Avoiding oil field technical debt

debt cardStung by the recent COVID-19 oil slide, oil companies are trying to avoid excessive financial debt. But technical debt must also be paid in the future. And its ravages can restrict cash flow and curtail reserves.

This blog post is brought to you by Proven Reserves Exploitation, one of our information partners. Nein commercial use of der AppIntel content.

One operator complained about the operating errors of properties acquired from another operator. She blamed this technical debt for current compliance problems. But the regulator required her to fix the problems anyway.

See all the details in her application documents. Get them from our self-serve web portal.

Buy these application docs now Subscribers get them for free

What is technical debt?

At Proven, we borrow the term technical debt from the IT industry.

Technical debt is the amount of money that must be spent to correct an oil field from the way things were done before. Tech debt is incurred by using shortcuts in the past. It is also incurred by ignoring maintenance. It also comes from new and changing technology.

Need to get up to speed quick on ASP flooding?
?subject=Help me get up to speed on ASP flooding&body=Help me get up to speed on ASP flooding%0D%0A%0D%0AMy Name:__________ %0D%0AMy Phone Number:__________ %0D%0A%0D%0A(Or call Proven Sales at 403-803-2500.)">Contact Proven for support. We have all the details from all the installations.

Whence Technical Debt?

Where does technical debt come from?

Technical debt matrixThe tech debt matrix helps explain the sources oil field technical debt.

Some debts are deliberate. The operator that incurred them did so on purpose.

Some debts of inadvertant. The operator that incurred them we not aware of the problem they were creating.

This will be someone else's problem

A reckless way to incur tech debt is to pump up the production rate without concern for reserves, while cutting corners on operational stability and reservoir recovery.

The rationale behind this approach is the intention to sell the asset quickly and let the next owner deal with the problems created by neglect.

This type of tech debt doesn't show up on the seller's financial balance sheet, but it will certainly show up on the buyers later.

Example: Ignore workovers and abandonments and understate the future costs. Then sell knowing the buyer will be faced with spending all the workover and abandonment costs.

Example: Drill all your horizontal wells North/South, because it doesn't matter what's in the reservoir. When the next operator tries to flood the pool, they will have instant breakthrough. Too bad for them.

Reckless? Not always.

But not all deliberate debts were incurred recklessly. Some deliberate tech debts were incurred prudently believing that the resulting consequences would be acceptable in the future.

Example: A prudent agreement to grant an overriding royalty may get a deal done, but it will reduce the value of an oil field and shorten its life.

Oops. Inadvertant tech debt

When an operator incurs technical errors inadvertantly, he can either learn from the experience or go on in ignorance.

The more often an inadvertant technical debt is repeated, the larger it becomes and the more costly to fix. First generation horizontal wells are often riddled with this type of tech debt.

Help me find the horizontal well failures of other operators.
?subject=Help me find the horizontal well failures of other operators&body=Help me find the horizontal well failures of other operators.%0D%0ACan AppIntel help?%0D%0AMy phone_______________">Contact sales for a trial of AppIntel.

Tech debt incurred by changing technology - IT

In the IT industry legacy programs written yesteryear are now running on outdated hardware, operating systems and languages. For example, a business critical COBOL payroll program running on a PDP-11 is in danger of crashing when one can no longer repair the old mainframe nor update the data files.

The technical debt of this example is expressed in the cost of the new computer hardware, operating system and languages. But the biggest technical debt is the refactoring (IT term for reprogramming) a new payroll system in the new computer environment.

Tech debt incurred by changing technology - Oilfield

As oilfield technology changes, a technical debt is incurred as yesteryear's wells, pipelines and facilities require upgrades.

Example: 1960 vintage vertical wells drilled with surface casing that doesn't meet today's standards creates a future technical debt for repair, danger of failure, and costly abandonment.

Example: First generation horizontal wells drilled in the wrong place or orientation create a tech debt cost of reduced production when a flood is initiated. First gen horizontal well technology just didn't embrace directional permeability.

How do we fix the field where all the horizontal wells were drilled North/South??
?subject=Contact me about your simulation of Hz redvelopment&body=Is it worth while to fix the field where all the horizontal wells were drilled North/South?%0D%0ATell me about your simulation process to show the pros and cons of horizontal redevelopment with next generation wells.%0D%0AField__________%0D%0AFormation_______________%0D%0AMy phone_______________">Contact Proven for our testing simulation on your field.

