The world of oil and gas was quite a different place a quarter century ago. Production mostly came straight up out of vertical holes. Though the Texans had drilled the first horizontal well in 1929, in Canada horizontal drilling was still mostly an esoteric, unproved and untested technology.
In 1987, all that began to change—so much so that, during the last 25 years, it simultaneously emerged as a standard production technique and revolutionized production. One result is that many petroleum resources have become technology-driven plays. Another is that reserves are way, way up.
In a sense, the most important uses of horizontal-drilling technologies are reverse images of each other.
“What makes horizontal drilling for non-conventional resources [like shale gas and tight oil] so attractive to the financial community is the very high initial rate of return,” says Dave Russum, director of geosciences at AJM Deloitte. “In the beginning, production rates are extremely high, although they quickly taper off. You have to remember that these applications enable you to get highly desirable hydrocarbons out of really poor reservoirs.”
The oilsands represent the mirror image of this situation, Russum says. “You are drilling into tremendous reservoir rocks—highly porous and very permeable—so there’s plenty of oil in there. But until you process the stuff, it isn’t a particularly attractive commodity.”
It’s true that in April 1978, Imperial Oil Limited drilled Canada’s first horizontal well into the Clearwater formation at Cold Lake—a storied well overseen by Roger Butler in an early test of a system of oilsands production now known as steam assisted gravity drainage (SAGD). After that test and a less interesting effort by Texaco Inc. a couple of years later, in Canada the technique mostly languished until 1987.
Then the advent of improved downhole drilling motors and the invention of other necessary supporting equipment, materials and technologies—particularly downhole telemetry equipment, which enabled rigs to drill straight on target—led to an explosion of new applications for this technology. Producers and the drilling and service firms that support them found endless new uses for directional drilling, especially as it is used for horizontal wells.
Appropriately, in Canada the first horizontal wells drilled after Imperial’s early test were part of the Underground Test Facility (UTF), which celebrated its official opening on Jun. 29, 1987. Developed by the Alberta Oil Sands Technology and Research Authority (AOSTRA), the UTF involved a pair of tunnels driven into limestone 15 metres below the reservoir.
Within those tunnels, AOSTRA constructed large well chambers. “Pairs of injection and production wells were drilled upwards from the well chambers at a 17-degree slant, and deflected horizontally into the base of the reservoir,” according to the mining engineer behind the project, Gerry Stephenson. “The mobilized bitumen drained by gravity from the steam chamber in the reservoir to the wellhead in the tunnel, and all of the production was pumped from a central location.”
Those tests proved Butler’s theories about SAGD beyond any possible doubt.
Over its 15-year life, the UTF also evaluated other recovery strategies, but nothing compared to its SAGD results.
“AOSTRA’s staff had estimated that the recovery might be somewhere between 30 per cent and 45 per cent of the bitumen in place,” during the Phase A tests, according to Stephenson. “We actually got 65 per cent recovery. The steam chambers formed by mobilization of the bitumen spread way beyond the area we’d expected….Over the 10-year life of the well pairs, Phase B got a steam/oil ratio, the most critical figure of all, of 2.3 to one.”
The tests at the UTF forever transformed Canada’s oilsands industry. Today, SAGD is responsible for more than half of Canada’s bitumen production.
Ironically, Sceptre Resources Ltd. drilled the first horizontal well in Saskatchewan to test a SAGD-like system at Tangleflags, just as the UTF began its definitive tests. Drilled into the shallow (450-metre) Lloydminster sandstone, this primitive application of a form of SAGD illustrated the kinds of problems horizontal drilling could overcome. With an active aquifer below and a gas cap above, the reservoir’s pay thickness was about 27 metres. The oil was heavy—about 13-degree API. Primary production from the field had been meagre (0.6 per cent of the oil in place), and he use of cyclic steam stimulation, which uses vertical production wells, had flopped when those wells broke through to the underlying aquifer and started producing 99 per cent water.
That was when the company decided to try SAGD—not the technique we use today, but the primitive version Imperial had tried out nine years earlier. Sceptre injected steam through four vertical wells near the gas-oil contact, draining the mobilized oil through a horizontal well. At the industry’s leading edge, the company found itself with a technical and economic success.
Fast production from tight reservoirs
More than any other series of innovations, the technology-intensive processes that now surround directional drilling have enabled the industry to get production out of otherwise unproductive rock. In August of that same transformational year, Alberta Energy Inc. (a predecessor to Encana Corporation) drilled the first horizontal well into the Glauconitic formation at Suffield. This was the first time a Canadian operator drilled horizontally into a conventional oilfield.
Things then quickly sped up. In February 1998 alone, three significant projects based on horizontal drilling took off. Amoco Canada Petroleum Company Ltd. began a 10-well horizontal-drilling program at Athabasca, into the Wabiskaw formation. Canadian Hunter Exploration Ltd. drilled gas wells at Ansell (Alberta) into the Cardium formation and at Helmet (British Columbia) into the Jean Marie. A few months later, Shell Canada drilled for Mississippian oil in Saskatchewan, at Weyburn. These early applications of the technology were meant to connect isolated small reservoirs or improve contact within heterogeneous rocks to enhance the sweep efficiency.
