Low Oil Prices Research Articles

Technology Focus: High-Pressure/High-Temperature (March 2022)

What a difference a year can make. Oil and gas prices have reached and stabilized at levels that have not been seen for over half a decade, demonstrating that the adage “low oil prices are the remedy of low oil prices” is still true. Let us now see if we are again at the cusp of a new period of exuberance and if the cyclical nature of oil prices could soon show its grim face once more. A key industry discipline required to delay, or maybe even avoid, another price collapse is the planning and execution of high-pressure/high-temperature (HP/HT) projects. Perhaps the movement of some financial institutions toward considering environmental, social, and governance aspects when deciding to fund oil and gas projects will provide the beneficial longer-term stabilization of the current oil and gas price levels. More than ever, the saying “the easy/cheap oil is over” is true, and that requires a more-stable economic environment than we had in past years to assure the world’s uninterrupted energy and chemical feedstock supply, an important share of which will come from HP/HT reservoirs. For this year, I think we can see where the activity currently is from the available HP/HT related papers of the past year or two. A predominance of papers came from Chinese companies enthusiastically embarking on these challenging projects to secure their domestic energy needs and reporting their technology innovations and learning curves in interesting case studies. I was able to find some geographic diversity by including case studies from the Middle East as well, where good ideas and innovative low-cost approaches have enabled economically feasible project delivery in tough times. Notably absent in the choice of papers were the traditional HP/HT areas of the deep Gulf of Mexico and the North Sea. But maybe the more favorable oil and gas prices will spawn some new activity in these areas as well, if the regulatory and fiscal environment also improves. Reading this year’s case studies, some of the more experienced engineers among us will notice that, on some occasions, known challenges have been encountered that, in our experience, had been successfully mitigated in previous projects. This is likely a weakness from the Great Crew Change, where the knowledge preservation and transfer may not always have happened satisfactorily. The cut-throat cost-saving environment of the past few years, combined with the worldwide health crisis leading to curtailed travel and many workshops and conferences being canceled, certainly contributed to this lack of information flow as well. This is why it is so important to engage in SPE through online interest/discussion groups to find the necessary expertise in our pool of members. With this recommendation, I hope you will read the 2022 featured papers with interest and take them as encouragement and a source of good ideas for the years of greatly improved activity levels before us. Recommended additional reading at OnePetro: www.onepetro.org. IPTC 20148 - Solid Management Optimization for Offshore Big-Bore HP/HT Sour Gas Well Cleanup by Ardian Nengkoda, Saudi Aramco, et al. SPE 199052 - One of the Deepest Wells Drilled in Bolivia: High Pressure and Temperature in More Than 9 Months of Drilling, No Casing Wear Detected by Russell Mertens, WWT International, et al. SPE 202250 - Next-Generation Ceramic Sand Screens as Openhole Completion Solution in High-Rate Erosive and Corrosive Well Environment at Dvalin HP/HT Field, Offshore Norway by Robert Ritschel, Wintershall DEA, et al.

Effective Stress Factor Analysis of Proppant for Multi-stage Fracturing in Horizontal Wells

In order to determine the effective stress factor of proppants during the multi-stage hydraulic fracturing operation in horizontal wells and select the appropriate proppant type, the analysis of the effective stress characteristics of proppants is carried out. This analysis considers the geomechanics and long-term production characteristics of multi-stage fractured horizontal wells in reservoirs like Xinjiang Mahu shale oil and Southwest China shale gas. The analysis of influencing factors is also carried out. The results show that, during the multi-stage hydraulic fracturing operation in horizontal wells, the stress on proppants is not only related to geological factors such as reservoir closure stress, but also closely related to total injection volume, cluster spacing, liquid type, injection displacement and post fracture management. First, increasing injection intensity, reducing fracture spacing, using low viscosity fracturing fluid, adopting high injection displacement and utilizing reasonable flowback system can effectively supplement reservoir energy, postpone the effective stress peak of proppants, and increase the effective conductivity of proppants. Second, the production performance analysis results of nearly 300 horizontal wells (from Xinjiang oil field, Erdos tight oil reservoir, Sichuan shale gas reservoir, etc.) shows that: the effective stress of proppants in horizontal wells is only 50–60% of that in vertical wells, which results in a different proppant selection criterion in the volume stimulation of horizontal wells and provides the geomechanics basis of replacing ceramsite proppant with quartz sand to reduce cost and increase efficiency. Based on the above conclusions, the field test of replacing ceramsite proppant with quartz sand was carried out. The proportion of quartz sand increased from less than 30% in 2014 to 69% in 2019. Without any impact on production, the annual investment cost was decreased by more than 1 billion yuan, which set a great example for the promoted low-cost development of unconventional oil and gas reservoirs under low oil price background.