Horizontal well redrills and refracks are also manifestations of technical debt.

Avoiding tech debt by watching the operations of others

You may be able to find out how others are optimizing floods by reading regulatory applications. There are over 10,000 enhanced recovery applications in Alberta alone. If you want to learn, time to get started reading.

You can search for anything in an application using AppIntel. Just type into the KiP box plugged injector or tight flood or balancing flood.

You can even have AppIntel send you interesting enhanced recovery scheme applications as soon as they are registered.

Want to try it out? Get unlimited area alerts by email. You select the area and the application types.
?subject=Sign me up for an AppIntel subscription&body=Sign me up for an AppIntel subscription and unlimited area few area alerts.%0D%0A%0D%0AMy Name: __%0D%0AMy Phone Number: ___%0D%0A%0D%0ASend me email alerts centered around UWI __%0D%0AWithin this many miles __%0D%0AType of applications __%0D%0ACheck out pricing https://www1.appintel.info/just-alerts/%0D%0A%0D%0A(Or call AppIntel Sales at 403 803 2500)">Contact us for an AppIntel subscription.

Avoiding tech debt by piloting

Another way to avoid technical debt is by running a pilot of an operation. A small scale pilot can be used to iron out the bugs of a reservoir process.

There will always be additional problems with scale up, but at least these aren't intertwined with a poorly conceived reservoir process in a well piloted project.

Fixing technical debt in floods

Part of Proven's skill set is fixing the tech debt of legacy floods. The tech debt of a legacy floods is the cost of the lost production that could have turned into cash flow.

Most operators used the set and forget method of initiating a water flood. The neglect created a technical debt that is costing the industry in Alberta $10 billion this year.

Unfortunately there are very few flood engineers left.

Improving a flood takes a special set of skills. These are not taught in university. You cannot read them in a book.

Most of the experienced flood engineers left the industry over the last ten years. Some retired. Some moved to other industry. Some retrained to be doctors.

Optimize your flood with Proven's Optiflood.
?subject=Help me improve my flood using Optiflood&body=Help me improve my flood using Optiflood. I understand Optiflood is a process that incorporates learnings from improving 200 floods.%0D%0A%0D%0AMy Name ________________%0D%0AMy Phone number _____________%0D%0AField ______________%0D%0APool_______________%0D%0A(Or call Proven Sales at 403-803-2500.)">Contact Proven for their experience at using Optiflood to improve over 200 floods.

Tags: Tight, Flood, AppIntel advantage, Acquisitions, Cut costs

Granger Low   2 Jul 2022



Reducing miscible solvent bank thickness

Pay no attention to the clown face in the contours

Technicality closes application

But check out the great net pay maps

Gas flood nears 45% recovery

A Cretaceous pool near Edmonton

Fixing flood noncompliance the wrong way

Check out the tempting corner shot

What they didn't teach you in school about miscible floods

CO2 chasers

Flood still not optimized? The opportunity cost is high.

Always choose the best return.

What technical debt from 1st generation horizontal wells?

Are your horizontal wells old age or new age?

Must you pay the technical debt of legacy floods?

Reward: Production and cash flow increase

The lost science of flood optimization

Whither all the flood engineers?

Alberta operators losing $10 billion per year from unoptimized floods

How much are you losing?

Don't battle the regulations alone

Maybe you too can sour-up your pipeline

Urgent or Important: Rejuvenating your flood

Remember flood-day

SAGD Push/Pull Strategy?

Disposing into a producing formation

Don't blow the lid

Fracking into a neighboring well causes a blowout

Detox your waterflood

New reserves from tired old floods

Consulting the ghosts of Christmas past about their floods

Making the most of your new acquisition

Smarter acquisitions

Video demo on using the KiP box for acquisitions

5 ways your flood is trying to get your attention

Are you listening? Take the quiz.

8 benefits of flood balancing you don't know

Balance your new flood. Catch the upside.

Benefits of balance

Making more production from VRR of 11

Improve your water flood with Optiflood from Proven Reserves

Get the most out of your legacy water floods

Injecting bugs in SAGD

How does it affect corrosion?

This page last updated 2 Jul 2022.
Copyright 2011-2022 by Regaware Systems Ltd.
  Calgary, Alberta, Canada
AppIntel is a website for data mining oil and gas information from Alberta government sources. If you spot any errors on this site, please email our webmaster.
  Share