Download - Revista E&P - Febrero 2011
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E P M A G . C O
A H A R T E N E R G Y P U B L I C A T I O N
Drill Bit Technology
Downhole Systems& Solutions
ReservoirCharacterization
RegionalReport:
Arctic
Drill Bit Technology
Downhole Systems& Solutions
ReservoirCharacterization
RegionalReport:
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DrillingadvancesExpandable reamers seta new industry standard
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UNCONVENTIONAL RESOURCES
LWD provides solution for bolsteringshale gas economics
Advanced microseismics optimizeunconventional development
RESERVOIR CHARACTERIZATION
Bridging the resolution gap
Radioactive sources are vital yetchallenging
DRILL BIT TECHNOLOGY
PDC bits optimized for shale development
Hybrid bit technology finds new ground
Drilling efficiency gains allow operatorsto drill more wells
New PDC designs produce major successes
DOWNHOLE SYSTEMS & SOLUTIONS
Versatile tool solves several well problems
Seeing is believing
DEEPWATER ADVANCES
New sensor allows leak detectionfor subsea structures
Strake technology extends spar field life
A legend embraces deepwater MPDtechnology in Indonesia
IndustryPULSE: Oil marketstightening quickly
Research indicates that the industry has recoveredfrom the recession and is going to be hard-pressedto meet growing demand.
EXPLORATION & PRODUCTIONW O R L D W I D E C O V E R A G E
FEBRUARY 2011VOLUME 84 ISSUE 2
A HART ENERGY PUBLICATION www.EPmag.com
COVER STORY
30
Drilling AdvancesExpandable reamers move from
marginal to integrated components
6
WorldVIEW: Taking a newlook at North America
In late 2009, Devon Energy decided to refocusits efforts on the US and Canada. Executive vicepresident of E&P Dave Hager talks about theexcitement of staying closer to home.
10
Unconventional: Utica
Operators take a closerlook at the Utica
Utica shale is young
but promising
67
71
36
40
42
46
50
52
54
56
59
63
74
76
78
88 REGIONAL REPORT: ARCTIC
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AS I SEE IT
The world is getting smaller 5
MANAGEMENT REPORT
Integrated solutions are an adaptive change 12
DIGITAL OIL FIELD
Cloud computing stacks up for SPE-friendly reserves management 17
IT advances provide a pipeline for efficient communication 22
EXPLORATION TECHNOLOGY
Making sense of it all 25
WELL CONSTRUCTION
New bit design provides better cuttings 27
PRODUCTION OPTIMIZATIONA lesson worth re-learning 29
TECH WATCH
A new approach meets an old need 80
TECH TRENDS
Innovations and new releases 84
INTERNATIONAL SPOTLIGHT
Uruguay presents offshore opportunities 87
INTERNATIONAL HIGHLIGHTS
Operators display global reach 98
ON THE MOVE/INDEX TO ADVERTISERS 103
LAST WORD
Taking the measure of reliability 104
E&P (ISSN 1527-4063) (PM40036185) is published monthly by Hart Energy Publishing, LP, 1616 S. Voss Road, Suite 1000, Houston, Texas 77057.Periodicals postage paid at Houston, TX, and additional mailing offices. Subscription rates: 1 year (12 issues), US $149; 2 years (24 issues), US $279. Singlecopies are US $18 (prepayment required). Advertising rates furnished upon request. POSTMASTER: Send address changes to E&P, PO Box5800, Harlan, IA 51593. Address all non-subscriber correspondence to E&P, 1616 S. Voss Road, Suite 1000, Houston, Texas 77057; Telephone:713-260-6442. All subscriber inquiries should be addressed to E&P, PO Box 5800, Harlan, IA 51593; Telephone: 713-260-6442 Fax: [email protected] Copyright Hart Energy Publishing, LP, 2011. Hart Energy Publishing, LP reserves all rights to editorial matter in this magazine.No article may be reproduced or transmitted in whole or in parts by any means without written permission of the publisher, excepting that permission tophotocopy is granted t o users registered with Copyright Clearance Center/0164-8322/91 $3/$2. Indexed by Applied Science, Technology Index and Engineering I ndexInc. Federal copyright law prohibits unauthorized reproduction by any means and imposes fines of up to $25,000 for violations.
DEPARTMENTS AND COMMENTARY
COMING NEXT MONTH The 2010 Drill Bit Records are in! And you can see them in the March issue ofE&P. Other features include coiled tubing drilling, advances in 4-D seismic, stimulation technology, and subsea
systems. The cover story is an international unconventional shales report that identifies emerging regions of interest,
while the monthly shale focus takes a look at developments in the Barnett. Finally, find out what E&P activity istaking place in West Africa in a special regional report. As always, remember to visit www.EPmag.combetween
issues to read exclusive articles on industry events and the latest news.
ABOUT THE COVER Baker Hughes 1214-in. Kymera is a hybrid design featuringthe rock-crushing strength of roller cones combined with the cutting superiority and contin-uous scraping of diamond bits. (Image courtesy of Baker Hughes Inc. and the AmericanPetroleum Institute). Transoceans Polar Pioneer semisubmersible is one of the drilling rigsthat has worked on the Troll field on the Norwegian Continental Shelf. (Photo courtesy ofTransocean)
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ONLINE CONTENT FEB 2011
Providence plans Irish drilling frenzyProvidence Resources will kick off a 12-well multi-
basin drilling program offshore Ireland in 2011, thecompany said.
PREMIUM CONTENT Subscribe @ EPmag.com/explorationhighlights
Deepwater Appomattox discoveryestimate about 250 MMboeAccording to IHS Inc., a deepwaterAppomattox discovery on Mississippi Canyon
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Tough year ahead forCanadian gas producers
By Ashley E. Organ, Assistant Editor
The strong Canadian dollar, US gas
supplies, and a keep America working
mentality will keep Canadian natural
gas prices low in 2011.
READTHELATESTEPmag.comINDUSTRYNEWS
XTO horizontal Woodford discovery flows418 b/d, 3.36 MMcf/dHouston-based XTO Energy Inc. reported an initial flow rate of 418 b/dof 50-gravity condensate, 3.36 MMcf/d of gas, and 530 b/d of waterat an Ardmore Basin horizontal test.
