The HUMMER of gas wells
New generation drilling techniques challenge convention
Not every word heard lately by the more than 270 Alberta firms with over 68,000 employees in oilfield services and supplies is discouraging. The industry still has fans in a world-class investment house that expects to come out on top among the fittest survivors of the crisis in big league finance.
“I reactivated my Hummer last week,” jokes Michael Zenker at the annual meeting of the Petroleum Services Association of Canada. In San Francisco, Zenker heads up North American gas and power research for the 20,000-employee global investment arm of Barclays Bank, a British business empire that has 318 years of experience at outlasting financial storms. His firm doubts that the current low in the energy cycle will last for long.
Zenker’s joke is an economist’s shorthand reminder that a drop in the cost of a widely used commodity revives demand and eventually sends prices back up. Barclays correctly predicted the mid-December decision by the Organization of Petroleum Exporting Countries to lop about two million barrels a day off total output by its 13 members. But the global bank also pointed out that OPEC enforced a cut twice as deep in 2000 to pull oil out of its last trough, when prices averaged US$15 at the market bottom in 1998. Barclays expects the next oil low as early as the first quarter of 2009 then a start on a strong recovery also forecast by the International Energy Agency.
Zenker’s Hummer is also a symbol for the next round of production growth. PSAC’s annual meeting also heard from John Tasdemir, an oilfield services specialist with Tristone Capital Inc., who maintains that industry’s emerging emphasis on unconventional sources of natural gas creates a demand for technology of greatly increased power. Tapping the hottest new supply source, shale gas, requires contractors that can blast networks of flow channels into geological zones resembling giant hockey pucks. The production technique combines long horizontal wells and potent “fracs” or injections of materials by high-powered pumps to fracture the dense rock.
“You’ve got to get wedged into this space,” Tasdemir says in describing the emerging market for equipment capable of drilling big wells and snapping open large geological layers. Shale gas development spells growing use of Western Canada’s estimated 270 deep rigs capable of drilling bores more than 3,500 meters long. High-pressure pumping is expected to be required for 30 per cent of gas wells this year, a 15-fold increase from the previous era of shallow drilling into naturally flowing formations.
The new shale wells typically go down 2,000 meters into the ground then make 90-degree turns to run horizontal legs for a kilometer or more across the rock layers. Multiple, long-distance fracturing injections needed to make gas flow require 18,000- to 23,000-horsepower pump arrays or more than 10 times the force used for conventional wells.
Tasdemir urges service and supply contractors to ensure their offerings are up to the demands of unconventional operations in order to profit from them. The rewards can be high, the Tristone analyst adds.
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