Mining Resource Corridor development in Nigeria: critical considerations and actions for a diversified and sustainable economic future

The low crude oil prices in 2019 add momentum to Nigeria’s need for economic diversification as its foreign earnings come primarily from crude oil sales. As a result, Nigeria is seeking to explore other economic potentials, such as developing a Mining Resource Corridor (MRC) to reduce poverty and assist the country’s sustained growth and development. MRCs catalyse mineral extraction, transportation, processing, and infrastructural development and integrate other sectors of the economy, thus, creating jobs and promoting economic diversification and inclusive growth. However, achieving this requires drawing up an articulated delivery mechanism through a framework strategic implementation plan to attain a strategic diversification away from hydrocarbons to minerals. This article takes an applied research approach to examine the critical considerations and actions that Nigeria should take in developing an MRC to ensure a diverse and sustainable economic future. Additionally, it discusses the lessons Nigeria can learn from two corridors in Mozambique. This study notes that the success of a MRC is a function of, among other things, a skilled and adequately strengthened institution, enabling infrastructure and the participation of communities in the decision-making process of the corridor development. It also includes the support of all levels of government and possible assistance from development partners and donor agencies such as the World Bank.

Saudi Non-Oil Exports before and after COVID-19: Historical Impacts of Determinants and Scenario Analysis

The diversification of the economy including its exports is at the core of Saudi Vision 2030. The vision targets to raise non-oil export from 16% to 50% of non-oil GDP by 2030. Achieving this, in addition to other goals, necessitates a better understanding of the non-oil export relationship with its determinants. However, we are not aware of a study that estimates the impacts of the determinants on Saudi non-oil exports covering the recent years of reforms and low oil prices and that conducts simulations for future. The purpose of this study is to develop an econometric modeling framework for Saudi non-oil export that can enhance informing the policymaking process through empirical estimations and simulations. For estimations, we applied cointegration and equilibrium correction methodology to the annual data for the period 1983–2018. Results show that Middle Eastern and North African countries’ GDP, as a measure of foreign income, and Saudi Arabia’s non-oil GDP, as a measure of production capacity, have statistically significant positive effects on Saudi non-oil exports in the long run. The real effective exchange rate (REER), as a measure of competitiveness, also exerts a positive effect in the long run if it depreciates and vice versa. Furthermore, our findings support the Export-led growth concept, which articulates that export can be an engine of economic growth and does not support the Dutch disease concept, which highlights the consequences of the resource sector for the non-resource tradable sector for Saudi Arabia. Macroeconometric model-based simulations conducted up to 2030 reveal out that the Saudi non-oil export is more responsive to the changes in REER than any other determinants. The simulation results also show that non-oil manufacturing makes a three times larger contribution to the future expansion of non-oil exports than agriculture. Moreover, the simulations discover that finance, insurance, and other business services, as well as transport and communication play an important role in improving the Saudi non-oil export performance in the coming decade. The key policy recommendation is that measures should be implemented in a coordinated and balanced way to achieve non-oil exports and other targets of the Vision.

Application of the Delayed Royalty Framework for Onshore Petroleum Investment in Nigeria Using the 1993 Production Sharing Contract

The 1993 production sharing contract (PSC) in Nigeria specifies different royalty rates for oil and gas investment. The royalty rates were fixed. This makes the fiscal arrangement to be regressive in nature. Royalty rate of 20% is to be paid for onshore investment using the 1993 PSC. Hence, there is a need to make the fiscal arrangement progressive. The delayed royalty framework was incorporated into the1993 PSC as a progressive measure to make it dynamic. Two economic models were developed using spreadsheet technique to evaluate the impact of the delayed royalty framework on onshore petroleum investment. The 1993 PSC fiscal framework was used to develop the economic models. The delayed royalty framework was incorporated into one of the models. The delay in royalty payment hinged on the payout period of the investment. It was observed that the delayed royalty framework increased the contractor’s revenue during the period of low oil price. Thus, increasing the sustainability of the investment during period of low oil price.