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The first appearance of the cloud in E&Pmagazine occurred nearly a year ago in
an interview with Steve Ballmer, CEO of Microsoft Corp. Ballmer talked with Hart
at Microsofts 7th annual Global Energy Forum about the advantages of the cloud
and what it means for oil and gas companies. A few weeks ago, Microsoft was back in
Houston for its 8th annual Global Energy Forum. Since last year, the focus on the
cloud has gained momentum with Microsofts Windows Azure platform, a productCraig Hodges, Microsoft general manager, US manufacturing and resources,
described as an operating system in the cloud.
The Windows Azure platform is fairly new. It was introduced a year ago and began
to gain traction in the oil and gas industry in November 2010. According to Hodges,
Azure allows companies to put their business processes up in the cloud.Acceptance across industries has been quick. Hodges reported there are 20,000 cus-
tomers and partners using Azure. On a broad base, weve got great uptake just in the
last 12 months, he said. Large international operating companies are onboard already,
Hodges said. Seven out of 10 big energy companies around the globe are in the game.
Chevron is one of the supermajors making use of the cloud. Chevron has improved
joint venture information sharing using Windows Azure, which the operator said pro-
vides a secure space of partners to exchange technical information, allows synchronizingbetween on-premises and cloud databases, and offers a federated security model that
allows each operator to manage its own authentication and authorization resources.
Pemex, Mexicos national oil company, is using the cloud to standardize data man-
agement, information access, and computing infrastructure to better use existing
datastores that contribute to controlling costs and optimizing production.
Shell also is using the cloud to increase business value through high levels of busi-
ness integration. Jay Crotts, vice president of IT services for Shell, told attendees of the
Global Energy Forum that Shell has identified four advantages of using the cloud:
speed, agility, cost, and scale.
Crotts explained how Shell is using what he called a hybrid cloud to its advantage.
The hybrid cloud combines traditional and cloud computing, he explained, listing
Shells hybrid cloud components as infrastructure as a service, platform as a service,and software as a service. The biggest challenge, according to Crotts, is not the cloud
itself. The challenge is in making sure there is a consistent environment internally. I
think the cloud is ready, he said.
Clearly, the cloud in its many applications holds great promise. These kinds of
technologies are going to make oilfield operations teams much smarter and able to
manage many more fields more productively, Hodges said.In light of the views that surfaced at this meeting, it appears that if your company is
not onboard with the cloud now, it might be time to give
serious thought as to why not.
The cloud is coming, and its coming faster than you
might think, Hodges said.
As ISEE IT
EPmag.com | February 2011
Editor JUDY [email protected]
Senior Editor RHONDA [email protected]
Senior Editor TAYVIS [email protected]
Senior Editor JO ANN [email protected]
Senior Editor RICHARD G. [email protected]
Contributing Editor DON [email protected]
Assistant Editor ASHLEY E. [email protected]
CorporateArt Director ALEXA SANDERS
Senior GraphicDesigner LAURA J. WILLIAMS
Production Director
& Reprint Sales JO LYNNE [email protected]
Manager,Special Projects JO ANN DAVY
Online Editor REBECCA [email protected]
Director ofBusiness Development ERIC ROTH
Group Publisher RUSSELL LAAS
1616 S. VOSS ROAD, STE 1000HOUSTON, TEXAS 77057
TEL: +1 713.260.6400FAX: +1 713.840.0923
www.EPmag.com
Exectutive Vice President, Consulting
E. KRISTINE KLAVERS
Executive Vice President and CFO
KEVIN F. HIGGINS
Executive Vice President
FREDERICK L. POTTER
President and Chief Executive Officer
RICHARD A. EICHLER
The world is getting smaller
Read more commentary at
EPmag.com
JUDY MURRAY
Editor
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February 2011 | EPmag.com6
industryPULSE
The slippery balancing act known as supply anddemand has taken its toll on the oil and gas industry
numerous times, most recently in 2008 as a result of alarger worldwide economic crisis. Arguably, the oil indus-
try rebounded much more quickly than other industries,with per-barrel prices resting comfortably in the US $80+range for much of 2010. And reports from agencies suchas the International Energy Agency (IEA) and EnergyInformation Administration (EIA) that track supply anddemand trends indicate that the industry is headed for aneven more comfortable state as it enters 2011.
In a research report titled Improving fundamentalspoint to higher oil price trading range, Simmons & Co.International studied data from these two agencies cov-ering much of the past year. While Simmons analyststend to be more bullish in general than the IEA or EIA,
the former surprised them in November by reportingone of its largest monthly demand revisions, expecting3Q 2010 demand to grow by almost 1 MMbbl/d of oil.With the upward revision, global demand growth hasaccelerated every quarter in 2010, the report states,resulting in a quarterly record high global demand of88.5 MMbbl/d of oil in 3Q 2010. The EIA also upped
its September US demand statistics by more than200,000 b/d of oil, further increasing the record-high3Q 2010 global demand estimates.
Additionally, IEA revisions indicated that the oil mar-ket was undersupplied in the second half of 2010, partlydue to a rapid decline in floating storage inventories.
Overall, the Simmons report indicates that 3Q 2010
marked a significant milestone as it was the quarterin which global demand fully recovered from the effectsof the economic meltdown. Global demand of 88.5MMbbl/d of oil topped the previous quarterly high of88 MMbbl/d of oil in 4Q 2007. Not surprisingly, this ismostly due to non-OECD countries, where 3Q 2010demand was 10% higher than 4Q 2007 demand.
2011 outlookWhat do last years trends mean for this year? Simmonsis modeling more normalized demand growth as itrecognizes that many variables exist. For instance, while
developing countries are seeing gross domestic product(GDP) numbers that are outstripping expectations,inflation and rising interest rates could dampen growthgoing forward. Continued pressure to the US dollar willmake exports more competitive, and o ther factorssuch as slowing Japanese production, austerity meas-ures in Europe, and displacement of crude oil used for
heating and power generation also will help stymiedemand growth.
Therefore, Simmons modeled flat demand inthe OECD and a 3.3% increase in non-OECDcountries, including China at 5% growth.
