From ages to stages

The production life of the field can be divided into three stages corresponding to the industry’s ages. The first, exploration, coincides with the industry’s youth. This stage favors the major oil companies, with their vast financial and human resources. The main players are geologists and geophysicists. During this stage, large risks are taken. The stage coinciding with the middle age is exploitation, when the large fields discovered during the exploration stage are waterflooded. Again, it favors the major oil companies because they own the large fields and have the financial and human resources to install and operate large waterfloods. The principal players in this stage are engineers. Large risks are taken during this stage, but not as large as risks of the exploration stage.

The depletion stage occurs during the mature age. At this stage, current fields are worked on by plugging back or deepening wells to new producing zones, and by infill drilling. Fields smaller than the discoveries of the exploration stage are found, and waterfloods begin in fields smaller than those waterflooded in the exploitation stage. Depletion is a stage of innovation, where many ways are found to do things cheaper and more efficiently. During this stage we see the widespread application of new technology such as 3D seismic, horizontal drilling, and СО2 flooding. This is the first stage that does not favor the major oil companies. Their large financial and human resources are better adapted to exploring for and exploiting large fields. Depletion favors independents, with their much lower overhead. And it favors two types of independents: the exploitationist and the depletionist.

Independent types

The exploitationist has a full staff of engineers, geologists, landmen, and accountants. He is familiar with and has participated in most of the new technology: 3D seismic, horizontal drilling, CO2 flooding, and so forth. In addition, he is capable of drilling wells very cheaply and has very low overhead. I like to think that my company, Henry Petroleum Corp., is an exploitationist. The exploitationist is willing to take some risks but does very little pure exploration.

The second type of company, the depletionist, is much different from the exploitationist. A depletionist has virtually no technical staff. With his low overhead he is able to operate wells much cheaper than either the major oil companies or the exploitationist. He will nurse wells along and pay close attention to them but does not have the technical staff to operate waterfloods and CO2 floods or to conduct 3D seismic. The depletionist is risk-averse. Independent operators must decide whether they will be exploitationists or depletionists. There is little room for compromise between the types. You can be either an exploitationist with a large technical staff or a depletionist with very little, if any, technical staff; you can’t be both.

O&G Journal, November 2007

Date: 2016-01-14; view: 764