HAVE SOME OIL WELLS BECOME MORE PRODUCTIVE BY BEING SHUT DOWN?

Allen Gilmer: The Unintended Consequences Of Shutting In Humans... And Oil Wells
Forbes, 11 June 2020

Tried buying a cheap bike at Walmart, lately? There are scant choices these days. This is one of the myriad of consequences, both intended and unintended, to our global health response to COVID-19 beyond the pandemic itself that should keep academicians busy for the next 20 years.
 
Over the last several months more people have been UN-employed, on both a real and a percentage basis levels, than has been seen since the Great Depression. Global supply chains have been resilience-tested in ways none have been tested before. Energy is at the very core of every supply chain. Absolutely nothing gets manufactured or moved from point A to point B without using some form of it. 

The Complexity Of “The Invisible Hand”

Humans take for absolute granted the benefits accrued from stuff out of sight and out of mind. Only when the “invisible hand” is handcuffed is there an opportunity to truly see its workings. 

The economic system is much like an ecosystem. Humanity has been conditioned to worry about ecosystem collapse, with reflexive efforts to save species, yet no such concern exists around the economy. Why? Fundamentally, little disruptions to it are magically solved. [...]

A Black Swan Cockfight   The pandemic has been characterized as a “black swan,” a rare, unpredictable event with potentially severe consequences beyond what’s normally expected. For folks in the energy industry,  Russia’s efforts to not play nice with OPEC+ in an effort to stick a fork in US unconventional oil and gas, combined with a structural deficiency in the futures markets which allowed spot prices to drop to laughable negative values turned a dangerous tragedy into a black swan cock fight, where every rule is thrown out. The stuff of nightmares.   The pandemic response shut down human and supply transportation virtually overnight. As much as 30 million barrels of oil per day, the product of 20 years of steady demand growth, of “just in time” deliverability of crude oil needed a place to land. The ironic aspect is that the remaining 70 million barrels per day keep modern civilization working at lock down levels and have kept humans dangerously oblivious to the consequences of losing that base load. How quickly can we recover as the global economic system comes out of forced hibernation?  The global energy industry has quickly slashed workforce and capital budgets planning for the worst. US oil companies underwent a shut-in of their own, curtailing production from thousands of wells in the US. It’s estimated that over 1.8 million barrels per day will be curtailed over the second quarter of this year, with the largest percentage of curtailments among the largest producers.  These large-scale shut-ins have long-term consequences. Analysts vary on how long it will take for supply and demand to balance. In the meantime, as shut-in wells are brought back online, the data provides interesting implications for the future.  It's a fascinating problem. For conventional reservoirs, shutting in wells runs the very real risk of never getting them back, which lies in stark contrast of shutting in gas wells.  For low-producing conventional “stripper” wells, shut-ins may well be permanent, as it’s unlikely they will come back at a level that makes production economic. This, in turn, impacts communities relying on severance and ad valorem taxes.  In many rural communities, revenue from these wells provides a stable foundational portion of the tax base for fire and police, ambulances, schools and social funding. A Happy Ending?   In an internal discussion with several Enverus producer members last month, they reported that their unconventional wells that are slowly being brought back on line as the spot price increases past $30.00 per barrel, are exhibiting higher rates than prior to shut-in, with one operator reporting new flows more than 2.5 times pre shut in rates. This “magical” behavior makes some sense. An unconventional oil well owes its ability to flow to being a “solution gas drive” reservoir. It produces oil as part of the gas coming out of solution as the pressure drops. It is the same mechanism an aerosol can exhibits to deliver its aerosolized liquids.      The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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A Black Swan Cockfight   The pandemic has been characterized as a “black swan,” a rare, unpredictable event with potentially severe consequences beyond what’s normally expected. For folks in the energy industry,  Russia’s efforts to not play nice with OPEC+ in an effort to stick a fork in US unconventional oil and gas, combined with a structural deficiency in the futures markets which allowed spot prices to drop to laughable negative values turned a dangerous tragedy into a black swan cock fight, where every rule is thrown out. The stuff of nightmares.   The pandemic response shut down human and supply transportation virtually overnight. As much as 30 million barrels of oil per day, the product of 20 years of steady demand growth, of “just in time” deliverability of crude oil needed a place to land. The ironic aspect is that the remaining 70 million barrels per day keep modern civilization working at lock down levels and have kept humans dangerously oblivious to the consequences of losing that base load. How quickly can we recover as the global economic system comes out of forced hibernation?  