1
Background on Reservoir Class Program

PURPOSE

Premature abandonment of marginal oil wells and fields is a growing energy problem in the United States. Once a field is abandoned, the remaining resources are essentially removed from future access by the high cost of reestablishing production. Prolonging production from marginal oil fields and halting the potentially irreversible loss of access to an increasingly scarce domestic resource are important goals of U.S. energy policy.

Maintaining a viable domestic supply of oil and natural gas is important to the United States for both economic and strategic reasons. Income generated by the domestic oil and gas industry fuels the economy, creates jobs, and generates federal revenues from bonuses, leases, and royalties from exploration and production on offshore and onshore federal lands. 1 Domestic production also decreases U.S. dependence on imported petroleum products, which currently account for slightly more than 50 percent of total U.S. oil demand 2 and about 31 percent of the

1  

In 1993, revenues to the U.S. Treasury from oil and gas bonuses, leases, and royalties totaled about $3.5 billion (Minerals Management Service, Mineral Revenues 1993).

2  

In 1994, domestic field production of crude oil averaged 6.63 million barrels per day (bpd); net imports (i.e., imports minus exports) of crude oil averaged 6.92 million bpd (Energy Information Administration, Monthly Energy Review, January 1995).



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1 Background on Reservoir Class Program PURPOSE Premature abandonment of marginal oil wells and fields is a growing energy problem in the United States. Once a field is abandoned, the remaining resources are essentially removed from future access by the high cost of reestablishing production. Prolonging production from marginal oil fields and halting the potentially irreversible loss of access to an increasingly scarce domestic resource are important goals of U.S. energy policy. Maintaining a viable domestic supply of oil and natural gas is important to the United States for both economic and strategic reasons. Income generated by the domestic oil and gas industry fuels the economy, creates jobs, and generates federal revenues from bonuses, leases, and royalties from exploration and production on offshore and onshore federal lands. 1 Domestic production also decreases U.S. dependence on imported petroleum products, which currently account for slightly more than 50 percent of total U.S. oil demand 2 and about 31 percent of the 1   In 1993, revenues to the U.S. Treasury from oil and gas bonuses, leases, and royalties totaled about $3.5 billion (Minerals Management Service, Mineral Revenues 1993). 2   In 1994, domestic field production of crude oil averaged 6.63 million barrels per day (bpd); net imports (i.e., imports minus exports) of crude oil averaged 6.92 million bpd (Energy Information Administration, Monthly Energy Review, January 1995).

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merchandise trade deficit. 3 Further decreases in domestic production will exacerbate the trade deficit problem and increase foreign dependence for a resource that provides about 40 percent 4 of the total U.S. energy supply. The Reservoir Class Field Demonstration Program, hereafter referred to as the Reservoir Class Program, was initiated in 1992 as part of a broad DOE effort to counter the continuing drop in domestic oil production 5 and to slow the abandonment, because of unfavorable economics, of wells in “mature” fields that typically still contain 60 to 70 percent of the original oil in place (OOIP). 6 Of this remaining oil, approximately 32 percent (113 Bbbl; 21 percent of OOIP) is mobile 7 but bypassed during primary recovery and waterflooding and about 68 percent (238 Bbbl; 45 percent OOIP) is immobile, requiring advanced recovery methods to produce. 8 The specific goal of the program is to encourage oil companies to employ techniques that will increase oil recovery from wells in these “mature” fields. As major companies reduced their efforts in domestic onshore operations and shifted their emphasis to frontier areas (Alaska and offshore) and international operations, DOE recognized that production of oil from mature fields in the lower 48 states and the continental shelf of the United States would shift to smaller companies and independent producers. Such companies generally lack the internal technical expertise and capital resources to undertake technically or economically risky projects, leading to 3   For 1994, the U.S. merchandise trade deficit totaled $168.4 billion. Imports of petroleum and petroleum products accounted for $51.5 billion of this total (U.S. Department of Commerce, Survey of Current Business, January 1995). 4   In 1993, the latest year for which complete data are available, U.S. energy consumption totaled 83.89 Quadrillion BTU (Quads), of which 33.84 Quads were supplied by petroleum— crude oil, lease condensate, and natural gas plant liquids (Energy Information Administration, Monthly Energy Review, January 1995). 5   U.S. domestic field production of crude oil declined from 8.60 million barrels per day (bpd) in 1980 to 6.63 million bpd in 1994 (Energy Information Administration, Monthly Energy Review, January 1995). 6   In 1994, for example, there were approximately 442,500 stripper wells (wells that produce less than 10 barrels of oil per day) in the United States, which accounted for about 14 percent of domestic production of crude oil. In the same year, about 18,000 (4.0 percent) stripper wells were abandoned (Interstate Oil and Gas Compact Commission, Marginal Oil: Fuel for Economic Growth, 1995), presumably due to unfavorable economics. 7   Mobile oil is that oil which can be moved to the well under the force of gravity, the natural pressure of the reservoir, or with the aid of conventional pressure maintenance or displacement technologies (e.g., water or natural gas flooding). Immobile oil is that oil held in the rock pores by capillary or viscous forces and is usually produced using gas, chemical, or thermal methods. 8   An Assessment of the Oil Resource Base of the United States, Oil Resources Panel: A Commentary by William L. Fisher, Noel Tyler, Carol L. Ruthven, Thomas E. Burchfield, and James F. Pautz. U.S. Department of Energy Report DOE/BC-93/1/SP, 1992.