Meanwhile, supply growth is expected to bemore modest in 2011 than in 2010. The reportcited factors such as a mild hurricane season inthe US and onshore supply growth from theBakken and natural gas liquids (NGLs) as factorsspurring supply increases in 2010. But the glacialpermitting process now taking place post-morato-
Oil markets tightening quicklyResearch indicates that the industry has recovered from the recession and is going to be
hard-pressed to meet growing demand.
Global energy use is expected to grow by 36%, with non-
OECD countries led by China, where demand surges by
75% accounting for almost all of the increase. (Graph
courtesy of the International Energy Agency)
Rhonda Duey, Senior Editor
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February 2011 | EPmag.com8
rium in the Gulf of Mexico should ensure declining pro-
duction offshore, which possibly could offset onshoresupply gains.
Other countries will see modest supply growth,including Russia, Brazil, and Colombia, and biofuels
are expected to add another 200,000 b/d of oil to the
supply mix.
What about OPEC? The report notes that global
demand growth has outpaced both OPEC and non-OPEC
supply by about 400,000 b/d of oil. To help fill the gap,
Simmons expects that OPEC will need to ramp up its pro-
duction by about 1 to 30.1 MMbbl/d of oil. OPEC has
been producing between 29.15 and 29.25 MMbbl/d of oil
since July with no meaningful commentary on increasing
production, the report states.
Overall, the report concludes that the supply and
demand framework will tighten more quickly than had
been anticipated previously. While our demand assump-
tions for 2011 are well-grounded, it must also be said that
upside optionality outweighs downside risks based on
leading-edge trends and assuming global GDP growth of
about 4% or better in 2011, it states. Further, our non-
OPEC production assumptions do not necessarily have
the same degree of upside potential as our demandassumptions.
The bottom line is that it is more likely that the global
physical markets for oil tighten more quickly than more
slowly in 2011.
2010 to 2015The most recent IEA forecast indicates a modest
upward supply revision and a 300,000 MMbbl/d of oil
demand increase. However, the mid-term estimates (2010
to 2015) are positive, with a demand in global growth of
5.9 MMbbl/d of oil, offset only marginally by increased
supply. OPEC spare capacity is expected to decline from
5.1 to 3.6 MMbbl/d of oil over this period.
Simmons analysts found this report particularly encour-
aging because demand forecasts were revised higher forthe sixth consecutive month. Looking into 2011, the IEA
revised its demand forecast by 300,000 b/d of oil over its
previous forecast. The latest estimates put global demand
at 88.8 MMbbl/d of oil for 2011.
To 2035In a November 2010 presentation to the press, the IEA
forecast a 36% rise in global energy use by 2035, with
non-OECD countries accounting for almost all of the
increase. China alone is expected to see demand
surges of 75% over this time frame. Demand for all
types of energy will increase in non-OECD countries,while demand for coal and oil will decline in the
OECD. Meanwhile, conventional oil production is
expected to be flat, even including fields yet to be
discovered or developed, and incremental supply
surges will come from unconventional oil and NGLs.
The presentation notes that natural gas is set to
play a key role in meeting the worlds energy
needs. The agency forecasts unconventional gas
plays will account for 35% of the increase in global
supply to 2035, and increasingly this will comefrom non-US fields. Worse news for gas producers,
though the IEA expects the gas glut to peak soonbut dissipate very slowly. This will keep pressure on gas
exporters to move away from oil price indexation, particu-
larly in Europe. And as many have predicted, sustained
low natural gas prices are likely to beat out renewable and
coal in power generation.
From an oil standpoint, demand is expected to increase
before 2020 but taper off by 2035, with declining OECD
demand overpowering growth in non-OECD demand.
Industry plansAs if in anticipation of this tightening market, the global
energy market is planning record spending in 2011,according to a survey by investment bank Barclays Capi-
tal. The survey reports international E&P spending is
expected to rise 12% in 2011. We believe the industry is
in the early stages of a long international upcycle, the
report states.
More than 400 oil and gas companies were surveyed.
The largest spending increases will be felt in Latin Amer-
ica, the Middle East/North Africa, and Southeast Asia. It
also is anticipated that supermajors will outspend national
oil companies for the first time in several years. We viewthis as a positive indicator, the report states.
Worldwide E&P spending is on the rise, particularly outside of North
America. (Graph courtesy of Barclays Capital)
industryPULSE
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Oklahoma City-based Devon Energy has long
been a force with which to be reckoned
amongst the larger US independents, steadily
growing its portfolio both in North America and
overseas. But recently the company announced that
it would strategically reposition itself as a high-growthNorth American onshore company, divesting its off-
shore and overseas assets and directing proceeds from
those sales to its US and Canadian onshore portfolio
as well as retiring debt.
This is not to say the companys portfolio has been
vastly diluted. Devon is active in the Avalon and Bone
Spring plays in the Permian Basin, the Granite Wash
play in the Texas Panhandle, the Cana Woodford
shale play in Oklahoma, and the Jackfish and Pike
plays in Canada as well as holding acreage in the
Barnett, Haynesville, and Horn River shale plays.
With this vast portfolio now commanding its full
attention, the company has ambitious plans to
continue to grow shareholder value.
Why was the decision made to focus
on North America and not the Gulf
of Mexico or offshore Brazil?
We thought it was an appropriate
decision. With the large number
of opportunities that we had in
our E&P portfolio, there were
more than were going to be
properly funded in the next fewyears. When we looked at it from
several perspectives, it made the
most sense to monetize the off-
shore and international.
First, we didnt think that we
were getting the full value in our
stock price for the Gulf of
Mexico and international proper-
ties. Those tend to be more long-
term projects, and because they
didnt show up in short-term pro-
duction or reserves, they werent being fully value
the marketplace.
We also felt the nature of those assets made the
very marketable. We had had a number of discove
in the deepwater Gulf of Mexico as well as discove
in deepwater Brazil, and we felt that they would b
very interesting to many different companies.
It wasnt a question of c ompetency. We have tre
dous operational competencies both onshore andshore. But we had to make a decision.
Your discovery in Brazil was a presalt discovery.
Was that one hard to walk away from?
From a pure excitement and technical perspective,
yes, because theres a lot of thrill, and we think its
tremendous discovery. But sometimes you have to t
off your technical hat and put on your financial ha
This refocusing must have put some strain on your group
optimize the remaining assets. How have you gone abou
doing this?