Enhancement of oil recovery by surfactant-polymer synergy flooding: A review

With the depletion of conventional resources, it is necessary to enhance the recovery of remaining oil. The tertiary oil recovery chemical flooding is the most promising for enhanced oil recovery (EOR). The use of alkali in chemical flooding produces fouling with the formation, which brings new challenges to chemical flooding EOR. So, alkali-free surfactant-polymer (SP) flooding is used as a new solution for EOR. The polymer makes the displacing fluid have a high viscosity and increases the swept volume. The surfactant can decrease the interfacial tension and emulsify the crude oil while the displacing fluid reaches the corresponding area. The synergistic effect of the two is more conducive to the recovery of the remaining oil. As a result, SP flooding is a more practical approach to enhance oilfield EOR. The research status of several surfactant and polymer types for EOR is reported in this work. According to the study, complex and anionic surfactants are better for EOR. For difficult formations, SP flooding is more suited because of the presence of polymers. Additionally, study analysis demonstrates that SP flooding and alternative polymer injection, when employed at the same cost, can enhance EOR and assist in resolving issues brought on by low oil prices.

Strategic cooperation of Iran at the regional level: enduring the US sanctions and reviving the oil and gas industry

Iran intends to alleviate the damage caused by the hostile relationship with the USA. As one way of the efforts, this research focuses on Iran's oil and gas cooperation with neighbouring countries, specifically those in the Middle East, the Caucasus and Central Asia. The analysis draws three conclusions depending on the theoretical framework of energy geopolitics. First, the efforts of Iran to overcome the situation have not been successful, combined with low oil prices by 2020. Second, Iran emphasises transportation as well as trade in its oil and gas cooperation with neighbouring countries. Finally, regional cooperation will bring substantial benefits to Iran in both economic and geopolitical aspects, working as a platform for increasing its undervalued influence at the global level.

Regional disparities and fiscal federalism in Russia

This paper examines how regional disparities have evolved in Russia and how Russia’s system of intergovernmental fiscal relations is managing these disparities. Regional disparities have fallen over the past two decades but remain relatively high. Socioeconomic outcomes remain worse in lagging regions despite faster growth and convergence in income levels. The twin shocks of COVID-19 and lower oil prices appear to have impacted richer regions disproportionately. Compared to other large countries with federal systems of government, Russia stands out with its high reliance on direct taxes as a revenue source for its regions. Russian policymakers have made efforts to reduce regional disparities by designing a federal transfer system that intends to close vertical imbalances, achieve redistribution, and insure regions against both common shocks (“stabilization”) and idiosyncratic ones (“risk-sharing”). Transfers from the federal budget to the regions provide some redistribution by reducing the dispersion in real per capita fiscal spending, but also tend to be associated with lower growth. The Russian fiscal system offers degrees of redistribution and risk sharing of around 26 and 18%, respectively — with in-kind social transfers contributing the most. Finally, federal transfers in the aggregate tend to be procyclical and are also fairly unresponsive to shocks to regions’ own revenues.

Oil prices, manufacturing goods, and nontradeable services

This paper studies the ability of manufacturing-specific shocks to explain oil prices. In an estimated three-region model (US, OPEC, rest of world) incorporating two sectors (manufacturing and services) in the oil-importing economies and featuring cross-border supply chains, such shocks rationalize the observed pattern of a positive comovement between oil prices and the global cyclical gap between manufacturing output and services provision. In the event of manufacturing technology shocks, oil demand, intermediate manufactured goods demand, and global trade move in tandem. Similarly important are shocks to final manufactured goods demand that are amplified by input-output linkages and trade. In the US, foreign shocks that cause higher oil prices – including oil supply disruptions – lead to rising manufacturing relative to services, and higher core inflation and policy rates. This rationalizes, to a large extent, the pattern during major oil price hikes, and, with opposite signs, during important low oil price episodes.

