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For Schlumberger Ltd., it's no longer about what it can do in the oilfield, it's what it wants to do, a feat increasingly accomplished through high-tech software.
The senior management team came together last week in a two-day investor conference, the first in three years. The key to building margins and revenues increasingly is tied to software innovations, many first tested in North America's onshore.
Schlumberger began some transformational initiatives first in North America's onshore, where it had 44 autonomous hubs. It's down to five regional hubs today, an efficiency that has allowed it to, among other things, increase the number of fracturing stages per crew by 35% in the past six months.
Another opportunity management sees is in evaluating and treating older wells in North America's onshore to enhance production through coiled tubing, slickline and cased-hole wireline services.
"Production services offer some of the most exciting growth opportunities in oilfield services today," said Production Group President Sherif Foda. Since the last investor conference in 2011, the production unit has grown at a compound annual growth rate of 10.6%, while the total global services market has grown by 8.9% on average.
"The total production market size today is estimated at more than $105 billion, making it larger than the estimated drilling and characterization market sizes combined," Foda said.
Schlumberger was making money but market fragmentation made the returns spotty. Margins dropped mostly on weakness in the North American pressure pumping market and it is "once again going through a period of overcapacity and consequent pricing erosion."
That doesn't mean that technology improvement is put aside to await better market conditions. It can't wait, executives said. If accounted for independently, Schlumberger's computer technology business would rank among the world's top 50, said Executive Vice President Ashok Belani, who oversees the technology division.
"Software is big in Schlumberger...We spend one-third of our R&E budget on software and related developments, and we employ more than 2,500 people within our software community."His team offered investors a look-see at some of the emerging oilfield technology.
"When drilling modern horizontal wells, real-time downhole measurements that read tens of feet into the formation together with high frequency real-time drilling data, allows us to perform simulations of the whole drilling operation," he said. The software has improved the turn-around time for a complex analysis by a factor of 20 to 100.
"The results are smoother, safer wells that contact more of the best reservoir sections to bring higher production for the customer." In unconventional reservoirs, understanding the "interplay of natural and induced fractures is imperative" to achieve effective and efficient completions."
Unconventional plays "call for different technologies and workflows, and we have been fast-tracking development of new tools and techniques to improve the economics of these plays." Some improve production, some cost efficiency, and some do both.
For instance, HiWay fracturing technology, introduced four years ago, remains the "fastest growing new technology in the history of Schlumberger," said North America chief Robert Drummond. HiWay relies on a combination of specialized surface equipment, engineered composite fluids with fibers and completion designs to promote flow channel formations within the proppant pack for higher recovery (see Shale Daily,April 24, 2012).
HiWay is used in more than 25% of all Schlumberger fractures worldwide and in more than 20 countries, according to the company. The use of HiWay technology "has spread across the entire Eagle Ford play," with about 1,200 wells completed to date.
Improving individual well productivity and its return on investment are keys to growth. Another technology, Mangrove workflow, is an engineered well stimulation design that created a "step change in perforation efficiency" since it was launched 18 months ago. It helps to identify sweet spots.
Mangrove first was deployed for a group of wells being developed by a consortium of Eagle Ford Shale producers. The completion efficiency reduced well costs by around $1.5 million per well, according to Schlumberger.
Infinity System is the newest unveiling, a technology fluid system that replicates traditional plug-and-perforate operations, eliminating the ball seat and the fracture balls. Wells may be completed with longer laterals and more productive zones, and possibly shave weeks off first-production time.
There's a lot more innovation still to be identified, especially for North America, said executives.
Not trumpeted by producers is the fact that North America's unconventional reservoirs have about 40% nonproducing clusters and 40% nonproducing fractures, said Drummond. That means 40% noneconomic wells.
Schlumberger took note by creating the Broadband Sequence, part of a family of fracturing services that temporarily bridges the entry points of low stress to allow new zones with higher stress to be stimulated.
"First, the differential pressure in each stage between the perforating clusters means that the lower stress zone will take most of the fluid," Drummond said. "Second, the height and settling of the proppant to the lower half of the fracture means a lower cross-sectional area for production."
In a case study using Broadband of an older Eagle Ford well, which Schlumberger re-fractured using the same number of stages and proppant volume per stage as done originally, the shut-in pressure was measured at the end of each stage and confirmed a sequential increase.
"After re-fracturing, the well exhibited a more than threefold increase in productivity index," Drummond said. "Payback time was just four months...
"The opportunity is huge. If we just think that 10% of the wells that exist today in North America are candidates, we are talking about nearly 10,000 wells."
Until recently, the platform technology essentially was used by external customers, but it increasingly has become part of the internal workflows in the dynamic, digital world. New technology sales at Schlumberger have grown since 2011 at a compound annual growth rate of 33.9%.
To leverage its understanding of new computing offerings, Schlumberger is siting a software innovation and technology center in the San Francisco Bay Area by creating SWT to drive advancements.
Another critical piece in development is maintaining and drawing a progressively engaged workforce. Schlumberger partners with 300 universities in 80 countries. For the R&E organization, it hires about 200 professionals a year.