Crudefunders (www.crudefunders.com) is excited to bring this week’s article to you, because it typifies the spirit of oil and gas companies by showing us what they do when prices fall and times get tough. These hard working folks endure some of the harshest working conditions to produce the “lifeblood” of the world’s economies: fossil fuels. For the purpose of this article however, we’ll focus on crude oil because, when times get tough in the oil patch, producers get working on problems!
Ferocious production declines in crude oil production, in the shale regions, have plagued the exploration and production companies (E & P’s) for years. Declines of as much as 75% at the end of year one and 85% at the end of year two plague new shale production. When prices for crude drop below $40 per barrel, the production costs are higher than the return and they just don’t pay. Below is a graph of two production curves for wells in the Bakken Shale and Three Forks Regions. Notice the rapid decline in oil production by the end of the first six months, then after two years.
As stated above, when West Texas Intermediate (WTI) crude oil prices drop, crude oil production drops along with it, and it becomes more dramatic when the price of a barrel of crude oil drops below $40 per barrel. As a matter of fact, the decline in production accelerates the lower prices go. This is what happened in December 2015 – the price of crude dropped below $40 per barrel and production began to shut down. Because of what happened at the end of 2015, E & P’s began working feverishly to find a way to keep these deep declines from happening again, once prices came back up. Not to be trite, but they were running up against a stone wall.
One geologist put it this way, “rock is rock; it’s a hard problem.” I remember being at a conference where the speaker, a geologist and advocate of finding alternatives for crude oil and the refined products said, and I am paraphrasing, “we must remember that we are attempting to pull a viscous (thick) fluid through tiny space in sometimes porous and sometimes non-porous rocks; some work and some don’t. Some problems we can’t completely fix even with hydraulic fracturing.” He was almost right.
Let me introduce you to Baron Lukas with Envirologic Solutions. Baron is the C.E.O. of Envirologic Solutions and is a colleague of ours at Crudefunders. Baron is a retired US Marine Colonel and former fighter pilot with 27 years in the service. His drive, organization and leadership typify the spirit of E & P companies and are the reasons the co-founders pulled him in to assist in their efforts. Here’s their story!
Envirologic Solutions is a company that provides innovative technologies to help remediate (remove) hydrocarbons from fresh water and soils, and remove salt water from soils as well. As you might imagine, all three can happen when drilling for oil and gas. Co-Founders Brian Bluhm, President and Dale Rankin, Vice President, started Envirologic Solutions with the primary goal of being “The Best” in their market segment. “Many things in the world are developing” said Bluhm and Rankin, “but the oilfield and cleaning industry remain religiously the same.” Because of this, we encourage our team to work hard every day to create a spirit of partnership with our clients. We work with our clients to help solve problems. “Be a resource” is what Col. Lukas says, as he challenges his team. So, it’s somewhat ironic that because of this challenge, his team kept running into the same problem: Yep, you guessed it, rapidly declining production curves, from their shale producers.
“Believe it or not this problem affects our business directly”, said Col. Lukas. “Fewer drilling opportunities means fewer opportunities for Envirologic Solutions so, it made sense for us to step into the fray.” In this regard, we were very fortunate that one of our vendors invited us to participate as a distributor for a brand-new nanotechnology for enhanced hydrocarbon recovery.
I know the following will sound a bit “Techie” but it explains how this new product works. According to corporate materials, this new nanotechnology improves initial and peak oil and gas production, and reduces the current steep production decline curves. These results are possible because this nanotechnology accesses and penetrates a large percentage of the 85% of the natural fracture network within the reservoir that conventional proppants cannot affect. Once this vast network of fractures is reached, quadrillions of nano-sized particles suspended in a colloidal dispersion produce a Brownian-motion, diffusion-driven mechanism known as “disjoining pressure” to produce significant, long-lasting efficacy in the recovery of hydrocarbons. Not only do these nanoparticles release hydrocarbons from the formation, they physically fragment and surround the hydrocarbons and other liquids and gases, producing micro droplets that flow freely and can then be recovered more easily and more economically. (More Production & Cheaper are the keys here) Moreover, nanoparticles remain within the formation, clinging to the rock surfaces and the well’s tubular goods (pipes), persistently allowing easier flow of hydrocarbons, while potentially reducing the development of scale, corrosion, paraffins, asphaltenes, and other disruptive conditions.
All that to say, for those of us who aren’t in the oil and gas business, this new technology, once it’s released for marketing, will help keep higher production longer and at a lower cost. it will help keep down-hole equipment protected as well, from disruptive agents, which can slow or spoil potential long term oil and gas production. They are solving a problem for their customers and saving them money at the same time; remember “More Production & Cheaper” The spirit of innovation, once again has allowed the oil and gas industry to recreate itself in order to survive.
This new product is nearing the end of an extensive test and market introduction period, and is currently being employed by a number of forward thinking E & Ps. We’ll circle back, once the product is released, but for now we’re fortunate to be able to have an inside look at what is happening on the “drawing boards” of the oil and gas industry. The team over at Envirologic Solutions certainly has the “right stuff” it’s the stuff that makes our oil and gas industry great and keeps the United States the number one energy producer in the world. You can find out more about this company on their website here, or reach out to Col. Lukas at [email protected] to discuss this new, revolutionary nanotechnology.
By Tim Snyder
If you want more information on the energy markets and what is making prices move every day, go to our website www.crudefunders.com and scroll down to where it says “Subscribe”. There you will find our link to the daily commentary “Energy Wise”, a comprehensive piece that includes both fundamental and technical analysis of the day’s energy markets and provides you with the detail that you need. For more on Energy Economist Tim Snyder and his company, go to www.matadoreconomics.com.
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