Fracturing Alliance Allows Economical Production of Massive Diatomite Oil Reserves: A Case Study

Abstract

Summary As North American oilfield operations mature, there is a perceptible loosening of the autocratic ties between oil companies and contractors. They are being replaced by alliances or partnerships designed to minimize cost while improving profitability of the companies involved. This paper evaluates a mature alliance, its implementation, structure, and results. Background California's Lost Hills field, ˜45 miles northwest of Bakersfield (Fig. 1), holds an estimated 2 billion bbl of oil in massive diatomite deposits. Although the porosity of the Lost Hills diatomite reservoir is generally very high, ranging to >60% in the cleaner diatomite, and pay thickness ranges from 500 to 1,200 ft, the permeability is very low (generally <1 md). Because of the low permeability, massive hydraulic fracturing treatments (2,500 to 3,000 lbm of proppant per net perforated foot) are now an integral part of field development. Discovered in 1910, the field produced <5,000 BOPD for the next 70 years (Fig. 2). Completions were either open hole or slotted liner, and production averaged 4 BOPD/well. During the late 1970's, low-sand-volume fracturing techniques (500 to 1,000 lbm per perforated foot) were introduced. Average well production climbed to 10 BOPD/well. Then, in 1987, well productivity again increased significantly with the initiation of massive hydraulic fracturing treatments. Figs. 2 and 3 clearly show the impact of this technology in a low-permeability reservoir. Field production rates have tripled without a significant increase in active well count (abandonment of old slotted-liner completions has kept pace with the addition of these new-technology wells) while ultimate primary recovery estimates have doubled. Responding to this development and the process efficiency opportunities that it created, an exclusive fracturing alliance was initiated in 1990 between Chevron and Schlumberger Dowell. In addition to significant productivity increases, major cost reductions have resulted from continuous process improvement efforts by the alliance team. As of Oct. 1, 1995, more than 2,586 fracture stages had been performed during the completion of more than 600 wells, placing in excess of 1.231 billion lbm of proppant. These efforts have contributed to a 160% production increase, from a pre-1989 level of 6,000 BOPD to current production of 16,000 BOPD. Since 1988, unit fracturing costs were reduced by 40% while profitability improved for both companies. Alliance Development1–9 Chevron Lost Hills Project Team. Owing to the significant volume of oil in place in the diatomite reservoir, Chevron realized the need to initiate a focused effort to optimize diatomite exploitation. In 1988, the company assembled a self-directed project team to review investment opportunities. This crossfunctional group concluded that a significant number of profitable primary development wells remained to be drilled. Because of the more than 500 producing wells required to develop the field, the group also recognized that the net present value of the Chevron Lost Hills asset could be significantly enhanced through reductions in drilling and fracture stimulation costs. Also, because this reservoir is unique and its properties poorly understood, the team believed that gains in well productivity could be achieved through technical evaluation and, ultimately, through a change of the basic fracture stimulation design. The project team recommended development of a long-term relationship with a single fracturing service company to realize the full potential of the Lost Hills field. Its implementation has played a key role in realizing the field's full potential. Alliance Partner Selection. From 1988 to 1990, Chevron conducted field performance evaluations of several fracturing services contractors. The main criteria for the evaluation were job execution, job monitoring, environmental performance, and safety performance. Cost of stimulation services and materials was also considered. This evaluation period was characterized by frequent premature screenouts caused by undesirable variability in gel viscosity and proppant concentrations. The majority of screenouts were caused by an inability to deliver the consistent fracturing slurry quality necessary to stimulate this unique reservoir efficiently. On the basis of these criteria, Dowell was chosen as the alliance partner; and in mid-1990, the two companies began an exclusive relationship for fracturing services at Lost Hills. Both parties began working together to develop the formal alliance document that would lay the foundation for the growing relationship. Alliance Organization. Fig. 4 illustrates the key components of the alliance structure, which includes the following.An alliance steering committee, which sets the overall direction.Two alliance managers (company/supplier).Two alliance coordinators, who coordinate team activities (company/supplier).Two additional members (company/supplier).Technical teams, which continuously improve fracturing design and field development through production and reservoir evaluation.Quality-improvement (QI) teams, which develop and administer performance metrics systems through continuous process improvement.