We had not really been using the North American
onshore assets for our growth engine in the past fe
years. Redirecting some of the people and capital
onshore allowed us to take adva
tage of the deep inventory that w
have. We have increased the cap
spending associated with North
America onshore, and we are co
dent were going to have consist
growth from those opportunitie
At the same time, we have to
ognize the oil and gas environmthat were in. We arent necessa
trying to maximize the product
growth at this point; were tryin
optimize production growth alo
with the proper fiscal discipline
that we focus on growth on a p
debt-adjusted share basis. We co
grow at an even higher top-line
if we chose to take on a lot mor
debt or issue a lot of equity. Bu
thats not what were doing.
Taking a new look at North AmericIn late 2009, Devon Energy decided to refocus its efforts on the US and Canada. Execu
vice president of E&P Dave Hager talks about the excitement of staying closer to home
February 2011 | EPma10
worldVIEW
Rhonda Duey, Senior Editor
Dave Hager of Devon Energy.
(Images courtesy of Devon Energy)
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The last few years have indicated a trend within the oilindustry to provide integrated/digital solutions to the
customer, with the value proposition that functionalsilos work together for the common goal.
Organizations can, at times, lack the necessary frame-work to execute an integrated solutions strategy. Astrategic bridge is necessary to execute the strategy andperform integrated operations. This bridge supportsstrategic decisions through the structure and culture ofan organization. Customer needs are addressed throughthe project and program approach, which is a collabora-tive effort that brings together people of various levels ofexpertise and perspective.
Statistics show that 66% of the companies in the USfail to execute their strategy. This failure is due largelyto the fact that those strategic decisions do not coincide
with the structure and culture of the organization,which results in poor execution and strategic failures.Even when technical challenges are solved through col-laboration, the most important question is whether thiscollaboration is worth it.
Integrated solutions: a strategyTraditionally, service companies have had a weak matrixfor solving a particular problem related to a specific areaof expertise. Operators leverage the industrysspecific knowledge in their operations. Servicecompanies that offer differentiated products
and solutions need to understand the cus-tomers needs and provide cutting-edge tech-nology with less response time. Their focus is tooffer unique value for the customer by creatingproducts with higher value.
Strategic alignment for executionAn important factor in executing the inte-grated solution strategy is the environmentof the service company. The correct strategicalignment measures the proper fit between the
two elements of a domain (i.e., between the strategy andculture, between the strategy and structure, or betweenthe structure and culture).
The four archetypal organizational cultures includecompetence, control, collaboration, and cultivation,often referred to collectively as a cultural egg. Inte-grated solutions fall under the collaborative-type cul-
ture, which emphasizes teamwork and people bydeploying cutting-edge technology. The distinctive com-petence of an organization can be determined with sucha cultural egg. For integrated operations, for instance,customer intimacy is required, which in turn means acollaborative culture. Operational excellence, on theother hand, is a control culture.
It is very important to recognize clear, distinctivecompetencies. Companies unable to recognize theircompetence have a real challenge. For example, anorganization is trying to reduce cost to increase the busi-ness efficiency of its several business segments in dis-
tressed economic times. The solution can be focusedtoward those business segments that are not generatingconsiderable profits. But those business segments canrepresent distinctive organizational competence, suchas innovation. A company might think that the problemcan be fixed by reducing operating cost, resulting inbusiness optimization. But, in fact, this random costreduction only helps in the short term. The long-termdamage will be significant because the organization has
Integrated solutionsare an adaptive changeAn integrated solution needs an appropriate environment for strategic execution.
Hamayun Z. Raja, SPE, Halliburton
PROGRAMS
IMPLEMENT OPERATIONSSTRATEGY
PROJECTSPORTFOLIO
STRUCTURE
CULTURE
A strategic bridge executes the strategy and performs integrated operations.
(Figures courtesy of Halliburton)
February 2011 | EPmag.com12
managementREPORT
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EPmag.com | February 2011
Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserves Information from the Soci-
ety of Petroleum Engineers (SPE), which incorporates
the requirements of the 2007 SPE/WPC/AAPG/SPEE
Reserves and Resources System, gives clear guidelines asto what is expected of modern reserves reporting. The
fundamental idea of providing online reporting soft-
ware that is secure, simple, and yet powerful in its flexi-
bility is equally applicable to reserves reporting.
The SPE standard states, The sufficiency and reliabil-ity of the database is of primary importance in the esti-
mation of reserves and other reserves information. The
information within such a database reflects the total
hydrocarbon resources of an oil company, and whether
in place, contingent, or prospective, these resources are
its primary assets. Accurate reporting against these assets
is not only needed to comply with regulations, but also isused to define the total value and share price of the
company so it can secure finance and investment oppor-
tunities for the future.
It makes sense, therefore, that a centralized system
should contain all of the key information and properties
relating to the companys property portfolio to give a
complete view of the business, not only to ease the
process of auditing, but also to provide a powerful busi-
ness tool upon which to base strategic decision-making.
Audit-readyThe values of reserves are heavily scrutinized, and sup-
porting software should contain comprehensive securitywith a clear audit trail that always is available. The SPE
document calls for a review of the policies, procedures,
controls, documentation, and guidelines as part of an
audit of reserves information. Policies and procedures
should be incorporated into a single database as accom-panying metadata, ensuring that information can be
presented quickly and clearly to the auditor. Further-
more, the controls and reporting available within such a
database application can prove data integrity and even
document the business process for the user.
The SPE says that checks should be made on adher-
ence to policies, procedures, and controls. Automatictracking of changes with details of what was changed,
when, and by whom simplifies operational processes and
ensures compliance with auditing requirements.
The SPE also recommends that historical reserves and
revision trends be part of an audit. To comply with this
requirement, it is essential that all information,
historical and current, is contained within one
database. By storing all of this information in a
secure cloud, a complete inventory can be
stored in one place with an audit trail that can be
traced. This single window on information
enables revisions, re-appraisals, and additions tobe viewed quickly, with the added benefit of
detailing why a change was made, what was
changed, and by whom. Furthermore, methods
by which reserves are estimated and which organ-
ization or person provided the estimate can beidentified, truly giving a complete view of the
ways in which values have been derived.
