Growing concerns about the longevity of US shale production has a number of leading US producers looking for ways to delay the inevitable and squeeze more out of existing plays.
While advances in horizontal drilling and hydraulic fracturing (fracking) paved the way for the shale boom by unlocking reserves that were previously thought to be inaccessible, the good times might be coming to an end. Shale growth is widely expected to peak later this decade.
Some operators are already running out of their best drilling inventory and productivity is waning, spurring the industry to become more efficient and find ways to maximise resource recovery. The need to extend inventory has been behind a recent uptick in mergers and acquisitions dealmaking in the shale sector, as producers seek to bulk up their positions. With shareholders squarely focused on improved returns and capital budgets under tight control, companies are seeking to get more from less.
ExxonMobil is looking to improvements in technology to double the amount of oil it can pump from its Permian shale wells. At present, the company is only recovering around 10pc of its unconventional resources. "There's still a lot of oil being left in the ground," chief executive Darren Woods says, adding that although fracking has been around for a long time, the science behind the technique is still not well understood.
A particular challenge when drilling longer wells is how to "efficiently frack along that entire lateral and make sure you're opening the rock up along that entire length," Woods says. Then there is the question of how to keep the fractures open to ensure the oil can flow. "That, in my mind, is where the first wave of technology will come," he says. "We think we've got some promising techniques to employ there that will significantly improve our recovery."
Like close rival Chevron, ExxonMobil is counting on the Permian basin of west Texas and eastern New Mexico as a key driver of growth in coming years. The firm aims to boost its output from the top US shale play to as much as 1mn b/d of oil equivalent by 2027, a target that was delayed by the pandemic.
What will be the 10pc solution?
Meanwhile, in more mature basins such as South Texas' Eagle Ford and the Bakken in North Dakota, companies are restimulating older wells to give them a new lease of life. Enhanced oil recovery (EOR) is also seeing a renewed push. ‘Refracking' wells that were initially drilled at an earlier stage in the shale development cycle has become an attractive option in a higher-cost environment.
In the Eagle Ford, US independent ConocoPhillips is "expanding resources through technology wins like refracks, which are highly economic, low-$30/bl cost of supply and can increase the ultimate recovery of the well by 65pc compared with its original completion", executive vice-president for Lower 48 operations Nick Olds says. The company has also boosted drilling efficiency in the Permian by 50pc since 2019 by targeting longer laterals.
Leading Permian producer Pioneer Natural Resources has reported encouraging results from an EOR project, and is carrying out further testing. And Devon Energy is creating an "underground laboratory" to test new monitoring techniques for initial stimulation and shale production in the Eagle Ford. Backed by a grant from the US Department of Energy, the pilot project will also collect data on improving recovery rates, whether by refracking or EOR. "These learnings will enable us to optimise recovery of resources not only in the Eagle Ford, but across our broader footprint in the US," chief operating officer Clay Gaspar says.
