Seizing Eor Opportunity

8/10/2019 Seizing Eor Opportunity

http://slidepdf.com/reader/full/seizing-eor-opportunity 1/8

26 SBC Energy Perspectives | 2nd Semester 2013

ith a production potentialequivalent to around 40% ofoil produced worldwide todate, enhanced oil recovery

(EOR) has long been knownas a possible jackpot for E&P players. However,although its implementation skyrocketed in theearly 1980s, EOR dipped signicantly in the1990s because of the intimate relationship be-tween oil price and eld maturation (see gure2, page 29). As the gure shows, the industry be-gan to massively use it again in the past decade.Still, EOR is considered an unmet promise forthe industry. The theme of the 2013 SPE EOR

Conference in Kuala Lumpur is “Delivering thePromise Now,” highlighting how frustrating thistechnology has been for the industry as a whole.This article will explore some of the complex is-

sues that have delayed full implementation ofEOR and outline concrete steps companiesshould take to ensure success in EOR projects.

EOR is performed during the tertiary stageof oil recovery (see gure 1, page 28) and usesthree basic mechanisms for recovering oilfrom rock: thermal method (reduction of oil viscosity), miscible gas injection (extractionof the oil with a solvent) and chemical method(alteration of capillary and viscous forces).

Seizing the EOR OpportunityHow management practices can contribute to a

successful EOR implementation

By Jerome Sevin

and Baptiste Capron

W



sbc.slb.com | SBC Energy Perspectives 27

At least three aspects of EOR have relegatedit to a frontier technique, despite many years ofpilot wells and projects. First, EOR operations require much higher precision than primary

production : project outcomes have an enor-mous dispersion with a high number of failuresand some very successful cases (in the 30% to50% range increase). Second, EOR remains ex- pensive: depending on project complexity andeld size, the costs range from $10 to $80 perbarrel. Third, EOR is still considered a techno- logical frontier for most industry players, espe-cially in the case of chemical methods. Indeed,EOR faces technical challenges in multiple do-

mains that must be addressed during its imple-mentation. These include the following:

Understanding both static and dynamic reservoircharacterization for correct assessment of uid

choice and injection well design and congurationProper design of offshore facilities to handle

large volumes of injection uids in a restrictedspace

Planning for the production and transportlogistics for these uids

Awareness of environmental constraints andreservoir life-cycle limitations

Correct use of reservoir surveillance tech-nologies I L

L U S T R A T I O N

B Y

G O R D O N

S T U D E R




Seizing theEOR Opportunity

Not only are there complex technical chal-lenges in EOR, but they are unique to each reservoir and type of EOR method. This topic is beyondthe scope of this article, which will focus insteadon specic ways of ensuring successful EOR proj-ects. Many operators have signicantly enhancedtheir capacity to deliver these complex projects

by addressing key management practices. We will explore four of these:How should companies enhance their port-

folio management approaches?What uid procurement strategies should be

developed?Which organizational adjustments are most

likely to provide an efcient EOR structure?Why does the industry face a shortage of per-

sonnel trained in EOR and how can this talentgap be addressed?

Taking into Account EOR Project’sSpecic Life-Cycle and FinancialPayoff Structure FacilitatesPortfolio ManagementInstead of treating EOR projects as ”normal”production projects, companies must take intoaccount their specicities.

An EOR project typically requires 6 to 10 years to begin signicant production, with thefollowing key steps:

Laboratory testing and design phase (1 to 2 years) in which suitable technology is selecteddepending on resources, reservoir properties,and uid properties

A pilot test (2 to 4 years) in which the cho-sen technology is tested and monitored on apilot well or eld

A full-scale deployment (3 to 5 years) on se-lected reservoirs, with full production up to 30 years

Because EOR projects are characterized bylong lead times to production, cash ows arehighly concentrated at the end of the projectlife, therefore impacting the net present value(NPV) as seen in gure 3 (see page 30). Con-sequently, as these projects require high in- vestments, although they are smaller at thebeginning, discount rates and tax regimes arekey, and uncertainties have greater magni-

tudes. However, because EOR projects aremostly opex driven, the payoff date is earlierthan in capex driven projects that have com-parable lead times.

