal fluidideal fluid or or inviscid fluidinviscid fluid. For example, . For example, a high viscosity magma will create a tall a high viscosity magma will create a tall volcanovolcano, because it cannot , because it cannot spread fast enough; low viscosity lava will create a shield volcano, spread fast enough; low viscosity lava will create a shield volcano, which is large and wide.which is large and wide.[1][1] The study of viscosity is known as The study of viscosity is known as rheologyrheology..

Other Terciary Recovery MethodsOther Terciary Recovery Methods Cyclic Steam StimulationCyclic Steam Stimulation This method, also known as the Huff and Puff method, consists of 3 stages: This method, also known as the Huff and Puff method, consists of 3 stages: 1)injection,1)injection, 2)soaking 2)soaking 3) production3) production. . Steam is first injected into a well for a certain amount of time to heat the oil in the Steam is first injected into a well for a certain amount of time to heat the oil in the

surrounding reservoir to a temperature at which it flows. After it is decided enough surrounding reservoir to a temperature at which it flows. After it is decided enough steam has been injected, the steam is usually left to "soak" for some time after (typically steam has been injected, the steam is usually left to "soak" for some time after (typically not more than a few days). Then oil is produced out of the same well, at first by natural not more than a few days). Then oil is produced out of the same well, at first by natural flow (since the steam injection will have increased the reservoir pressure) and then by flow (since the steam injection will have increased the reservoir pressure) and then by artificial liftartificial lift. Production will decrease as the oil cools down, and once production . Production will decrease as the oil cools down, and once production reaches an economically determined level the steps are repeated again.reaches an economically determined level the steps are repeated again.

The process can be quite effective, especially in the first few cycles. However, it is The process can be quite effective, especially in the first few cycles. However, it is typically only able to recover approximately 20% of the Original Oil in Place (OOIP), typically only able to recover approximately 20% of the Original Oil in Place (OOIP), compared to steam flooding which has been reported to recover over 50% of OOIP. It is compared to steam flooding which has been reported to recover over 50% of OOIP. It is quite common for wells to be produced in the cyclic steam manner for a few cycles quite common for wells to be produced in the cyclic steam manner for a few cycles before being put on a steam flooding regime with other wells.before being put on a steam flooding regime with other wells.

The mechanism was accidentally discovered by The mechanism was accidentally discovered by ShellShell while it was doing a steam flood in while it was doing a steam flood in VenezuelaVenezuela and one of its steam injectors blew out and ended up producing and one of its steam injectors blew out and ended up producing oiloil at much at much higher rates than a conventional production well in a similar environment.higher rates than a conventional production well in a similar environment.

Steam FloodingSteam Flooding Steam FloodingSteam Flooding In a steam flood, sometimes known as a steam drive, some wells are used as In a steam flood, sometimes known as a steam drive, some wells are used as

steam injection wells and other wells are used for oil production. Two steam injection wells and other wells are used for oil production. Two mechanisms are at work to improve the amount of oil recovered. The first is to mechanisms are at work to improve the amount of oil recovered. The first is to heat the oil to higher temperatures and to thereby decrease its viscosity so that heat the oil to higher temperatures and to thereby decrease its viscosity so that it more easily flows through the formation toward the producing wells. A it more easily flows through the formation toward the producing wells. A second mechanism is the physical displacement employing in a manner second mechanism is the physical displacement employing in a manner similar to similar to water floodingwater flooding, in which oil is meant to be pushed to the production , in which oil is meant to be pushed to the production wells. While more steam is needed for this method than for the cyclic method, wells. While more steam is needed for this method than for the cyclic method, it is typically more effective at recovering a larger portion of the oil.it is typically more effective at recovering a larger portion of the oil.

A form of steam flooding that has become popular in the A form of steam flooding that has become popular in the Alberta tar sandsAlberta tar sands is is steam assisted gravity drainagesteam assisted gravity drainage (SAGD), in which two horizontal wells are (SAGD), in which two horizontal wells are drilled, one a few meters above the other, and steam is injected into the upper drilled, one a few meters above the other, and steam is injected into the upper one. The intent is to reduce the viscosity of the bitumen to the point where one. The intent is to reduce the viscosity of the bitumen to the point where gravity will pull it down into the producing well.gravity will pull it down into the producing well.

