There is a developing trend of ‘refracking’ old shale oil wells in the U.S. that looks set to reap significant benefits.
The short life span of shale wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.
There are risks associated with refracking — from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir — and the sample size so far isn’t big enough to be conclusive, but oil giants like Marathon Oil and ConocoPhillips aren’t waiting to incorporate refracking into their shale operations.
Mike Vincent, a well-completion engineer who teaches the technique to industry workers, said he’s been overwhelmed by the sudden interest in the class. He even had to abandon holiday plans over the summer. “I’m booked every week teaching refrack classes out to November,” said Vincent, who runs a Denver-based firm called Insight Consulting. “It’s amazing how much passion there is.”
Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.” When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held in the well. Vincent said it’s common to see oil recovery climb 60% or more.
“I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.
A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30% more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.
While these kinds of increases are important to traditional drillers, they’re crucial in the shale industry, where output can start falling within days of a well being tapped. Companies such as EOG Resources, the largest shale oil producer, have long acknowledged that they generally are recovering just a small fraction of the oil and gas in place in the biggest and most prolific reservoirs.
“We’ve seen big changes in completion technology, and it looks like that’s only going to continue,” said R.T. Dukes, an upstream analyst at Wood Mackenzie in Houston. He estimates that there are about 100,000 horizontal wells that could be restimulated. “At that point, it becomes significant.”
So far, a few hundred refracks of shale wells have been done in the U.S., a figure that Vincent predicts will grow to at least 3,000 over the next two years. IHS forecasts they will come to make up as much as 11% of all hydraulic fracturing activity in the country by 2020.
The process to refrack a well isn’t that different than the original frac. Water, sand and other chemicals are pushed down the well, beyond the previously tapped areas, to create new fissures or to re-open clefts in the rocks that have closed.
It’s easy for things to go wrong. If poorly executed, the manoeuvre could take oil from the producing zones of other wells, or worse yet, ruin a reservoir. Then there’s the concern that some industry analysts have that a refrack only accelerates the flow without increasing the actual total output over the life of the well. EOG is among the drillers that remain reluctant to start using the procedure.
Refracking is still in its early days, said Robin Mann, global leader of the resource evaluation and advisory group in Deloitte LLP’s Houston office. “There’s always a risk you’re going to damage the reservoir or create interference between wells.”
But in an industry that is desperately trying to cut expenses after oil fell below $60 a barrel from over $100 a year ago, the technique’s low cost has great appeal. Because the first step in the fracking process is already done — the drilling of the wellbore — the outlay is just a fraction of the $8 million or so it costs to tap a new well.
Sanchez Energy, a Houston-based oil producer, expects to spend between $1 million to $1.5 million per well when it starts carrying out its first horizontal-well refracks later this year. The extra oil and gas it will pull out from each one as a result, meanwhile, could be worth as much as $2.5 million, according to Chris Heinson, the company’s senior VP and COO.
“It’s a compelling prize,” Heinson said in an interview last month. “There were a large number of wells out there that we know were originally completed with something that we could do better today. That’s really exciting.”