An optimisation model for incentivising the development of marginal oil and gas fields amidst increasingly complex ownership patterns: UKCS case study

Many recent discoveries in the UKCS have been economically marginal and comparatively small such that they are unable to be developed on a standalone basis. Nevertheless, there is a proliferation of production facilities and transport infrastructure that can, on accepting a tariff, process hydrocarbons from these smaller-sized oil and gas fields, thereby contributing to the UK Government's strategy of maximising economic recovery (MER). However, the empirical dimensions of cost-sharing arrangements between a field owner (host field or hub) and tie-in (satellite) fields are not well examined in the literature although they influence long-term economics in matured oil provinces. In this paper, we develop a mixed integer programming optimisation model to analyse how these third-party access to infrastructure issues impact MER in the UKCS. A first-best situation with only one regional operator is empirically compared with the actual situation of multiple ownership. We then assess the impact of different infrastructure unbundling provisions via pipeline tariff choices and their interaction with the fiscal regime on the net present value (NPV) and other project metrics such as timings of hub and field shutdowns. We find that differences in field ownership, tariff choice and changes to the fiscal regime impact the overall NPV of field developments. Our results also show that having a progressive fiscal regime in a mature basin such as the UKCS is important to support continued operations under low oil prices while increasing the government's take at high prices. The cost-sharing effect shows that imposing strict cost-sharing rules does not change overall project valuations, even in a low oil price scenario. An additional contribution to the extant literature is that tariff determination could be based on cost-sharing rules that enjoin each field tieback to a hub to pay a split tariff, comprised of a fixed cost of service (access charge) and variable (marginal) costs. • Presents MIP model for analysing economic dependencies of infrastructure assets. • Ownership style, choice of tariffs, and fiscal regime impact overall field value. • Reducing marginal tax rates improves profitability, reflecting neutrality and progressivity. • Tariffs are decisive as to whether satellite or user fields are developed. • Tariff determination to maximise MER should be based on two-part cost-sharing.

Oil price volatility and corporate cash holding

Since it is believed that oil price movements highly influence economic growth in oil-rich countries, this study examines the influence of oil price volatility on corporate cash holdings and adjustment speed and tests whether firms in the petrochemical industry are affected differently from firms in other industries. This study addresses these research questions using static and dynamic system GMM models on a sample of non-financial firms listed in Gulf Cooperation Council (GCC) countries between 2005 and 2019. The results of this study assert that oil price volatility has a significant impact on cash-holding decisions. Specifically, the study displays a positive and significant relationship between oil price volatility and firms' cash holdings. Again, the study discovers that firms adjust towards their target cash-holding level faster during high oil price volatility than during periods of low oil price volatility. Consistent with the trade-off theory, the study unveils that precautionary motive is a crucial factor motivating firms to retain large amounts of cash. The results also showed that firms in the petrochemical industry have a higher cash-holding ratio than firms in other industries. These results support the view that oil price volatility exposes oil-related industries to a higher uncertainty than other industries. Moreover, the findings are robust to an alternative measure of oil price volatility and model specifications.

Research on the Transformation Path of BP under the Dual-carbon Background

Nowadays, the oil and gas industry is facing a huge financial challenge, because it has been hit by the double blow of the COVID-19 pandemic and low oil prices. This, coupled with the global consensus on low-carbon energy, forces BP to seek a balance between oil business and low-carbon, sustainable development, and began to look for new value growth points to accelerate the pace of low-carbon transformation.

Improving Water Flooding Management through Facies Remodeling and the Use of Streamlines and Finite Difference Simulators

A successful water flooding project requires continuous surveillance and updated studies. The use of modern tools and practices is also essential to achieve maximum oil recovery. Field ‘X’ lies in the Western Desert of Egypt. Although the field employs water flooding as a secondary recovery mechanism, it suffers from low oil recovery, low sweep efficiency and high water’s production rates. In 2014, a field development plan was issued with a target recovery factor of 30% using water flooding. However, actual production has significantly underperformed initial forecasts, motivating a re-evaluation of the old plan. In particular, it was considered necessary to revisit the underlying geologic concept and how this was incorporated into flow simulation forecasts. The aim was to maximize the oil recovery factor before resorting to an expensive tertiary recovery plan; especially, under current low oil prices. This paper discusses the value of updating both static and dynamic models to better incorporate uncertainty associated with facies distribution. It also demonstrates the use of streamline simulation to reallocate water injection rates and determining the role of facies communication in improving the areal sweep efficiency. The new injection scheme is supported by the updated dynamic modelling study and added an incremental reserve of 6.5% and unlocked 28% of the oil in place in the field. Keywords: Water-flooding; Facies; Streamline; Simulation