In addition, since EOR projects are high-ly uncertain until testing and piloting phas-es have been successfully concluded, it isdifficult to establish an early realistic esti-mate of potential returns. For this reason,companies should manage EOR projects in a

FIGURE 1:OIL RECOVERY STAGES

Natural flow Artificial lift

Primary recovery

Waterflooding Pressure maintenance

Secondary recovery

Thermal Gas injection Chemical & other

Tertiary recovery

Directly fromprimary to

tertiaryrecovery

Enhanced oilrecovery

(EOR)

Improvedoil recovery(IOR)

2

SOURCE: SBC ANALYSIS




FIGURE 2:NUMBER OF EOR PROJECTS VS. OIL PRICE

SOURCES: BP STATISTICAL REVIEW OF WORLD ENERGY JUNE 2012; “2008 WORLDWIDEEOR SURVEY,” OIL & GAS JOURNAL SURVEY, APR 21, 2008

technology portfolio during the test and pi-lot phases, promoting them to regular“primary” production projects once theyhave proved successful.

Long-Term and ComprehensiveFluid Procurement Strategy atan Early Stage Secures CriticalResources After enhanced portfolio management, thenext step is consideration of the most expen-sive and uncertain component of EOR proj-

ects: uids (see gure 4, page 30). Detailedassessments of procurement strategies forEOR agents (uids) have now become essen-tial to address high uncertainty in nal de-mand, potential shortages of supplies,constraints on local content requirements,and environmental regulations.

A preliminary aspect of the uid procure-ment strategy lies in the challenge raised byuncertainties in nal demand. As an exam-

ple, the volume of carbon dioxide (CO2) re-quired depends on the incremental recoveryfactor, typically ranging from 3% to 8%. Therequired quantity of CO2 in reservoir cantherefore range between 1,000 and 4,000 ft3per incremental barrel. However, required volumes are known only after conclusion ofthe pilot stage, about 5 years after the begin-ning of the project. Because certainty isreached so late in the process, companies tryto identify and pursue early/low risk steps intheir uid procurement strategies in addition

to maintaining an increased exibility inlong-term contracts.

The second consideration is uid supply.EOR projects require a large continuous sup-ply of injection uids (steam, CO2, chemicals,etc.), which are often costly and complex.Handling high volumes of uids exogenous tothe reservoir is still an alien task for some oilcompanies because many of them have nottried these technologies on a large scale, not

Number of EOR projects launched during year

1980 1985 1990 1995 2000

6

4

2

16

0

14

12

10

8

60

50

80

70

40

30

20

10

0

Brent priceUS$

2005





even for water or inert gas injection. So far,most successful EOR projects have been insmall- or medium-sized elds. A different pic-

ture emerges in large and super-giant elds, which are reachingtheir nal stages of primary andsecondary recovery. Here, EORuid requirements could be dis-ruptive to other industries, par-ticularly in the case of chemicalssuch as ethylene (for surfac-tants), which is also used in plas-tic industries. Conversely, thelack of uid supply can jeopar-dize the success of an EOR proj-ect. As a consequence, E&Pcompanies should consider t-for-purpose infrastructures dedi-cated to EOR projects to cope with these potential supply prob-lems. As an example, more than80% of the EOR-CO2 projects takeplace in the U.S., because CO2

has been readily available andsupported by an effective pipe-line network. (See SBC Energy

Institute’s factbook BringingCarbon Capture and Storage to Market .)

Another potential complicationis the necessary adjustment torules of operation, whether it is inresponse to local content require-ments or to environmental policycompliance. Because of a growingneed to monitor these factors overthe past few years, SBC has beenhelping companies to develop op-

erations, whether EOR-related ornot, in constraining environments.

Given all these factors, secur-ing uids sources in a timelymanner is critical for the successof an EOR project. Recommend-ed procurement strategies in-

clude long-term contractual agreements withsuppliers, which will enable companies to se-cure required volumes. In addition, this supply

FIGURE 4:EXPENDITURE DISTRIBUTIONOBSERVED IN THE INDUSTRY BY TECHNOLOGY

(AVERAGE VALUES FOR ON-SHORE PROJECTS)

FIGURE 3:NET PRESENT VALUE (NPV) OF TYPICALEOR PROJECTS VS. TYPICAL CAPEX DRIVENPROJECT (THEORETICAL REPRESENTATION)

NOTE: THE PERCENTAGES MAY SIGNIFICANTLY VARY BETWEEN LAND ANDOFFSHORE PROJECTS, BEING HIGHLY DEPENDENT ON THE SOURCE OF THESPECIFIC INJECTION FLUID. PRODUCTION COSTS OF SUCCESSFULPROJECTS BY TECHNOLOGY (USD/BBL): NATURAL GAS – 17; CARBONDIOXIDE – 17.5; STEAM/HOT WATER – 15; SURFACTANTS/POLYMERS – 28.5; INSITU COMBUSTION – 15