The global energy industry has quickly slashed workforce and capital budgets planning for the worst. US oil companies underwent a shut-in of their own, curtailing production from thousands of wells in the US. It’s estimated that over 1.8 million barrels per day will be curtailed over the second quarter of this year, with the largest percentage of curtailments among the largest producers.  These large-scale shut-ins have long-term consequences. Analysts vary on how long it will take for supply and demand to balance. In the meantime, as shut-in wells are brought back online, the data provides interesting implications for the future.  It's a fascinating problem. For conventional reservoirs, shutting in wells runs the very real risk of never getting them back, which lies in stark contrast of shutting in gas wells.  For low-producing conventional “stripper” wells, shut-ins may well be permanent, as it’s unlikely they will come back at a level that makes production economic. This, in turn, impacts communities relying on severance and ad valorem taxes.  In many rural communities, revenue from these wells provides a stable foundational portion of the tax base for fire and police, ambulances, schools and social funding. A Happy Ending?   In an internal discussion with several Enverus producer members last month, they reported that their unconventional wells that are slowly being brought back on line as the spot price increases past $30.00 per barrel, are exhibiting higher rates than prior to shut-in, with one operator reporting new flows more than 2.5 times pre shut in rates. This “magical” behavior makes some sense. An unconventional oil well owes its ability to flow to being a “solution gas drive” reservoir. It produces oil as part of the gas coming out of solution as the pressure drops. It is the same mechanism an aerosol can exhibits to deliver its aerosolized liquids.      The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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A Black Swan Cockfight   The pandemic has been characterized as a “black swan,” a rare, unpredictable event with potentially severe consequences beyond what’s normally expected. For folks in the energy industry,  Russia’s efforts to not play nice with OPEC+ in an effort to stick a fork in US unconventional oil and gas, combined with a structural deficiency in the futures markets which allowed spot prices to drop to laughable negative values turned a dangerous tragedy into a black swan cock fight, where every rule is thrown out. The stuff of nightmares.   The pandemic response shut down human and supply transportation virtually overnight. As much as 30 million barrels of oil per day, the product of 20 years of steady demand growth, of “just in time” deliverability of crude oil needed a place to land. The ironic aspect is that the remaining 70 million barrels per day keep modern civilization working at lock down levels and have kept humans dangerously oblivious to the consequences of losing that base load. How quickly can we recover as the global economic system comes out of forced hibernation?  The global energy industry has quickly slashed workforce and capital budgets planning for the worst. US oil companies underwent a shut-in of their own, curtailing production from thousands of wells in the US. It’s estimated that over 1.8 million barrels per day will be curtailed over the second quarter of this year, with the largest percentage of curtailments among the largest producers.  These large-scale shut-ins have long-term consequences. Analysts vary on how long it will take for supply and demand to balance. In the meantime, as shut-in wells are brought back online, the data provides interesting implications for the future.  It's a fascinating problem. For conventional reservoirs, shutting in wells runs the very real risk of never getting them back, which lies in stark contrast of shutting in gas wells.  For low-producing conventional “stripper” wells, shut-ins may well be permanent, as it’s unlikely they will come back at a level that makes production economic. This, in turn, impacts communities relying on severance and ad valorem taxes.  In many rural communities, revenue from these wells provides a stable foundational portion of the tax base for fire and police, ambulances, schools and social funding. A Happy Ending?   In an internal discussion with several Enverus producer members last month, they reported that their unconventional wells that are slowly being brought back on line as the spot price increases past $30.00 per barrel, are exhibiting higher rates than prior to shut-in, with one operator reporting new flows more than 2.5 times pre shut in rates. This “magical” behavior makes some sense. An unconventional oil well owes its ability to flow to being a “solution gas drive” reservoir. It produces oil as part of the gas coming out of solution as the pressure drops. It is the same mechanism an aerosol can exhibits to deliver its aerosolized liquids.      The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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A Black Swan Cockfight
 