A Dynamic Analysis of Oil Prices and Inflation Model and Method

The study examines the impact of oil prices on inflation by applying a threshold model for five (5) ASEAN members, namely Malaysia, Indonesia, Singapore, Thailand and the Philippines. Three (3) indicators for oil price shocks are extracted in conjunction with Mork [23], Lee et al. [22] and Hamilton [13] methods. Consequently, these values are used to delineate the effect of price shock differentials. The pass-through effect is integrated into the threshold equation model. Later, the model is calculated to have an impact on inflation of high and low oil prices. The result is that the oil price shock appears to have a major impact on inflation when prices are in the high regime. This extends to all shock measures. The effective exchange rate and industrial price index (IHP) are classified as the primary determinant of inflation in all sample countries. As such, counter-cyclical monetary policy considerations should remain driven by the emerging downside risks of oil price shocks. It requires a more accommodative monetary environment to offset inflationary pressures on the domestic economy.

Economic Aspects and Sustainability of Ethanol Production—A Systematic Literature Review

Meeting the increasing global energy demand in a sustainable way is a major challenge for humanity. One of the solutions in the transportation sector is ethanol, which is currently the only economically viable direct fuel substitute. In addition to the first-generation technology, which provides the vast majority of production, better results can be continuously realized by using advanced technologies. This study aims to investigate the economic aspects and sustainability issues of ethanol production with a systematic literature review. During the selection process, 64 studies from a total of 16,141 identified articles were analyzed in-depth. There is a consensus that first-generation production methods cannot result in a long-term solution. However, advanced technologies are currently immature, and ethanol production is more expensive with them. The use of wastes/residues and coproducts can improve both the economic outlook and sustainability of the advanced technologies. Overall, the newer generations of technological advancements are constantly improving the environmental performance, whereas the economic performance is deteriorating. Considering low oil prices (0.36 USD/L), none of the ethanol production methods can be competitive on a purely cost basis. This increases the importance of coproducts (further processing and more valuable coproducts). Regarding sustainability, a complex analysis is essential, which must cover at least the environmental, social, and economic aspects. At the methodology level, a complex life cycle analysis seems to be the best tool, as it can take into account these relevant aspects (environmental, economic, and social).

THE IMPACT OF OIL PRICE SHOCKS ON ECONOMIC GROWTH: THE CASE OF TAIWAN

Most studies continue to analyze oil shocks. Earlier authors recognize that oil price volatility plays a critical role in the economy. There is accordingly evidence that oil price shocks negatively impact real gross domestic product (GDP) growth rates and cause higher inflation. However, this paper uses different perspectives to investigate whether it is beneficial to Taiwan's overall economy based on a low oil price event. This study's results reveal that an increase in the oil price leads to an increase in the consumer price index (CPI), causing higher inflation. Moreover, a long-term rise in oil prices would negatively impact the GDP growth rate. Alternatively, in the event of falling oil prices, there may not be an immediate decline in the price of goods. However, firms' reductions in the cost of goods resulted in declining CPI, due to the decreasing oil price over the past few months. Furthermore, it was observed that GDP would decrease when there is a long-term decline in the oil price. All the previously mentioned results are almost consistent with those of previous studies of high oil price events. In addition, the economy would be negatively impacted by a long-term decline in oil prices.Keywords: Oil price shocks, Oil fluctuation, Economic activity, Impulse response functionJEL Classifications: F62, M21, O11, Q43DOI: https://doi.org/10.32479/ijefi.11822

Petroleum Reservoir Control Optimization with the Use of the Auto-Adaptive Decision Trees