SOURCE: SOCIETY OF PETROLEUM ENGINEERING

NOTES: VALUES DISCOUNTED WITH A RATE OF 10%; CONSTANT OIL PRICEOF USD $10 PER BARREL; TAX REGIME: 70%; 100% EQUITY FUNDING FORBOTH PROJECTS

EOR PROJECT: INITIAL INVESTMENT 3 YEARS PRIOR TO FIRST PRODUCTION

CAPEX DRIVEN PROJECT WITH PRODUCTION START-UP AFTER 8 YEARS


21 3 4 5 76 8 9 10 1211 13 14 15 1716 18

$250

$0

-$500

-$250

-$750

-$1,000

Years

EOR projects:opex driven

Capex drivenproject

Millions (USD)

88%

11%1%

76%

20%

4%

67%

23%

10%

54%

28%

18%

44%

38%

18%

% of total costs

Capex

Other opex

Injectionfluids opex

Carbondioxide

Steam/ hot water

Surfacants/ polymers

In situcombustion

Naturalgas




must be carefully managed and tailored to theproject stage since, as shown for nancial as-pects, nal uid injection requirements arehighly uncertain.

More Transverseand MultidisciplinaryOrganization at AllStages of Projects IncreaseEfciency and PromoteEOR Awareness Another crucial component of EOR success isproviding an effective organizational structure.Effective interfaces within the organizationmust be established between teams leading thepilot phase, asset project teams, and frontlinebusinesses to support EOR projects.

Given the cross-disciplin-ary and integrated nature ofEOR projects, associated or-ganizations need to be coordi-nated beyond the silo-shapedmodels that are currently in

place. Referring to the innovation framework in the leadarticle (see “An Inquiry intothe Pathways to Innovation,”page 4), these types of organi-zations can contribute toknowledge creation throughcross-fertilization of multiplelines of inquiries and disci-plines (X solutions). Accordingly, collaborativeenvironments for innovation in EOR should bepromoted by research communities using at-

ter structures, managed by cross-functionalteams and nourished by individuals going beyond their functions.

Today, many companies handle EOR proj-ects using different departments for projectmanagement depending on the stage of theproject (such as reservoir studies at the be-ginning of the project) without designing anEOR-specic long-term unit. Companiesshould aim for the creation of a more trans-

verse structure to optimally leverage compa-ny experts and competencies. Thesestructural changes should provide increasedcollaboration between disciplines and im-proved project follow-up, along with moreconsistent communication with corporate en-tities, technical services and external stake-holders including universities, R&D centers,and contractors (see gure 5, page 32).

For example, while working with a majorE&P company, SBC found that the organizationrequires at the corporate level an EOR entitycollaborating with R&D centers, top EOR-relat-ed universities, and a pool of EOR experts (res-ervoir engineers, petroleum engineers andproduction technologists). This entity wouldactively work with frontline businesses to pro-

mote and submit EOR solu-tions to business developmentand strategic planning unitsat the subsidiary level.

At the earliest operation-al phases, a multidisciplinary

asset project team, with a fo-cus on reservoir engineering, would manage EOR deploy-ment at the asset level, witha pool of EOR experts andlaboratories offering robusttechnical consultancy servic-es. Supported by the overallorganizational framework,

the asset team would remain as the key devel-oper of EOR within its elds, given the closelink between EOR and specic reservoir condi-

tions and the knowledge that this team alreadypossesses.

Finally, any EOR-related organizationalchange should be coupled with a shift in cor-porate culture, one that promotes EOR byaligning internal goals and providing more rec-ognition and awareness of its importance with-in the organization.

All that said, any level of organizationalsophistication would be pointless without

“Given the cross-disciplinary and

integrated nature ofEOR projects, associ-

ated organizationsneed to be coordi-nated beyond the

silo-shaped modelsthat are currently

in place.”





skill and talent, resources that EOR-relat-ed structures have been in shortage of formany years.

Fine-Tuned Manpower Planningand Accurate Assessment ofEOR-Related Positions Are Key to Attract Necessary New Talent As with all complex ventures in the industry,EOR projects need the strong support of hu-man resources (HR) to reach their targets atevery stage of the talent supply chain.

While pressure on petrotechnical profes-sionals (PTPs) is rising, companies need toassess and correctly plan for the number of ad-ditional competencies to fulll current andfuture projects including EOR. They have torecruit both locals and expatriates, train anddevelop them in a multidisciplinary environ-ment, while creating required career pathsand managing outows, enabling successfulEOR succession planning.