“In the 1990s the big push was to explore conventional carbonate rocks, especially from the Mississippian in Saskatchewan,” according to AJM Deloitte’s Russum. “The idea was to develop known reservoirs where the rock quality was variable, using horizontal wells to extract more oil from those formations…. Many different companies hopped onto the horizontal-drilling bandwagon in Saskatchewan with more than 500 wells drilled into the Mississippian in 1997 alone. In that year more than 1,300 horizontal oil wells were drilled across the basin—a tally that was not beaten until 2007.”
Horizontal drilling also began to tap the heavier oils in Saskatchewan and southeastern Alberta in the 1990s, and there was a lot of experimentation in other reservoirs. Also, of course, in that decade SAGD began to be developed in its modern form.
As horizontal drilling became more commonplace, the petroleum industry began combining it with innovations in both drilling and well-completion technologies and ideas. The result has been like a snowball rolling downhill. Horizontal drilling has been enhanced by geo-steering, measurement-while-drilling, coil tubing, downhole motors and new bit design, for example. Also, producers can now drill multilateral horizontal wells from a single drilling pad.
Perhaps the most important recent development on the drilling side is the monobore. Monobore drilling involves running a casing string, then forcing a steel cone down the well to expand it in the hole. This process is repeated with identical casing strings. Thus, monobore completions have the revolutionary characteristic of installing a string with the same interior diameter from top to bottom.
“These are making a huge difference,” Russum says. “In the past, you had to drill a vertical well, then run the casing to the bottom and wait for the casing to set before you could begin to drill the horizontal leg. Monobores help reduce those time-consuming steps.”
Although technologies like microseismic are also making a difference, the most important developments on the completion side have involved the increasing power and sophistication of hydraulic fracturing. Better fracking has developed because of new packers, better pumping equipment and better treatment fluids and proppants.
“It’s now easier to isolate horizontal wells and to put fractures into certain points of the formation,” according to Russum. “In the early days, each stage of multistage fracking would take a whole day. Each frac would have to be tested separately before you proceeded to the next one. Today it’s a continuous process.”
These clusters of technological breakthroughs first created the shale gas revolution. Pioneered by an American, George Mitchell, in the Barnett shale in Texas, tight gas reservoirs began yielding highly economic volumes of natural gas—and not incidentally, drove down the price of gas. Some observers now describe natural gas as a low-value by-product encountered in shale reservoirs in the quest for natural gas liquids.
From a production perspective, the other great outcome from this cluster of technologies has been the development of tight oil from shale, what Russum prefers to call “conventional oil from more shaley, low-permeability reservoirs.” One outcome is that both western Canada and the United States are experiencing a growth in light oil production for the first time in decades—much of it coming from the Bakken play in North Dakota and Montana. After decades of decline in Alberta, for example, light oil production has recently risen to a 10-year high.
An explosion of Uses
These new technologies are changing almost everything about Canada’s petroleum industry. For example, horizontal wells are now a huge part of gas storage.
“You can store gas very quickly into those wells,” says Russum, “and you can extract it quickly, too. Then there is the whole area of trying to reduce surface impact. I think we’re going to see more and more of that. Surface owners are more and more reluctant to have pumpjacks and other surface equipment on their land, and horizontal wells are less likely to disturb natural habitat. There is also extended reach, so you can reach under lakes and towns and cities. You can use it to reduce water production in a thin reservoir located over an aquifer.”
The economics of the horizontal well are also greatly improved, especially when you are planning production from a narrow reservoir—10 metres thick, for example. Horizontal wells provide much greater contact with the reservoir per dollar of drilling than do their vertical kin. And when they are drilled in search of unconventional resources like shale gas and tight oil, the producer gets a quick payback because initial production rates are so high.
Still not convinced? Then let the numbers tell the tale. According to an AJM Deloitte study, which is complete to late 2011, more than 30,000 horizontal wells have produced conventional oil or gas in western Canada over the past 25 years. Of that tally, 4,300 were completed in 2011. This set a record for horizontal oil drilling: nearly 3,500 wells (led by the Cardium, Viking and Bakken), and an additional 800 wells focused on gas—mainly attracted by the high liquids content in the Montney and Middle Mannville. Today, half of western Canada’s wells are being drilled horizontally.
Is horizontal drilling helping bring about any other changes? Perhaps it is even changing the way corporations work.
“Companies that fail to adequately research the geology are putting themselves at considerable risk if they assume all resource plays are alike and that more and larger fracs are the solution to economic production,” according to Russum. Even so, engineers are increasingly replacing geologists in the executive suite.
Traditional geologists who spent entire careers looking for conventional reservoirs are now more interested in minor variations in rock properties, in stress regimes and in proximity to source rock. In terms of traditional petro-geology, this is a difficult concept to grasp, but to a large extent it is a response to the revolution spawned by horizontal drilling.
Oilsands companies in particular, but also other companies involved in modern resource plays, are basing their business plans on step-by-step, decades-long development of vast and well-defined resources. This means traditional wheeling-and-dealing is at least partly on the decline—to a large extent replaced by courting cash-rich foreign companies with deep pockets and the desire to support these capital-intensive activities.