The advancement of exploitation technology over the last decade is unprecedented in our industry, but appears to have led to a disparity between those that have leveraged these advanced well designs in their assets, and those that are hesitant to embrace the novel methodologies. The author has had extensive exposure to both groups throughout North America, and can identify misconceptions common in the latter group that may impede their application of these more aggressive exploitation strategies. Suggested challenges to some of the more prevalent mindsets are summarized in this article.
Recently the author has delivered an extensive series of 1-day management seminars targeted at independent operators interested in applying horizontal, (H-well) and other advanced exploitation technologies in marginal resource settings. A common attitude generally expressed by this operator group could be summarized as; “H-wells are best suited to the major operators exploiting prolific, high profile (cost) development settings. This advanced well type is too technically challenging, too expensive and risky for a small operator in a marginal resource. We can make reasonable ROR with conventional vertical wells of known cost and acceptable risk, so why bother with these more challenging well designs?”
Although these issues appear valid at first glance, one should examine the assumptions deeper before discounting the wide range of benefit potentially delivered by horizontal technology. One must expect higher costs and operational risks with H-wells, but this does not mean they are viable only in the high cost, prolific field settings.
One need only look at the collective industry experience of the Western Canadian Basin, where there are approximately 16,000 horizontal wells in operation. It is difficult to quote exact numbers due to the lack of an industry-wide accepted definition. This industry is relatively small, ranked 11th in conventional oil production globally. It is generally characterized by what would be considered low cost, marginal resources compared to typical development settings globally; yet holds a dominant position with respect to rate and diversity of horizontal well applications.
In fact, one could logically argue that, in general, the more marginal the setting, (thinner, tighter, depleted), the better a horizontal investment versus a vertical well. The inherent ability to access laterally discontinuous reservoir amplifies the benefit compared to a vertical well in heterogeneous reservoirs. The dramatically improved utilization of reservoir push energy, (pressure), implies that the more depleted the field, the greater the rate and recovery increase delivered by an H-well. Some of the more exotic production processes are only possible with H-wells, (e.g.; SAGD), and thus allow exploitation where conventional well/production systems are not viable. The consolidation benefits in respect to surface disturbance, OPEX reductions, reduction of lease reclamation liability etc., are all secondary benefits that could make or break a development.
We recommend that the basic mindset must be challenged. Rather than ask “why bother”, the operator might ask “why not” drill an H-well. If one is going to invest capital on exploiting a resource, should one not evaluate and strive to maximize the total value added of the application on a specific asset and per acre basis? There are simple commercial models that allow this form of NPV screening. Thus a reasonable assessment of value added delivered by competing well types can be preformed as a first step in the exploitation pursuit. There are wide ranges of design and implementation applications that allow the operator to define and mitigate the operational risk aspects on a site-specific and well-specific basis. So both the cost/benefit and well construction issues can be cost effectively addressed in marginal setting applications.
In high profile settings, (eg; deep-water developments), all well costs will be elevated compared to a marginal onshore setting. Therefore the incremental cost of h-wells versus vertical/directional wells is not a major component or hindrance. This makes horizontal wells in high cost settings relatively easy to justify. But when the CAPEX is tripled, or worse, by employing a horizontal well in a low cost environment, it is a much tougher sell. The independent operator may observe all the “high end” technology incorporated in the high profile applications, and may conclude that they are a necessary component of H-well success. But this is not always the case. In fact, in many applications, the less complex the design, the higher the h-well chance of both technical and economic success.
Another barrier often anticipated is the lack of expertise in screening, designing and implementing this general well type. The multinationals have extensive global experience in developing and applying this technology. How can a small independent operator compensate for this lack of intellectual resource? The key to this is the site–specific nature of successful H-well application. Yes, it’s true that an independent in Lansing Michigan will not have the luxury of Exxon’s collective global expertise; but that expertise has relatively minor relevance to the viability or optimization of an H-well in Lansing. In fact, it is the years of hands-on experience and insight to the local setting that represents a key component of success. The local operator must apply this site-specific experience to customize design and thus maximize value in his limited resource. But first he must become conversive with the basic dos and don’ts, the universally repeated failure modes pervasive in H-well applications.
This does not necessarily imply years of lab study, simulation or 3-d visualization; but rather applying relatively simple principles with respect to the site-specific keys of the resource and application setting. The explosion of this technology has spurned a wide spectrum of low cost solutions to the technical challenges inherent in h-wells. Familiarity with these rapidly evolving options is a prerequisite of optimized application.
The smaller, independent operator often expresses revelation when first exposed to the definition of basic application “needs” versus technical discipline “wants” related to H-wells. Not all successful H-wells must employ smart or even conventional completions, nor need they be constructed underbalance and guided with state-of-the-art LWD drilling assemblies. The bottom line to economic success is to arm the site specific, multi-disciplined team with basic training and tools; so that they can properly define the application critical needs and avoid the common failure modes. The small independents can’t afford three economic or operational failures to get up the steep learning curve to optimize a specific application. They must get exposed to the proper methodology of screening, design and implementation before mobilizing a rig and learning in the field. A small investment in time to acquire this exposure is key to successful H-well application in all settings, particularly in marginal fields.
H-wells offer potential value added to almost all reservoir settings. They should be at least considered as an option in any development investment. They do cost more and imply higher operational risk, and they do not work everywhere. But the operator can effectively evaluate the cost/benefit balance, and properly address the site-specific operational concerns of any potential application. With a minor investment in time, and arming the team with a few simple tools, the value-added potential of H-wells can be leveraged to marginal assets.