System flexibilityDatabase management might seem like an IT
issue, but in the area of reserves information, this
digitalOIL FIELD
Cloud computing stacks up forSPE-friendly reserves managementAn online solution helps oil companies manage their most important assets.
Dr. Esther Hayes, EnergySys
The graphical report shows production forecast and reserve categoriza-
tion. (Figures courtesy of EnergySys)
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Sea
Change
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EPmag.com | February 2011
database is fundamental to how companies run their operations. The SPErequires that significant changes from anything other than production
should be accommodated. This could be geographical or political differ-
ences, for example, or inflation or price variances. A system needs to allow
for the investigation of multiple long-term investment scenarios and offer the
flexibility to show the effects that any changes have on the current or alterna-
tive business strategies. Changes must be in accordance with review/appraisal
cycles and must be completely audited. A modern solution should take datafrom reserves portfolios and development definitions and handle all of the
reserves inventory management, including calculating monthly and annual
forecasts with values for revenue, expenses, reserves, production, and net
present value, giving users confidence in both their business decisions and
their ability to meet auditing requirements.
The solutionThe EnergySys Reserves Management application takes operational data
from production and allocation reporting systems or even directly from an
email so the latest information regarding reserves decline is readily avail-
able in the reserves inventory. This also gives the user the capability to review
forecasts against actual data, providing the information required to continu-ally improve estimates and future projections.
The latest online application, built on a common core also used for the
companys Hydrocarbon Allocation and Production Reporting applications,is a single place for all statutory and supporting data. It provides flexible cal-
culations and reporting to meet diverse needs whether for internal, cus-
tomer, or regulatory requirements. It allows for any number of alternative
development scenarios defined by production and reserve profiles, capital
and operational expenditure schedules, price profiles, different levels of
project risk, and long-term price and cost discounts. Standard workflows and
calculations are provided within the system, including calculation logging to
clearly show how values have been determined and that data integrity has
This single window on information enables revisions, re-appraisals, and additions to
be viewed quickly, with the added benefit of detailing why a change was made,
what was changed, and by whom.
digitalOIL FIELD
1W
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And the SeaLance Dw C
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February 2011 | EPmag.com20
been maintained. It is simple for an auditor to review
information and confirm good data governance now
and for the future.
A modern product should offer flexibility and usabilityalong with complete security and traceability. Its aim
should be to remove any difficulty associated with audits
for both the company being audited and the auditor.
No more spreadsheetsMany companies continue to rely on spreadsheets to
manage their reserves information despite the fact that
spreadsheets do not address many of the problems identi-
fied here. In fact, spreadsheets can exacerbate these
issues. Inherent problems associated with validating and
controlling data entry into spreadsheets along with ques-
tions related to avoiding unintentional modification, sys-tem reliability and data integrity, version control, and
change tracking make spreadsheets unsuitable for man-
aging information of this kind. The entire system shouldmake processes demonstrable with clear and quick
reporting to show an auditor how the reserves were esti-
mated and how data are managed.
EnergySys has recognized the value in having a solution
that can be up and running in days or weeks rather thanmonths, with the right people able to access the right
information, wherever and whenever they need it.
Online, user-friendlyThere also is a growing recognition in large organizations
that IT is not a core skill except in very specialized areas
such as seismic data processing and analysis, where high-
performance computing and sophisticated algorithms are
employed. Deployment of reserves management systems
traditionally has been associated with long implementa-
tion times and substantial upfront costs. An online service
can reduce these factors significantly. Users access thebest available technology and security developments
through a managed online service. The only challengethen is to build the application and by adopting a ready-
made application, the hard work already is done.
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In todays tough energy market, it is critical for oil and
gas workers to be able to communicate and share infor-mation with colleagues quickly and efficiently anyplace,
anytime. Swings in supply and demand, volatile prices,
and shifting worldwide energy policies have made E&Pmore complex than ever. As the industry expands globally
and work teams are dispersed among multiple locations,
enabling instant communication is a prime focus for oil
and gas IT departments.
To investigate industry attitudes and practices related to
this communication imperative, Microsoft and Accenture
recently conducted their third annual survey of 205 pro-
fessionals within international, national, and independent
oil and gas related companies. The goal of the survey was
to understand the factors that drive increased collabora-
tion among professionals and determine current thinking
about the business value of collaboration tools to enhanceprocesses and workflows. The newest survey amplified key
trends compared to previous survey findings.
The need for collaboration tools is growingIndustry professionals are collaborating more than ever.
More than one-third (34%) of those surveyed reported
spending more time collaborating in 2010 than the previ-
ous year, and respondents consistently identified the capa-bility to interact with colleagues, partners, and customers
from anywhere at any time through any device as a tech-
nology enhancement that would further company success.
The rise of the digital oil field draws attention to thisneed because it requires the optimization of communica-
tion processes between field workers and management at
home offices. While it is essential for management to
securely capture and analyze the constant stream of data
flowing in from the field, it is more vital for field workers
to have access to technologies that enable them to collabo-
rate with management and receive real-time feedback for
critical decision-making.
Large amounts of information are being shared among
colleagues in disparate office locations, and there has
been an enormous increase in the amount of collabora-
tion that is taking place with experts outside a given organ-
ization. There is no question that the need for a secure
exchange is crucial.
Although the vast majority of those surveyed agree withthis assessment, nearly 40% of them said when they use
instant messaging (IM), they used public IM tools for busi-ness collaboration, while only 27% are using company IM
tools. Respondents listed email as the primary method
for file sharing, both inside and outside the organization,
followed by the use of physical storage devices like flash
drives and USBs. With employees using various forms
of company and social media to communicate, there is
potential for sensitive information to be compromised.
Another critical point is that many industry professionals
are using older, non-secure methods to share information
and files, a process that unwittingly puts a company at riskfor sensitive data to be lost or stolen. Management needs
be aware of the need for secure sharing environments.
Unified communications solutionsTo enhance collaboration across work groups and ensure
the security of information exchange, it is clear that oil
and gas companies must make fundamental changes to
the way they communicate by integrating collaboration
technologies and introducing remote collaboration tools
into a unified communications system. A number of for-
ward-looking companies in the oil and gas industry
IT advances provide a pipeline
for efficient communicationOil and gas professionals can work smarter, improve productivity, and enable access to criticalinformation in real time by streamlining communication and business decision-making.