The global increase in energy demand and the decreasing number of newly discovered hydrocarbon reservoirs caused by the relatively low oil price means that it is crucial to exploit existing reservoirs as efficiently as possible. Optimization of the reservoir control may increase the technical and economic efficiency of the production. In this paper, a novel algorithm that automatically determines the intelligent control maximizing the NPV of a given production process was developed. The idea is to build an auto-adaptive parameterized decision tree that replaces the arbitrarily selected limit values for the selected attributes of the decision tree with parameters. To select the optimal values of the decision tree parameters, an AI-based optimization tool called SMAC (Sequential Model-based Algorithm Configuration) was used. In each iteration, the generated control sequence is introduced into the reservoir simulator to compute the NVP, which is then utilized by the SMAC tool to vary the limit values to generate a better control sequence, which leads to an improved NPV. A new tool connecting the parameterized decision tree with the reservoir simulator and the optimization tool was developed. Its application on a simulation model of a real reservoir for which the CCS-EOR process was considered allowed oil production to be increased by 3.5% during the CO2-EOR phase, reducing the amount of carbon dioxide injected at that time by 16%. Hence, the created tool allowed revenue to be increased by 49%.

Oman: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Oman

Sultan Haitham ascended to the throne in January 2020 and has committed to implementing strong fiscal and structural reforms to address longstanding vulnerabilities. In addition to persistent fiscal deficits arising from incomplete adjustment to lower oil prices since 2015, Oman faced twin shocks from the COVID-19 pandemic and a collapse in oil prices in 2020 that amplified fiscal and external vulnerabilities. The authorities moved rapidly to contain the spread of COVID-19 infections and provided broad-based policy measures to limit its impact on the economy. In addition, frontloaded fiscal consolidation has been implemented in the 2021 budget as part of the authorities’ Medium-Term Fiscal Plan (MTFP) which aims to eliminate the fiscal deficit over the medium term. Banks have high capital buffers and liquidity, but credit risk is a concern going forward. Structural reforms have been accelerated under Oman Vision 2040 to boost non-oil private sector growth and facilitate job creation.

Practice and Development Suggestions for Volumetric Fracturing Technology for Shale Oil in the Ordos Basin

The use of volumetric fracturing technology can greatly increase the output of single well of shale oil in the Ordos Basin, but it is difficult to achieve economic and effective development under the condition of low oil prices due to the fact that the technical idea, technical mode and parameter system of fracturing are not reasonable enough. For this reason, based on field practice and laboratory test results of volumetric fracturing of shale oil at the Chang 7 Member of the Yanchang Formation in the Ordos Basin, the technical idea for volumetic fracturing was changed, thereby forming the technical mode of “large well clusters, long horizontal wells, subdivision cutting, cluster perforation, soluble ball seats, and variable-viscosity slickwater”. Then, the parameter system for volumetric fracturing was optimized. The mechanism and key technology for fracturing stimulation were systematically analyzed with the geological characteristics of the shale oil formation in the basin. The research results showed that the understanding of the seepage mechanism of shale oil in the reservoirs has gradually evolved from a single effective displacement mechanism for conventional reservoirs to a compound mechanism of effective displacement and oil-water imbibition displacement. The technical mode of volumetric fracturing proposed for the Ordos Basin was researched and developed independently, and its utilization obtained good field application results. In order to deepen and improve the volumetric fracturing technology and obtain higher productivity, some suggestions for the development of shale oil in the basin were put forward, including the further study of mechanism for fracturing stimulation, optimization of key technical parameters, and development of visualized volumetric fracturing technology. The research results can provide a basis for the optimal design of volumetric fracturing of horizontal shale oil wells, and can be used as a reference for the fracturing stimulation of similar reservoirs.

Assessing COVID-19's "known unknowns": potential impacts on marine plastic pollution and fishing in the South China Sea.

This paper examines three of the COVID-19 pandemic’s “known” impacts to date: its widespread and fundamental altering of government policy priorities; record low oil prices and its role in further escalating already heightened levels of strategic competition in East Asia and weakening of the existing multilateral order. The paper then uses some of the observed outcomes of these changes under the pandemic so far, in addition to additional evidence and causal linkages drawn from past research, to assess COVID-19’s potential, but still unknown, longer term influence on marine plastic pollution and overfishing in the South China Sea, two of East Asia’s most pressing marine environmental problems. In addition to flagging potential COVID-19 linked issues of concern in these two important policy areas, this approach also may assist further inquiry into the pandemic’s still unknown potential to undermine environmental protection and regulatory efforts in other environmental issue areas.