Despite nuclear secrets troubles, the US Department of Energy(DOE) is right on when it comes to helping fund new production technologies.
DOE told us recently about a joint government-industry experiment in California's San Joaquin Valley that recovered some 1 million bbl of incremental oil from part of an old field that had all but been abandoned.
During a 5-year period ending late last year, the 40-acre Pru Fee lease, part of the giant Midway-Sunset field near Bakersfield, underwent rejuvenation via some new wrinkles in reservoir characterization and thermal enhanced oil recovery (EOR) technology. The lease contributed nearly 1.8 million bbl of Midway-Sunset's primary production of more than 1 billion bbl. But reservoir conditions and viscous 13° API oil dictated thermal recovery techniques to release further production. However, cyclic steaming, the most common EOR technique used in the area, was only partially successful through the 1980s. Thereafter, a continuous steamflood might have proved more effective, but production had fallen to less than 10 b/d, so the lease seemed beyond the capabilities of conventional technology, even though as much as 90% of the original oil remained in place.
Enter the DOE's Reservoir Class Demonstration Program, established in 1991 to foster new technology in US oil and gas fields likely to be abandoned prematurely. Independent producers are the program's primary targets, though DOE has contributed some funding to joint research and development (R&D) ventures with majors, as well.
The dollars are in the details
Under the program, companies propose research and technology demonstration projects, listing details of intent backed by a solid business plan and a thorough R&D blueprint. There are limits to how much federal money can be granted for grassroots projects, with some increments for extended operations. DOE money must be at least matched or exceeded by the companies and institutions involved. That could be in cash, but also the value of services and equipment rendered. All data collected must be made available to producers who might benefit from them in similar field applications.
Dr. Steven Schamel of the Petroleum Research Center at the University of Utah and both Arco Western Energy and Aera Energy LLC, the Pru Fee leaseholders at the time, proposed the pilot. DOE came up with US $2.2 million, which was combined with $3.6 million in cash and services from the university and its industry partners. This allowed researchers to run seismic surveys, compile new information on rock properties and analyze cores and outcrops to create a geologic profile of the reservoir in unprecedented detail. They then fed the data into advanced computer programs that simulated how the reservoir would respond to various production strategies. The computer programs helped pinpoint the optimal patterns in which new wells should be drilled to inject continuous steam for improved recovery.
The rest is history. The initial project revealed heretofore unrecognized recoverable oil from another formation, and after a number of nine-spot steamflood patterns were installed, the old lease started yielding oil in large quantifies once again. In 1999, the project won an award for innovative technology from none other than this magazine's predecessor, Hart's Oil & Gas World. By March 2001, incremental production had hit the 1 million-bbl mark. Aera Energy operates the lease, having acquired Arco's interest several years ago.
Since then, other companies, using the technical data compiled at Pru Fee, have reopened several of the 27 remaining shut-in leases at Midway-Sunset.
This was just one of a growing number of projects in which government seed money served to engender R&D that not only improved production, but convinced other companies to try the new technology. Had taxpayer dollars not been invested in 1996, the Pru Fee project probably wouldn't have been tackled at all.
Hedging the risk with federal grants in return for revealing all technical findings to interested peer group companies makes such projects worthwhile. Ultimately, the benefits gained are returned to taxpayers as increases in domestic production.
Both the DOE and program participants pronounce the Reservoir Class Demo program a success. For the program's first three phases, DOE contributed about half of the $112.3 million spent on 52 projects. The returns in federal and state production taxes from just one of those projects - a successful waterflooding project in a high-paraffin reservoir in Utah's Uintah Basin that added 2.4 million bbl and spawned 11 new waterfloods in the area - exceeded the total cost of the program thus far.
The 'CW card' often played
Using federal greenbacks to stimulate new technology that benefits private industry and taxpayers has been a common practice in this country for decades. But despite their relative success, they too often are filed by politicos - liberal and conservative - under the corporate welfare, or CW, heading. Some play "the CW card" to lend a sleazy implication to such arrangements, particularly when it involves oil and gas companies, whom they tend to glom together under another "shady" collective term: Big Oil. It's a sure-fire way to rile the electorate.
DOE gets tarred with the same brush, and that agency, whether under Republican or Democratic administrations, is particularly sensitive to such sarcasm. It tends to hurt when budget time comes around. DOE does have its problems. It lacks an admirable record in some areas. For example, it has been roundly criticized for its defense security slip-ups.
But in oil and gas, the DOE hit a homer with shared R&D funding for improved production. Its Fossil Energy organization, totaling fewer than 1,000 scientists, engineers, technicians and administrative staff, does a bang-up job helping less well-heeled independents apply new technology to increase production.
But hold on, there's good news. President George W. Bush's new energy policy has undertones that could effectively thwart attempts to demonize programs like the Reservoir Class program. DOE's sharing research costs with industry could finally be reflected in the beneficial light for which it was originally intended.
In fact, it's one area in which the statement "I'm from the federal government and I'm here to help" actually rings true.

Comments