Mike Bannon, Microsoft Corp.
As the industry expands
globally, enabling instant
communication is a prime focus.
February 2011 | EPmag.com22
digitalOIL FIELD
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digitalOIL FIELD
already are adopting unified communications technology
to gain the new efficiencies they require as the industry
evolves. Unified communications solutions allow users to
see the presence of colleagues to determine who is avail-able to communicate and then collaborate by instant mes-
sage, voice call, and/or one-to-one video conferencing to
exchange files and see one anothers desktops.
Indonesias MedcoEnergi Internasional, for example,
recently sought to upgrade its unified communications
capabilities so every employee could stay connected.
This approach also was expected to reduce costs across
the organization. In 2010, MedcoEnergi Internasional
deployed Microsofts Lync unified communications solu-
tion in combination with IP phones so even employeeswithout computers could stay connected and have access
to presence information. By deploying Lync Server, Med-coEnergi has been able to provide more resilient phone
service at remote sites at a fraction of its previous cost. By
virtualizing its servers, enabling one server to run many
different operating systems and applications, the company
has seen a 50% reduction in required hardware.
Royal Dutch Shell also has gained effi-
ciencies and cost improvements with its
Microsoft communications server. Its
104,000 employees work in more than 110
countries and territories in locations as
diverse as upstream exploration sites,
downstream refineries, and trading floors.Eighty percent of its teams are global
teams, with members in multiple locations
around the world. Microsoft technology
has streamlined the companys communi-
cations significantly. Shell employees canswitch easily from one communications
method to another. With one click, a
user can change an IM conversation to
a voice call or video conference. More-
over, employees phone numbers and
voice mail are not fixed to a specific phone
device. Calls are routed to wherever theemployee is logged on.
Because Shell employees work in so
many different time zones, determining
who is available in any given geography
often was a challenge. Employees now can
look at an icon next to a persons name
and know whether that colleague is online,
out of the office, or busy.
Unified communications also is reducing
Shells technology costs because a central-
ized VoIP system based on its unified com-
munications solutions lowers the cost and complexity of
managing multiple private branch exchange (PBX) sys-
tems at global offices. The system centralizes all call con-
trol, collaboration, and management servers into threedata centers. Shell anticipates retiring more than 200
pieces of PBX equipment as a result of its switch.
Shell also gains savings from the consolidation of audio
and video conferencing into its Microsoft solution. The
company previously had maintained more than 600 video
conferencing rooms. That number will decrease as Shell
continues to deploy its unified communications technology
globally. Shell expects to significantly reduce the charges
received from its hosted audio conferencing service as well,
with users transitioning to calls via unified communications.
When oil and gas companies apply technology such as
Microsoft Lync for communicating whether from head-quarters to jungle operations or from senior workers to
new recruits they have begun to control costs, improve
productivity, provide enriched support for their remote
workforce, gain operational efficiencies, and become more
responsive to changes in their business environment.
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At a
time when reservoirs are becoming harder to find
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Well positi o
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es
or the 1
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Eldad Weiss is a leading figure in the petroleum
software industry, having grown Paradigm Ltd.
from a small boutique technology player into one of
the largest software and solutions vendors in the
industry. While the industry has made tremendous
strides in data integration over that time, he said,
challenges remain. I recently visited with Weiss to
discuss the status and future of the industry.
What are some of the changes you anticipate in the com-puter industry that have the ability to bring about disrup-
tive change in seismic interpretation? How will the industry
need to adapt to those advances?
I believe that the progress weve been seeing over the
past two decades the exponential growth in available
data, the automation tools being developed to process
and analyze these data, techniques for interpreting
multiple surveys and multiple volumes, and multidisci-
plinary data sharing will continue
and perhaps even accelerate. Each
leap forward will require the industry
to adapt its tools and workflows totake advantage of the new capabilities.
The emergence of prestack data as
a component of many workflows, for
example, requires more than just an
ability to see trace data. The inherent
complexity of ray paths through the
overburden, the sheer volume of data
that need to be accessed, and the
effects of anisotropy on waveform propagation are only
some of the challenges that face deadline-constrained
geoscientists who are suddenly being required to make
sense of 30 to 50 times more data than before. Visuali-zation tools, new display methods, and processes that
make visible the illumination that resulted in a given
reflector or event are all part of the answer and will
become increasingly accessible to the new generation
of geoscientists.
Despite enormous advances in computer technology, many
interpreters still do things the same way because Thats
the way Ive always done it. How can change management
be driven by oil companies? By software vendors?
The challenges for the E&P industry, as I see them,
are threefold: We need to further develop the toolsneeded to fully utilize all of the available data, we
need to build new workflows to make efficient use of
multidisciplinary integration of data and applications,
and we then need to embark on a comprehensive edu-
cational program aimed at transitioning such novel
processes from advanced users to the mainstream
community. This will entail a joint effort on the part
of E&P software vendors and oil and gas companies.
Users are in danger of being over-
whelmed by the sheer amount of data
now available and by the integration of
all these data at the desktop level. Therole of data management is becoming
increasingly important due to the
growing need to improve data access
permission and security measures.
Oil companies must also insist that
their asset teams take advantage of the
new technologies and back up their
drilling decisions with a critique of the
data and their limitations; a review of alternate out-
comes, probabilities, and uncertainties in the interpreta-
tion and model-building phases; and a discussion of the
risks engendered by prospective drilling programs(overpressure, cave-ins, fracture zones, etc.). These dis-
cussions should be interactive and comprehensive and
include all of the various teams as well as management.
It is only when managers ask for more detail and rigor-
ous science as part of the decision-making process that
geoscientists will begin to
broaden their activity and
use new and advanced
technology to deliver on
these expectations.
Making sense of it allParadigm Ltd.s founder and CEO discusses the challenges the industryfaces as the data explosion accelerates.
Read more commentary at
EPmag.com
RHONDA DUEYSenior Editor
EPmag.com | February 2011
explorationTECHNOLOGY
Each leap forward
will require theindustry to adapt
its tools andworkflows to takeadvantage of thenew capabilities.
