E&P Momentum: Déjà Vu All Over Again

[Editor's note: A version of this story appears in the December 2019 edition of Oil and Gas Investor. Subscribe to the magazine here.]

With tens of thousands of locations populating the well inventory for E&Ps, it seems at first glance to be a little early discussing EOR in shale.

However, a program to inject natural gas in the volatile oil window of the Eagle Ford demonstrates that cyclic gas injec­tion (CGI) or, as more colloquially known, huff and puff, has moved beyond the ex­perimental stage and is a proven method to economically increase incremental oil recovery in shale.

Furthermore, the Eagle Ford process is undergoing experiments in both the Den­ver-Julesburg Basin and the Bakken Shale. The big prize, of course, is the Permian Basin, where excess natural gas earns zero revenue and is flared away, creating economic waste and bad optics for the in­dustry just as environmental, social and governance is becoming a major issue in interactions with the public.

EOR has been overlooked as a source of new tight formation oil in an era dominat­ed by hydraulic fracturing. However, EOR doubled Permian Basin production from conventional fields during the past 100 years. Early efforts involved re-injecting field gas into San Andres oil fields. During ensuing decades, the Permian witnessed significant efforts involving waterfloods. By the 1970s, EOR evolved to carbon-di­oxide miscible floods which have sustained conventional mega-fields for decades in the Horseshoe Atoll, the legendary Yates Field, and in multiple San Andres plays along the Central Basin Platform. Cumula­tive yield is measured in billions of barrels.

Yet, shale plays, the latest iteration in 160 years of American oil production, have unfolded with little interest in sec­ondary or EOR other than attempts to re­fracture wells that were stimulated with earlier generation completion techniques.

Tight formation oil plays currently yield 6% to 9% of original oil in place. Consid­ering EOR moved Permian Basin conven­tional oil recovery from 18% to 20% up to 40%, maybe contemplating methods to extend the life of tight formation plays de­cades into the future is time well spent.

To date, six operators have employed cy­clic gas injection on 30 well pads across the Eagle Ford. The most active of these, EOG Resources Inc., has not formally shared results with the industry. Howev­er, Houston-based engineering firm Shale IOR LLC conducted detailed detective and engineering work on Eagle Ford EOR and presented findings during the September 2019 DUG Eagle Ford conference in San Antonio.

Using public data sources, coupled with field work and enhanced via reservoir sim­ulation models, Shale IOR determined cyclic gas injection efforts in the Eagle Ford volatile oil window deliver consis­tent, robust results with average first cycle EOR adding 200 barrels per day per well and an increased incremental oil recovery between 80% and 100% during a 10-year project life.

Shale IOR’s review of six years of EOR effort in the Eagle Ford found at the sim­plest level that new oil production volume is proportional to gas injection volume on a cycle that includes 30 to 40 days of injec­tion followed by 30 days of harvest. This re­sponse is predictable, consistent and imme­diate, unlike the lagged production increase found in conventional EOR projects.

This is a repressuring process and not a displacement process as is found on misci­ble gas floods. If an operator reaches target pressure on the very first gas injection cy­cle, it is possible to generate a 100% in­crease in incremental oil.

In the Eagle Ford, the process involves capital spending of about $1 million per well for compressors and infrastructure and additional spending to purchase natu­ral gas. In the end, purchased gas is zeroed out by gas sold in the future, but it can en­tail an upfront cost of $12- to $18 million before the yield turns cash-flow positive.

The Permian Basin is a natural labora­tory for expanding the experiment in tight formation EOR and also adds the potential of finding ways to incorporate CO₂ tech­nology for enhanced recovery in tight for­mation plays. Short term, a Permian oper­ator that can recycle its own gas and has its own processing capability can achieve ro­bust economics via the CGI methodology. Additionally, there was an unexpected side benefit discovered in the Eagle Ford. Re­pressurizing primary wells (parent wells) for enhanced recovery can alleviate future well interference issues and address the increasingly vexatious parent/child well phenomenon.

Stay tuned.