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the abandonment of many oil fields that still contain significant amounts of potentially recoverable oil. The ultimate objective of the Reservoir Class Program is to promote the application of advanced technologies and more effective use of conventional technologies in order to maintain or increase oil production in marginal fields in the United States. The program utilizes a cost-sharing plan to encourage industry to apply new techniques with high potential to improve oil recovery. By encouraging the application of a wide variety of new technologies, the Reservoir Class Program will permit DOE and industry to determine which (if any) of these techniques are most effective in increasing oil recovery from a specific reservoir class. Transfer of those technologies found to be most cost-effective to small companies, independent producers, and major companies will encourage the widespread adoption of these techniques throughout the domestic oil industry. DOE projects that this program will allow industry to add about 1.5 billion barrels to domestic production by the year 2020. The success of the Reservoir Class Program will ultimately be measured by increased production from marginal fields and by the economic return on the DOE’s investments in the program. Although its impact cannot be directly measured for several years, early results suggest that the program has already begun to pay significant dividends. For example, the Lomax Exploration Company estimates that a minimum of 31 million barrels of oil will be recovered as a result of its demonstration project. According to a study by Grabhorn (1995), “The return to the government in form of taxes generated from this project alone is probably more than enough to pay for the entire Class 1 field demonstration program”. 9 As required by the technology transfer component of the Reservoir Class Program, the Lomax Exploration Company has published papers and held workshops about its project. As a result, other operators in the immediate area are adopting the technology that was successfully demonstrated by the Lomax project. If this pattern is repeated, then a small number of successful projects have the potential to repay the DOE’s investment many times over and generate significant increases in oil production from marginal fields. Reports of success from another demonstration project emerged as this report was being finalized. Production from the Dundee Formation project (Chapter 2 and Appendix B, Project 19) has increased by a factor of ten, and this success has rejuvenated interest in old Dundee fields that had produced over 352 millions barrels of oil before they were largely abandoned by 1945. 9   Grabhorn, Merle, 1995, DOE field demonstration program logs successes, Oil and Gas Journal, Oct. 23, 1995, p. 77.

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ORGANIZATION AND RESERVOIR CLASS BASIS The Reservoir Class Program is organized on the basis of geologically defined reservoir classes. DOE uses the term class to denote a group of reservoirs with a similar depositional history. Depositional history strongly influences the internal variability of porosity and permeability—and thus the flow of hydrocarbons—in the reservoir. Twenty-two reservoir classes are recognized by DOE, 16 clastic (sandstone) and six carbonate (limestone and dolomite) classes. Classes 1, 2, and 3 (Fluvial Dominated Delta, Shallow Shelf Carbonate, and Slope and Basin Clastic Reservoirs, respectively) are thought to include the reservoir types with substantial resources from which oil recovery has historically been least efficient. These classes were selected for demonstration projects during the first four years of the program. 10 Depositional models for Class 1, 2, and 3 reservoirs are illustrated in Figure 1.1 , Figure 1.2 and Figure 1.3 , respectively. PROGRAM COMPONENTS Reservoir Characterization A key technical component in most of the projects examined by the committee is reservoir characterization. Reservoir characterization involves the integration of geological (especially well data), geophysical, and engineering data to determine the shape, size, internal structure, and other physical and chemical properties of the reservoir. Reservoir characterization is used to develop models to better understand fluid flow within reservoirs to enhance recovery of mobile oil and guide the application of advanced recovery techniques to maximize the recovery of residual (immobile) oil. Reservoir characterization is performed in the early stages of a project so that infill drilling, waterflooding, and advanced recovery techniques can use these data most effectively. In many cases, reservoir characterization is continually reassessed during the life of a field. Demonstration of Advanced and Conventional Technologies The decline in oil prices and the reduction of domestic operations by the major oil companies have combined to decrease the application of both advanced and conventional recovery technologies. By demonstrating that a wide variety of advanced and conventional technologies can be economically feasible, the Reservoir Class Program seeks to develop the technical 10   See, for example, U.S. Department of Energy, Program Opportunity Notice (PON), Number DE-PS22-94BC14972, Class III Oil Program—Near Term Activities, p. 1-1.