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wellCONSTRUCTION
Drill bit technology is in a continuous state of
evolution. Many operators have experienced
better performance in drilling operations by match-
ing bit design to highly advanced bottomhole assem-
blies and using bits specifically designed to contend
with specific types of formations, including improved
cutter strength, hybrid combinations of roller cones
and PDC technology, and more aggressive cutter pro-files. With an improved capacity influencing bit selec-
tion, more options are leading to more efficient
drilling projects.
When it comes to analysis, more rock equals more
data. While coring provides optimal samples, the trips
needed to acquire cores are not always considered
the best investment, especially in tight markets such
as unconventional gas. While
MWD/LWD can assist drilling
engineers in optimizing the tra-
jectory of the well, geologists
often are left out of the processwith only a limited amount of
information garnered from cut-
tings. Where PDC bits are used,
these cuttings often are referred
to as rock flour. While cuttings
can provide a limited amount of
reservoir data, larger samples are
needed to provide more down-
hole data.
Encore Bits LLC currently is making
headway with what is known as the
Micro-Coring Bit. The new bit providesall the advantages of PDC capability,
while allowing the generation of a micro-
core of the formation being drilled in
the center area of the bit where the cut-
ting structure is interrupted. Conven-
tional cores are acquired by running a
standard coring bit, which requires an extra trip with
no gains in ROP or total depth. By adding micro-cor-
ing capability to an engineered PDC bit, the coring
process takes places automatically with each successive
plug or micro-core circulated to surface through the
annulus. Having a legitimate section of rock can open
a wide range of information on downhole conditions
throughout the entire well bore, giving geologists
something to work with. The design allows for an
improvement in cuttings quality, especially in hard
rock environments where standard cutting sizes are
reduced due to the low depth of
cut achieved in these formations.
In addition to providing geolo-
gists with better rock samples
at surface, the No Center BitDesign also saves a significant por-
tion of the energy used in the bits
cutting action. While this bit cur-
rently is being tested domestically,
it already has shown the ability to
generate larger rock fragments
than conventional bits in Pak-
istans Lumshiwal sandstone.
Coring operations soon might
be carried out simultaneously
with the drilling operation, reduc-
ing trips and nonproductive timein the process.
Drill bit design will continue
to improve the speed at which
fields are developed. Breaking
down the barriers that exist
between
drilling productivity and reser-
voir characterization can only
enhance the profitability of
field operations.
New bit design
provides better cuttingsRock data are key parts of full field development, although rock flour isthe most available substance being circulated up the annulus for now.
Read more commentary at
EPmag.com
TAYVIS DUNNAHOESenior Editor
EPmag.com | February 2011
When itcomes to
analysis,more rockequalsmoredata.
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CLEANER
At Newpark Drilling Fluids , environmental
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productionOPTIMIZATION
Some might recall when branch banks were forbidden
in Texas. I know that is hard to believe when you see
the proliferation of banks gracing almost every intersec-
tion in town today, but it is true. Perhaps you would like
to know why?
Back when Texas really was part of the wild west,
towns sprang up on the frontier like weeds. In those days,
three elements defined a town a saloon, a general store,
and a bank. We all know about the first two, because they
figured into every western movie ever made. The last edi-fice managed to keep a low profile. The reason was that
the entrepreneurs who ran the early banks believed they
could make more money by installing branch banks in
every new town and grow their businesses. The only prob-
lem was they could have had a dozen banks, but they only
had one set of money. The way they stayed in business was
as soon as the bank examiners came to do their annual
audit, the bank hired a man with a fast horse to move the
money to the next bank overnight. Completely unaware
of this nefarious scheme, auditors were counting the samemoney over and over.
Finally, there was a crop failure or some other eco-nomic disaster, and the hapless depositors found out that
there was not enough money to cover their withdrawals.
After a few unlucky bankers were strung up by angry
crowds, branch banking ended in Texas, for almost a cen-
tury. So why am I telling you this story?
Some of todays oil patch entrepreneurs are like those
old bankers. Say the Black Gold Energy Co. issues a press
release claiming a 20% production increase from its
Bonanza field. Within a few weeks, you start seeing ads
and flyers saying, Black Gold uses Big Bite Bits to boost
production 20%You guessed it; they all are counting the same 20%
increase over and over and taking credit for it. The fact is
that all of these products might have contributed to theincrease, but it is highly unlikely that any one product
deserves credit for the entire production increase.
I am starting to hear grumbling from the ranks of oil
operators, particularly some independents. In a recent
conversation, an industry veteran voiced his opinion that
many service companies are not delivering the value to
support their prices. This is another way of implying that
they are trying to take sole credit for every production
improvement, increase in drilling efficiency, or cost-saving procedure. If they can take credit for the value
added, they can charge more. That might be true if they
could prove conclusively that the value added resulted
solely from their product or service.
An operator explained it to me in clear terms: I know
you think that if your tool improves drilling efficiency,
you are entitled to charge more for it, but what you dont
realize is that our company doesnt care about penetra-
tion rates, per se we only care about money! He con-
tinued to explain that if a new whiz-bang rotary steerable
system upped penetration rates by 25% but caused an
additional bit trip, all those drilling efficiency gains werefor naught.
The industry is plainly exhorting service companies to
sharpen their pencils and bring a positive business case
along with their sales pitches. If a company cannot prove
the value it claims todeliver or cannot deliver
that value consistently, it
had better be prepared
to hop the first fast horse
out of town!
A lesson worth re-learningGeorge Santayana was right. Those who cannot remember the past arecondemned to repeat it.
Read more commentary at
EPmag.com
DICK GHISELIN, P.E.Senior Editor
EPmag.com | February 2011
it is highly unlikely that any
one product deserves credit for theentire production
increase.
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Navigator
SERIES
f J
Shale
Sandstone
T
- Limestone
Wi
J
.
r
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February 2011 | EPmag.com34
as the bit and bottomhole assembly (BHA) were in com-
pression, drilling through a hard stringer or a hard sec-
tion of the formation, the reamer cutters could be
anywhere from 80 to 130 ft (24 to 40 m) above the bit
because of the integrated BHA and application. Once
the bit drilled the harder stringer or the section 80 to
130 ft later, the reamer would try to match this perform-
ance as it drilled through that same formation, enlarg-
ing that section.
