Once in a while I would like to look inward and discuss technical advances in the industry or how things have evolved. In the case of hydraulic fracturing, the process has emerged as the premier production enhancement technique in oil and gas wells that can be successfully applied to most formations. In high permeability intervals, eg 100md, fracturing can be used to turn a good well into a far better well. For offshore wells, high-permeability fracturing, known in the vernacular as fracpack, or variants, has become the well completion of choice that results not only in production increase but also in the considerable reduction of reservoir fines production.
However, as permeability decreases, fracturing moves from being desirable to being essential. In tight gas formations (generally defined as having a permeability of 0.1md or less), there is no substitute for inflow area and fracturing is the only cost-effective method for providing this. In North America there are numerous gas reservoirs that would not be producing today without hydraulic fracturing.
During the 1980s and 1990s hydraulic fracturing really ‘came of age', becoming the industry's accepted practice for tight gas formations in the US and Canada. Consequently, the industry was able to develop a massive infrastructure, both for the large amounts of equipment required for the process and for the substantial support industry (such as frac tanks, water haulers, proppant supplies, workover rigs and so on). In the late 1990s and into the new century the developing shale gas industry was able to draw upon these resources and it is likely that without the tight gas industry, which spawned hydraulic fracturing, the shale gas industry would probably not exist today.
Figure 1 shows the distribution of the global industry, and it is clear that it is still dominated by activity in the US and, to a lesser extent, Canada. This in turn is driven by tight gas, shale gas and, most recently, shale oil. Figure 1 was developed by meticulous canvassing of service and producing companies. A ‘spread' generally includes four to five modern pumping units (about 10,000HHP) a blender and all ancillary equipment.
Figure 2 shows the evolution of the fracturing market from a just under $3 billion in 1999 to almost $13 billion in 2007. This makes fracturing the second largest expenditure by the E&P;industry. Only drilling is bigger. It also illustrates the huge impact of the recent global economic downturn on US and Canadian activity, mostly as a result of the drop in domestic natural gas prices. Activity worldwide dropped from $12.5 billion in 2008 to $9 billion in 2009. This had a deleterious effect on the industry and, in particular, led to a large reduction in workforce. However, the industry saw a significant increase in oil prices, starting in late 2009, which has helped the North American fracturing industry recover to record levels, estimated to have surpassed $13.5 billion in 2010.
The offshore sector of the fracturing industry is concentrated in six major areas – the Gulf of Mexico, eastern Mexico, southern Brazil, the North Sea, West Africa, the Arabian Gulf – and several minor ones. Combined, these areas comprise about 85% of the global offshore market. Offshore fracturing is radically different from land fracturing, as the equipment has to be mounted on a vessel. Consequently costs are much higher.
Usually, the stimulation equipment is permanently mounted on a vessel, so that the vessel is dedicated to fracturing operations and nothing else. About 90% of offshore fracturing is performed using dedicated vessels – the remaining 10% is performed using skid-mounted equipment temporarily mobilized to a platform supply vessel for a specific project.
Although the offshore sector is only about 5% of the overall global fracturing market, it is rapidly expanding. The sector went from 20 operations in 2006 to 37 today (an ‘operation' being either a dedicated vessel or skid-mounted equipment used primarily for offshore work). In particular, over the last three years the North Sea has expanded from two to seven vessels, Brazil from two to four (six by the end of 2011), Mexico from one to three vessels and West Africa from two vessels to five vessels plus two sets of skid-mounted equipment.
As activity in the Gulf of Mexico has been declining, activity outside of North America has been expanding, as operators become more familiar and confident with fracturing operations.
Long term, the global fracturing industry will continue to be dominated by two differing philosophies. In the US, Canada, Russia and Argentina, the industry will continue to fracture every well it can get its collective hands on. Elsewhere, the industry will be dominated by the belief that fields are getting more mature and less prolific, so that the industry would need to reluctantly turn to fracturing. It is this difference between ‘want to frac' and ‘frac when we have to' that is central to why fracturing is so popular in North America and so underemployed elsewhere. OE
About the Author
Michael J Economides is a professor at the Cullen College of Engineering, University of Houston, and editor-in-chief of the Energy Tribune. The views expressed in this column do not necessarily reflect OE's position.