Permian CO2-EOR: pushing the boundary?

We see enormous opportunity from CO2-EOR in the Permian. It can double well productivity, generate 15-20% IRRs (at $50 oil) and uplift production potential from the basin by 2.5Mbpd. The mechanism and economics are covered in detail in our deep-dive note, Shale-EOR, Container Class.

But what is happening at the leading edge, as companies try to seize the opportunity?

To deploy CO2-EOR, operators must be confident in the technology. It must be predictable, with well-calibrated models informed by field-tests and laboratory studies.

Excitingly, Occidental Petroleum is developing such models. Its laboratory analysis into CO2-EOR has been published in a new SPE paper, in partnership with CoreLabs.

Oxy is at the forefront of CO2-EOR, according to our screening of patents and technical papers. It has conducted 4 x field trials, with further ambitions to lower decline rates from 2020 and drive value through its Anadarko acquisition.

This note profiles our top five findings from Oxy’s recent technical paper. CO2-EOR’s deployment is supported.

(1) CO2 was found to be “the best solvent” for huff’n’puff in the Permian, after laboratory-testing Wolfcamp cores, with CO2, methane and field gas. Under simulated reservoir conditions, around 3,600psi, bubbles of CO2 immediately began dissolving into the oil, helping to mobilise it.

(2) CO2 swelled the oil by 15-76% under the reservoir conditions tested in the study (below, right). Swollen oil is more likely to dissociate from the reservoir rock and flow into the well.

(3) Accurate ‘Equation of State’ models have been developed, matching the pressure, viscosity and well data from the laboratory study.

(4) Multiple Cycles. Huff’n’puff works by sequentially ‘huffing’ gas into a depleted shale well to entrain residual oil, then ‘puffing’ back the mixture of gas and oil. Ideally, this cycle can be repeated multiple times, recovering more oil each time (illustration below). Oxy’s laboratory study continued recovering material volumes of oil over six cycles. Lighter fractions were recovered in earlier cycles, followed by heavier fractions in later cycles. The authors concluded: “The multi-cycle incremental recovery – even at the small core plug scale – suggests the significant potential for multiple HnP EOR cycles for a future unconventional EOR project design”.

(5) Huge Recovery Factors. What slowed the eventual recovery of oil in the study was the high volume of oil already recovered. Initially, these shale samples contained 10.3% oil (as a percentage of the initial pore volume). By the end of the huff’n’puff trial, they contained just 2.4%, implying c77% of the oil had been drained: an incredibly high number, when compared with c 8-10% recovery factors in most analyst models. The result matches other lab tests we have seen in the technical literature (chart below). The field-scale implications of these studies are discussed in our deep-dive research.

Source: Liu, S., Sahni, V., Tan, J., Beckett, D. & Vo, T. (2019). Laboratory Investigation of EOR Techniques for Organic Rich Shales in the Permian Basin. SPE.

Shale: restoring downstream balance? New opportunities in ethylene and diesel.

We have all heard the criticism that shale oil is “too light”, so its ascent will create a surplus of natural gas liquids and a shortage of heavier distillates. Less discussed is the opportunity in this imbalance. Hence this note highlights one such opportunity, based on an intriguing patent from Chevron, which could convert ethylene into diesel and jet fuel, to maximise value as its shale business ramps up.

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Conclusions and Further Work?

Shale’s light product slate may create opportunities for integrated companies. Chevron’s ethylene-to-diesel patents are one example. But we have also seen a surprising uptick among other Oil Majors in patent filings for GTL, for oxidative coupling of methane and for a process to convert C3-4s into gasoline and diesel range molecules.

Our positive outlook on shale is best illustrated by our deep-dive note, Winner Takes All, but also be recent work focusing on the emerging opportunities with Fibre-Optic Sensing and Shale-EOR.

Can we help? If you would like to register any interest in the topics above, to guide our further work, then please don’t hesitate to contact us.

Shale EOR: Container Class

Will Shale-EOR add another leg of unconventional upside? The topic jumped into the ‘Top 10’ most researched shale themes last year, hence we have reviewed the opportunity in depth. Stranded in-basin gas will improve the economics to c20% IRRs (at $50 oil). Production per well can rise by 1.5-2x. The theme could add 2.5Mbpd to 2025 output.

Pages 3-5 review the theory of shale EOR. Its recovery factors could in principle surpass conventional EOR.

Pages 6-7 review lab results and field trials. They have been promising, suggesting >1.5-2x production uplifts should be attainable.

Pages 8-10 review the economics in detail. Our full model is informed by technical papers, and can be downloaded here.

Page 11 tabulates key statistics for using CO2 as a huff-n-puff injectant, the economic opportunities for carbon capture, but also the challenges.

Pages 12-13 attempt to quantify the production upside from shale EOR, by adapting our basin models.

Pages 14-15 cover the remaining challenges, including E&P patent-filing insights.

Page 16 lists a handful of companiesat the forefront of shale-EOR, including some earlier-stage start-ups.

EOG’s Completions: Plugged-In?

EOG has patented a system to deploy pressure and temperature sensors in its frac plugs, which are then retrieved at the surface, providing low cost data on each frac stage. The data can be used to improve subsequent frac stages. We model the economic uplifts at +$1M NPV and +5% IRR per well (at $50 oil).

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Machine Learning on Permian Seismic?

Pioneer Natural Resources is improving the accuracy of its Midland basin depth-models by up to 40%, using a machine-learning algorithm to re-calibrate its seismic from well logs. Faster drilling and better production rates should follow.

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Who else wants more shale?

The Majors’ deepening interest in shale was illustrated by Chevron’s $50bn acquisition of Anadarko. Consolidating in the Permian fits our ‘Winner Takes All‘ thesis.

But who else wants more shale in their portfolio? This is not to speculate on M&A, but simply looking at the companies’ research activity last year…

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If you would like to read our latest deep-dive note on shale-technology it is linked here. The full database, covering all 300 technical papers is available here.

U.S. Shale: Winner Takes All?

Shale is a ‘tech’ industry. The technology keeps improving at an incredible pace. But Permian technology is improving fastest, extending its lead over other basins.

These are our conclusions from assessing 300 technical papers across the shale industry in 2018. They are outlined in a new, 10-page note.

Across the board, we found 30% of our 300 technical papers should improve future economics. 60% were highly digital, and thus tended to be more impactful. Advanced analytics are still in an early innings.

The Permian stood out, extending its lead over other basins. It produced c25% of all the research; 25% higher-impact research and 40% more data-driven research.

Why the Thunder Said?

Energy transition is underway. Or more specifically, five energy transitions are underway at the same time. They include the rise of renewables, shale oil, digital technologies, environmental improvements and new forms of energy demand. This is our rationale for establishing a new research consultancy, Thunder Said Energy, at the nexus of energy-technology and energy-economics.

This 8-page report outlines the ‘four goals’ of Thunder Said Energy; and how we hope we can help your process…

Pages 2-5 show how disruptive energy technologies are re-shaping the world: We see potential for >20Mbpd of Permian production, for natural gas to treble, for ‘digital’ to double Oil Major FCF, and for the emergence of new, multi-billion dollar companies and sub-industries amidst the energy transition.

Page 6 shows how we are ‘scoring’ companies: to see who is embracing new technology most effectively, by analysing >1,000 patents and >400 technical papers so far.

Page 7 compiles quotes from around the industry, calling for a greater focus on technology.

Page 8 explains our research process, and upcoming publication plans.