While the bit had drilled through the harder sectioninto a more homogeneous formation that was softer than
the hard stringer, the bit would drill away much faster
until the reamer came down to the point where the bit
had drilled through the hard formation. As the reamer
started to drill through the hard formation, the ROP
would be slowed down dramatically. Meanwhile, the bitwas still in the softer formation and would drill itself off
the formation. So the bit would go from compression into
tension, which means the lower BHA below the reamer
was in tension. As the lower BHA is in tension, everything
is hanging on the reamer, so all of the BHA that 80 to
130 ft below the reamer did not have compression on it,
allowing lateral and torsional vibration, causing damage
to the BHA, bit, and reamer cutters.
By designing the bit and the reamer to be synchro-nized, Baker Hughes matched the bit and reamer cutter
technology so as the bit drilled off in the softer forma-
tion, the bit did not just drill away, allowing the BHA to
remain in compression. Contrary to consensus within
the industry, simply matching cutter size in the bit to
cutter size in the reamer does not provide a matched
system and mitigate vibration. We have known this for
a while because the multiblades on the bits are much
more aggressive than the reamer, Shale said. The
actual loading
per cutter on the
bit was removingmuch more
material than the
reamer, so the
bit was more
aggressive and
could drill offfaster than the
reamer. The
results in Troll
field speak for themselves. The operator found savings
through performance improvements of reduced
stick/slip and whirl and improved wear on the reamerand other equipment.
Looking aheadThe under-reaming world is dramatically changing. As
clients become more demanding, reliability will con-
tinue to be a driving force for this technology. A variety
of applications are generating tools that are rapidly
becoming more sophisticated. Most tools are ball-drop
activated and, in the beginning, consisted of a single
ball. Tools now are designed for multiple balls. In other
words, you can drop more than one ball, so you can
open and close the tool. Closing the tool allows you toperform different operations, Shale said.
Where reamers once were considered a stationary tool
with a limited, but necessary application, they are rapidly
being integrated into an ever advancing toolstring.
Editors Note: A portion of the technology discussed in this arti-
cle was sourced from SPE paper #138708, First Worldwide
Horizontal Run and Eastern Hemisphere Application of an
Expandable Reamer and Stabilizer BHA on Troll Field, Nor-
way, by Hugh D. Evans, SPE Baker Hughes, and Lydia E.B.
Ulvedal, SPE, Statoil.
COVER STORY:
DRILLING ADVANCES
Baker Hughes Hughes Christensen 12-in. Genesis Premium
HCD506ZX PDC bit is synchronized with the reamer cutters .
simply matchingthe cutter size in thebit to cutter size inthe reamer does notprovide a matchedsystem and mitigate
vibration.
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The DEEPCLEAN
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UNCONVENTIONAL
RESOURCES
Recently, efforts to increase well recovery rates have
focused on extending the lateral section and reducingstage lengths in a well. A study of more than 125 wells
running production logs showed that almost one-thirdof the perforation clusters in a number of these shale
plays provided a negligible amount of production.
Comparing the production results of the average and
exceptional producers, a 33% increase in contributing
perforation clusters can increase initial gas production
as well as EUR by up to 25%. Perhaps the most efficient
way to increase the number of contributing perforation
clusters is to incorporate key LWD measurements into
the BHA while drilling.
Well placement key
Steering a well with a gamma ray-only measurement canlead to erroneous reservoir interpretations, inconsistent
well production, and incorrect mapping of reservoir
properties and reduced EURs.
Understanding and grouping physical properties of
areas near the well bore optimizes the fracturing cam-
paign and thus enhances production from all perfora-
tion clusters.
By employing proprietary geosteering software, it was
possible to build a 3-D structure property model fromthe Eagle Ford pilot wells logging data. The software
was able to import a section from the model and use itto represent the formation dip and thickness, including
faults and formation pinchouts. In this case the model
was correlated with azimuthal images acquired during
washdown. The modeled dip and formation thickness
were adjusted so that the structure model agreed with
logs and borehole images. This duplicated the process
for real-time geosteering.
This well was steered in real time using only an aver-
aged, non-azimuthal gamma ray curve. Using this single
measurement, the resulting interpretation concluded
that the well had been placed in the middle of the reser-
voir and drilled into an interbedded lens along the lat-eral. The well was then dropped in angle to exit the
lens. Employing post-drilling LWD measurements, a
modeled interpretation was constructed. This model
showed that the well had landed high in the reservoir
and consequently exited the reservoir. The latter inter-
pretation was verified by overlaying azimuthal images
used to interpret dips. Using these images provided
confidence in an alternative
interpretation that was later rein-
forced by production results.
Optimizing drillingLWD tools also can help optimize
the drilling process, providing
added sensors for detecting
shock, monitoring annular pres-
sures, and identifying sweet spots
or hazards. In addition, LWD
solutions can be cost-effectively
employed to deliver real-time
azimuthal data for formation
evaluation in wells with high-
angled trajectories.
Some have argued againstLWD, citing costs of both the
service itself and the potential
risk of high lost-in-hole (LIH)
cost. But in addition to improv-
ing ROP and the additional pro-
duction outweighing the
marginal added-service costs,
LWD lowers drilling risk by
allowing operators to monitor
downhole drilling mechanics
data that can identify borehole
A plan view of the wellbore trajectory shows microseismic events from hydraulic fracture mon-
itoring. The red/blue curve on top indicates the fracture gradient displayed in dynamic range.
Lower green/purple curve indicates brittleness. The circles indicate microseisms from different
pumping stages. Microseismic data from the field clearly show that while the perforations
were placed into the brittle high-stress interval, the fractures actually diverted into the
nearby low-stress interval.
February 2011 | EPmag.com
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EPmag.com | February 2011
stability problems. It can be noted that no LIH events
have been recorded in more than 50 shale gas wells
employing advanced LWD techniques in laterals at the
time of publication.Additionally, real-time LWD azimuthal images can
provide high-resolution structure mapping throughimproved depth matching of horizons. This assists in
defining subsequent drilling targets in the play by
improving the precision of the landing depth reference
and thus enhancing an understanding of structure
undul