The pandemic has been characterized as a “black swan,” a rare, unpredictable event with potentially severe consequences beyond what’s normally expected. For folks in the energy industry,  Russia’s efforts to not play nice with OPEC+ in an effort to stick a fork in US unconventional oil and gas, combined with a structural deficiency in the futures markets which allowed spot prices to drop to laughable negative values turned a dangerous tragedy into a black swan cock fight, where every rule is thrown out. The stuff of nightmares.
 
The pandemic response shut down human and supply transportation virtually overnight. As much as 30 million barrels of oil per day, the product of 20 years of steady demand growth, of “just in time” deliverability of crude oil needed a place to land. The ironic aspect is that the remaining 70 million barrels per day keep modern civilization working at lock down levels and have kept humans dangerously oblivious to the consequences of losing that base load. How quickly can we recover as the global economic system comes out of forced hibernation?  The global energy industry has quickly slashed workforce and capital budgets planning for the worst.

It's a fascinating problem. For conventional reservoirs, shutting in wells runs the very real risk of never getting them back, which lies in stark contrast of shutting in gas wells.  For low-producing conventional “stripper” wells, shut-ins may well be permanent, as it’s unlikely they will come back at a level that makes production economic. This, in turn, impacts communities relying on severance and ad valorem taxes.  In many rural communities, revenue from these wells provides a stable foundational portion of the tax base for fire and police, ambulances, schools and social funding.

A Happy Ending?
 
In an internal discussion with several Enverus producer members last month, they reported that their unconventional wells that are slowly being brought back on line as the spot price increases past $30.00 per barrel, are exhibiting higher rates than prior to shut-in, with one operator reporting new flows more than 2.5 times pre shut in rates. This “magical” behavior makes some sense. An unconventional oil well owes its ability to flow to being a “solution gas drive” reservoir. It produces oil as part of the gas coming out of solution as the pressure drops. It is the same mechanism an aerosol can exhibits to deliver its aerosolized liquids.   

The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining.    The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.     It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang. There is an old saying- “That which doesn’t kill us makes us stronger”. The pandemic is a stress test not just for medicine, but for the global economy. In hydrocarbons, what may be a death blow to a certain kind of well may very well be a shot of adrenaline to the heart of another. Given that North America is alone in producing consequential unconventional hydrocarbons, this could very well be wonderful news to a beleaguered class of producers.    As is usually the case, policies or regulations that insist on “one size fits all” are a guarantee to be unoptimized overall, and, in some cases, tragically destructive. This applies to the economy at large as well. Data and experimental insight can help lead IF we use them objectively.  We should seek a day where we aren’t blindly reacting.   Full post   Tell your friends about us They can get our newsletter for free © 2020 The Global Warming Policy Forum, All rights reserved. Our mailing address is: The Global Warming Policy Forum 55 Tufton Street London SW1P 3QL United Kingdom About this mailing list: You are receiving this email because you opted into it with your subscription to the GWPF or through CCNet. You can update your list preferences here: - Update subscription preferences - Unsubscribe from this list

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The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining. 
 
The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.  
 
It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang.

The induced fractures surrounding the wellbore contain a lot of oil, and have higher relative permeability and porosity than the very small pores in the rocks themselves. The small molecular size of natural gas (mostly methane) relative to its liquid brethren allow it to preferentially seep from the rock pores into the fractures and “re-energize” the oil remaining. 
 
The question remains whether this enhanced production just accelerates the production of the recoverable oil in the wellbore or does it actually increase the Estimated Ultimate Recovery (EUR)? Will this Black Swan Cock Fight yield, in the end, a powerful new production management tool for unconventional wells to help counterbalance their rapid production declines? Maybe.  
 
It would certainly be an ironic, yet unintended response to Russian efforts to damage US unconventional production.  It will certainly accelerate our understanding of the reservoir and charge dynamics.  With demand still finding its foothold in the market, however, it could impact overall supply and supply overhang.