Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Open frontier, energy edition, 8/24

Two rigs on same pad. Photo by James Ulvog.

Two rigs on same pad. Photo by James Ulvog.

In spite of dropping prices for crude oil and turmoil in the energy markets, the long-term trend of abundant oil and gas is encouraging. The oil ‘glut’ isn’t going away, meaning we will have abundant crude for quite a while, and refracking may open the door to recovery of even more gas and oil.

7/6 – Bloomberg Business – Refracking Is the New Fracking – Graph of estimated production from shale oil guesses output will rise from about 2.2M bopd in 2012 to under 3.5M bopd now to 5.5M bopd each year from about 2018 to 2023. Then production will tail off to about 4.5M bopd from 2032 through 2040.

That is somewhere in the range of around 48 billion barrels of oil that was untouchable a decade ago. My untouchable I mean there-is-noway-we-will-ever-get-to-that-stuff untouchable. (Calc as a very rough average of 4.5M bopd x 365 days a year x 29 years {2040 less 2012}.)

It is possible refracking might come close to doubling that output.

A very small number of multiple refrack experiments suggests it is possible to repeatedly refrack a well and see renewed output each time. New phrases are “Cinco de Fraco” for five times and “Octofrac” for eight.

Bloomberg analyzed 80 wells that had been refracked. The graph of their calculations show output from a refracked well has a higher production curve for the first year than from the first time around. At the year point the curves essentially match. Raw data on the graph isn’t available, so I eyeballed it. Looks like the average production in the refracked graph is about 245 bopd for the first year. Output in the second year on both graphs is about 70. That means increased output is somewhere in the range of around 170 bopd. For a year that would be 62,050 barrels. At $60 that would be around $3.7M gross revenue.

Article quotes one company saying a refrack might cost $1M to $1.5M. At $1.5M, that is a profit of about $2M in one year time. Assuming no increase in production after the first year that is a mere 100% return, all in year 1.

Really astounding brain stretcher is to consider that a refrack could be done whenever you want. Wait until prices go up for a few months and you expect the prices to remain there for a few months, then refrack a dozen more wells. It would be like money in the bank. Pull it out when you want some extra cash.

8/21 – Russell Gold at Wall Street Journal – No End in Sight for Oil Glut – Production of crude oil has increased in the US since prices dropped. Saudi Arabia has increased their production as well. Only drop off seems to be the majors who have halted the multi-billion dollar multi-year projects. Economic incentives at the individual producer level are to keep drilling and keep pumping.

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