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FIGURE 1.1 Schematic block diagram illustrating depositional model for fluvial (river) dominated deltaic reservoirs, which correspond to Class 1 of the Reservoir Class Program. After Holtz, M.H., and L.E. McRae, 1995, Identification and assessment of remaining oil resources in the Frio fluvial-deltaic sandstone play, South Texas. The University of Texas at Austin, Bureau of Economic Geology Report of Investigations No. 227, Fig. 13, p. 12. Reprinted by permission of the Bureau of Economic Geology.

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FIGURE 1.2 Schematic block diagram illustrating depositional model for shallow shelf carbonate reservoirs, which correspond to Class 2 of the Reservoir Class Program. After R. S. Kerr, 1977, The University of Texas at Austin, Bureau of Economic Geology Report of Investigations No. 89, Fig. 9, p. 223. Reprinted by permission of the Bureau of Economic Geology. and economic experience necessary to encourage adoption of these technologies by independent operators, small companies and major companies. In addition, some conventional technologies are being applied in new areas where the technology has not been demonstrated as economically viable. An implicit tenet of the Reservoir Class Program is that the demonstration of these technologies is unlikely to occur under current and projected oil prices and in a time frame that can substantially reduce field abandonments without the economic boost and risk sharing provided by program funding. Technology Transfer In order for the Reservoir Class Program to achieve its overall objectives, the economically sound and effective technologies demonstrated in the projects must be effectively transferred throughout the oil industry. The purpose of technology transfer is to encourage the broader application of cost-effective technologies by disseminating the knowledge, data, and techniques most useful for solving reservoir characterization and oil production

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FIGURE 1.3 Schematic block diagram illustrating depositional model for slope and basin clastic reservoirs, which correspond to Class 3 of the Reservoir Class Program. After H.G. Reading, and M. Richards, 1994, Turbidite systems in deep-water basin margins classified by grain size and feeder system. AAPG Bulletin, vol. 78, Fig. 5, p. 803. Reprinted by permission of the American Association for Petroleum Geologists. problems. DOE has made technology transfer a key component of each of the Reservoir Class Program projects. IMPLEMENTATION Implementation of the Reservoir Class Program began in fiscal year 1992 (FY92) with the selection of 14 Class 1 projects (Fluvial Dominated Deltaic Reservoirs; see Appendix B for a list of Class 1 and Class 2 projects). In FY93, 10 Class 2 projects (Shallow Shelf Carbonate Reservoirs) were selected for support. Nine Class 3 projects (Slope and Basin Clastic Reservoirs) were selected in FY95. Location maps for the Class 1, 2, and 3 projects are shown in Figures 1.4, 1.5, and 1.6, respectively. The budget for the Reservoir Class Program is presented in Table 1.1, which shows that DOE’s share of the total cost of the program is 43 percent. Projects are organized into two groups: near-term, which focus on applying conventional but underutilized technologies, and mid-term, which focus on advanced technologies. Both groups of projects include a reservoir characterization element and an emphasis on technology transfer.

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FIGURE 1.4 Location map for Class 1 projects (fluvial dominated deltaic reservoirs).

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FIGURE 1.5 Location map for Class 2 projects (shallow shelf carbonate reservoirs).

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FIGURE 1.6 Location map for Class 3 projects (slope and basin clastic reservoirs).

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TABLE 1.1 Reservoir Class Program Budget (thousands of dollars) Class Cost to DOE Cost to Participants Total Cost Percent DOE Funding 1 43,258 54,667 97,925 44% 2 36,681 49,021 85,702 43% 3 36,757 49,003 85,760 43% Total 116,696 152,691 269,387 43% Source: Department of Energy

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