In this context of a skill-intensive indus-

try, the generation change (producing an in-crease in retirement and voluntary attrition)and the existing vacancies could result in atalent gap of more than 15,000 PTPs in a few

years. While the industry is already facingthese issues to meet its current skills require-ment, the EOR situation is even more chal-lenging because of recent history: as thenumber of EOR projects and operations de-creased during the low oil-price era of thelate 1980s and 1990s, a majority of expertsleft the industry, generating a large talentgap among reservoir engineers and PTPs spe-cialized in complex resources.

Even at early stages, EOR projects requirehighly experienced and varied human resourc-es. To cope with these requirements, compa-nies need a robust EOR-related personnelplan, which could reect their own long-termbusiness plan. This plan can then be cascadedinto recruitment, career development, andskill-specic training, which will generateEOR-specic accelerated capability develop-ment. Thus, comprehensive talent strategiesare necessary for the re-emergence of this dis-appearing but vital EOR expertise.

To achieve this, many companies use

their own research centers — Total’s Re-search Centre in Qatar, Maersk’s Oil Re-search and Technology Centre in Qatar, andPetronas’ Center of Excellence for EOR in

FIGURE 5: TYPICAL ORGANIZATION FOR EOR PROJECTS

EOR universities ContractorsR&D center 1

1Could be part of E&P company

Innovation

Business

E&PCompany

Corporate EOR

Humanresources

Front lines business

Corporatestrategic planning

Contract &procurement

Businessdevelopment





Malaysia are good examples. Companies canalso increase partnerships with universities,such as Wyoming University Institute, Tech-nical University of Delft, and Texas StateUniversity, as well as join partnerships withPhD programs. Also, the industry is benefit-ing from the emergence of EOR-specific fo-rums with professional societies, like theEOR Conference held by the Society of Pe-troleum Engineers, in which global expertsshare successes and lessons learned in eval-uating and implementing a variety of EORtechniques.

Furthermore, more accurate screening within typical EOR-related organizationshighlights key positions needed, such as EORportfolio managers, EOR production technol-ogists, and EOR reservoir and petroleum en-gineers, with particular skills linked. Forinstance, an EOR reservoir engineer willneed to have a deep knowledge of multipleEOR technologies (CO2, low-salinity water-ood, thermal processes, chemical EOR, gas

injection, to name a few); to be able to man-age laboratory contractors; to design andmodel core ooding experiments; and to develop both conceptual and full-eld composi-tional simulation models.

In addition, leaders of EOR-related enti-ties, whether in the eld at the asset level or atthe company headquarters, have to be speci-cally trained. For example, a corporate head ofEOR will be expected to perform many differ-ent and exacting functions, including:

Work collaboratively with various operating

assets and other entities such as business development units to provide cost-efcient EORsolutions

Lead simulation members of the team ofexperts

Provide rst-line technical quality-check of work

Master waterooding and most other EORprocesses

Manage a team that covers the full scope of

EOR from initial design and pilots to full-scale implementation as well as surveillance/ optimization.

This has to translate into internal process-es enabling early identication of potentialEOR leaders and providing them with bothtechnical and managerial skills.

ConclusionEOR will reshape the E&P business perhapsmore than any other segment of the industry.It is set for continuous growth — as a result oftechnological improvements, the renewal ofproduction licenses, and the need to build alow-carbon future. Most companies under-stand this and are adapting their managementpractices accordingly.

However, they must overcome numerouschallenges not addressed in detail in this arti-cle: they must dene an overarching EOR strat-egy, as well as strategies for assessing eldtechnology and injection-uid requirements.

In parallel, non-corporate industry stake-

holders — such states, regulatory agencies,and other heavy industries (steel, electricity,and cement) — must also prepare for the EORboom, for example, by developing appropriatetax regimes or local content strategies.

Most companies, especially national oilcompanies (NOCs), are still in the early stag-es of EOR. Their priority must be to imple-ment a new EOR culture: switching focusfrom production to recovery will provide aplatform for harnessing the industry’s wealthof knowledge.

Done right, EOR is not difcult. And by im-plementing a few crucial management practic-es, companies can do it right and signicantlyincrease the odds of success.

Jerome Sevin and Baptiste Capron work forSchlumberger Business Consulting (sbc.slb.com).We welcome your comments on this article:[email protected].

Copyright © 2013 Schlumberger Business Consulting. All rights reserved.

Documents

Seizing Eor Opportunity