EOR ProjectsEOR Projects Examples of current EOR projectsExamples of current EOR projects In Canada, a COIn Canada, a CO

22-EOR project has been established by -EOR project has been established by EnCanaEnCana at the Weyburn Oil Field in at the Weyburn Oil Field in southern southern SaskatchewanSaskatchewan. The project is expected to inject a net 18 million ton CO. The project is expected to inject a net 18 million ton CO

22 and and recover an additional 130 million barrels (21,000,000 mrecover an additional 130 million barrels (21,000,000 m33) of oil, extending the life of the oil ) of oil, extending the life of the oil field by 25 years field by 25 years [1][1]. When combusted, this extra volume of oil will produce nearly 60 . When combusted, this extra volume of oil will produce nearly 60 million ton COmillion ton CO

22, so in this case carbon capture and storage in combination with EOR leads , so in this case carbon capture and storage in combination with EOR leads to more COto more CO

22 emissions than without injection of CO emissions than without injection of CO22[[citation neededcitation needed]]. Since CO. Since CO

22 injection began injection began in late 2000, the EOR project has performed largely as predicted. Currently, some 1600 m3 in late 2000, the EOR project has performed largely as predicted. Currently, some 1600 m3 (10,063 barrels) per day of incremental oil is being produced from the field.(10,063 barrels) per day of incremental oil is being produced from the field.

[edit] Potential for EOR in United States[edit] Potential for EOR in United States In United States, the Department of Energy (DOE) has estimated that full use of 'next In United States, the Department of Energy (DOE) has estimated that full use of 'next

generation' COgeneration' CO22-EOR in United States could generate an additional 240 billion barrels -EOR in United States could generate an additional 240 billion barrels

(3.8×10(3.8×101010 m m33) of recoverable oil resources. Developing this potential would depend on the ) of recoverable oil resources. Developing this potential would depend on the availability of commercial COavailability of commercial CO

22 in large volumes, which could be made possible by in large volumes, which could be made possible by widespread use of carbon capture and storage. For comparison, the total undeveloped US widespread use of carbon capture and storage. For comparison, the total undeveloped US domestic oil resources still in the ground total more than 1 trillion barrels (1.6×10domestic oil resources still in the ground total more than 1 trillion barrels (1.6×101111 m m33), ), most of it remaining unrecoverable. The DOE estimates that if the EOR potential were to be most of it remaining unrecoverable. The DOE estimates that if the EOR potential were to be fully realised, State and local treasuries would gain $280 billion in revenues from future fully realised, State and local treasuries would gain $280 billion in revenues from future royalties, severance taxes, and state income taxes on oil production, aside from other royalties, severance taxes, and state income taxes on oil production, aside from other economic benefits. For the climate, the COeconomic benefits. For the climate, the CO

22 released from the combustion of 240 billion released from the combustion of 240 billion barrels (3.8×10barrels (3.8×101010 m m33) of oil would be on the order of 100 billion tonnes of CO) of oil would be on the order of 100 billion tonnes of CO

22, equivalent to , equivalent to four times the annual global COfour times the annual global CO

22 emissions. emissions.[[citation neededcitation needed]]

O&G Sell-side ScriptO&G Sell-side Script 1) 1) 1031 Like-Kind Exchange1031 Like-Kind Exchange- assure to branch to this option.- assure to branch to this option. 2) 2) No TransitionNo Transition: If not interested use : If not interested use

- “ Is it because of the price of oil being low?”- “ Is it because of the price of oil being low?”

- “Do you have anything for lease? Do you have an expiring lease?”- “Do you have anything for lease? Do you have an expiring lease?”

- “ Would you consider acquiring some properties?”- “ Would you consider acquiring some properties?”

- “We are working with an International E&P that has not been as adversely - “We are working with an International E&P that has not been as adversely effected by the credit crunch, would you like to hear what they would have to effected by the credit crunch, would you like to hear what they would have to say?”say?”

3) 3) Possible conversation drivers for buy/sell-sidePossible conversation drivers for buy/sell-side::

- Oil prices will not return for a while- shift to green investments- Oil prices will not return for a while- shift to green investments

- Investor’s in Turn-around projects- Investor’s in Turn-around projects

- Discuss EOR methods, water flooding, fracing, and overhead costs. - Discuss EOR methods, water flooding, fracing, and overhead costs.