‘Interventions that sustain, restore or increase production from existing wells are more relevant now’
Gbenga Onadeko is the Senior Vice President, Africa for Welltec. In an exclusive interview with Frank Uzuegbunam, Editor, Businessday West Africa Energy, on the sidelines of the just concluded SPE-NAICE 2016 conference, he spoke on the challenges oil service companies face in this era of low oil prices, the role of technology in ensuring cost reduction for marginal field operators, Welltec’s technology amongst other issues. Excerpts:
How do you see the theme of this year’s SPE conference; “Transparency in the Oil and Gas Business: An Imperative for Energy Security and Stability”?
Transparency in any business venture promotes trust and leads to progress. It is more important in the Nigerian Oil and Gas industry which today is the largest contributor to the foreign exchange earnings of the country. It ensures that information which can be used to measure performance and verify checks and balances are in place.
Transparency in every aspect, starting from awards during licensing rounds to bidding for services and the final choice of the applicable technologies, will attract the necessary investments which will in turn grow the reserves of hydrocarbon.
It will positively impact the current security situation which threatens to cripple the oil and gas industry in Nigeria.
The plan to transform the Oil and Gas industry using it as a catalyst for the economic development of Nigeria is noble and can be accelerated by transparency and accountability in the management of the country’s natural resources.
It is a known fact that countries that have high corruption perception index ratings, issued by the anti-corruption NGO – Transparency International are also the most prosperous. For example, Northern Europe has four of the top five countries with the highest ratings. Denmark has the highest rating and as a Danish company, Welltec operates at the highest ethical standard which includes having solid compliance programs.
What is your assessment of the theme for the marginal field workshop; “Enhancing the Marginal Field Value Chain: Cost Reduction & Operations Efficiency through Collaboration & Synergy”?
The theme of the marginal field workshop is very relevant especially in the current industry climate. Collaboration which focuses on cost reductions and improved operations efficiency must be actively promoted. It becomes a matter of survival for some of the marginal field operators who have alluded to having a relatively high cost of production. Technologies and best practices that lower overall OPEX per barrel (lifting costs) should definitely be sought after and implemented. Instead of drilling new wells, interventions that sustain, restore or increase production from existing wells become more relevant.
According to a 2015 study performed by McKinsey Solutions, the average cost of intervention per barrel of production is ~ USD 6. At the current relatively low price of oil, it is obvious to see that intervening for barrels is the correct approach as it is “cheaper, quicker, less risky and yields higher returns per barrel than drilling wells”.
Operators must seek service providers that offer these solutions, involve them in the screening of candidate wells and partner with them to execute campaigns which will yield incremental production at cost levels which make sense in today’s market. Improving the recovery factor in the marginal fields by 10 – 15 percent will lead to long term value addition to the operators, the country and other stakeholders.
How can technology help marginal field operators in this era of low crude oil?
Oil or gas well is similar to the human body; they both have combinations of Pumps and Pipes. We can choose to proactively look after our health which will lead to long life and vitality, or we can be reactive which tends to be much more expensive. Unfortunately, the perspective of waiting till our oil and gas wells are broken before taking actions is analogous to waiting till one has a stroke or heart attack before choosing to proactively look after one’s health.
By changing strategy to a systematic planned intervention approach, direct and tangible savings can be accomplished which can generate a positive cash flow without the need for drilling or workover rigs.
For example, Welltec assisted a client in Nigeria to restore production from a well that was shut in 14 years prior by removing near-surface obstructions preventing the well from flowing. Through the use of Welltec’s light robotic intervention technologies deployed on Electric Line, the operation was completed in less than a week which was approximately half the time and about a quarter of the cost it would have taken the same operation to be performed using alternative technologies.
In this area of technology, what can you ascribe as Welltec experiences and what unique attraction does the Welltec technology bring to the table?
Welltec is a world leading provider of well intervention and completions solutions. Our downhole robotic technologies ran universally on any electric line unit can be used to sustain, restore or increase production from existing wells and improve efficiency during the construction of new wells.
“Disruptive innovation” is one of the values of our company and we take pride in having the courage to challenge conventional thinking. We have efficiently resolved some challenges which our clients never envisaged could be done without deploying workover rigs.
Welltec operates in close to 30 countries globally and we have ongoing operations in about 8 countries in Africa.
Apart from the oil fields, do you also deploy your technology for gas fields?
Our technology is not limited by well type. In some cases, they are preferred for intervention in dry gas wells where the introduction of fluids can negatively impact the performance of the well. For example, we have devised methods to remove mechanical obstructions and debris from gas wells without the introduction of fluids.
What are the challenges oil service companies like Welltec face during this time of low oil price?
In our specific case, we work extremely hard to convince the operators to shift their scarce capital from CAPEX to OPEX, or redistribute their OPEX to utilize our technologies which can assist their cash flow. A few of the operators still shut in their wells or fields and this does not need to be the case for some. The availability of light technologies can be applied to restore wells whose current configuration and conditions are conducive. The mindset is changing as the value that Welltec brings is starting to be recognized. We are beginning to have more discussions with operators who are starting to embrace our methods and eager for us to assist them challenge the low oil prices and get more for less.
Do you see the low oil price regime lasting for much longer?
There are no crystal balls to predict the future price of oil. The consensus in our industry is that the era of USD 100 per barrel of oil will be gone for quite some time and the world needs to become smarter and more innovative in how oil and gas reserves are exploited.
What policy suggestions in the area of oil and gas sector can you make to the government?
The government can establish incentives which promote higher recovery rates from reservoirs, increasing total overall production and prolonging the lives of the fields and their respective wells.
The global average recovery factor from reservoirs is in the range of 25 – 30 percent. This means that we are throwing away expensive assets by leaving behind 65 – 70 percent of the discovered oil and gas reserves in the ground. A specific national oil company has achieved 50 percent recovery factor by putting in place specific strategies to maximize their recoveries through regular intervention in their oil and gas wells. The company is now aiming for 60 percent.
We advocate drilling better wells from the beginning and then maintaining them. In order to prolong the life of the well and promote the evacuation of oil and gas resources in a responsible manner, we encourage the investigation of a policy around the area of scheduled well maintenance and the introduction of appropriate incentives. A modest 10 to 15 percent increase in recoveries by marginal field operators and others, will go a long way in promoting the economic development of the nation.
Frank Uzuegbunam