Page 7 - NorthAmOil week 23

NorthAmOil COMMENTARY NorthAmOil
was reported that Kinder Morgan was in inter- nal discussions over the possibility of building a third Permian gas pipeline.
e company believes demand for gas take- away capacity could grow by 2 bcf per day each year over the coming years, Kinder Morgan’s CEO, Steven Kean, said at the time. us two pipelines of that capacity would not be enough to accommodate the total increase in the basin’s gas output.
“Demand to get gas out of the Permian con- tinues to grow and the desire to unlock value that’s in oil and [natural gas liquids, or NGLs] continues to put pressure on need for additional takeaway capacity,” Kean said. “ ere is interest in pipe three.”
Kinder Morgan is not the only one consid- ering a major new gas pipeline. LNG developer Tellurian has proposed building the Permian Global Access pipeline, to carry gas from the basin to its planned LNG export terminal in Louisiana. is pipeline would also have a capac- ity of at least 2 bcf per day, and could enter ser- vice around 2023. And several smaller pipeline projects have also been proposed for the region.
Exploring options
With only one major new pipeline per year com- ing online between now and 2021, while other proposals have yet to be rmed up, however, Permian producers are having to look at other options for dealing with their associated gas output.
One potential solution has presented itself, with Bloomberg reporting last week that at least ve producers, led by EOG Resources, are exper- imenting with enhanced oil recovery (EOR) methods of gas injection into mature wells that are in decline. e wells are then capped to build up pressure inside with the aim of dislodging any oil still present. e technique has already been widely used in conventional wells in the
US – with both natural gas and carbon dioxide (CO2) being injected – but is relatively new in unconventional operations. EOG – which has already been experimenting with shale EOR for at least three years in the nearby Eagle Ford play – has said that it can result in a 30-70% increase in oil output. Now, other companies are trying to replicate positive results from testing these techniques.
“If widely adopted, if it doesn’t lead to chal- lenges and the formations behave as we expect, then we expect it could utilise 25% of the associ- ated gas produced,” the University of Houston’s chief energy o cer, Ramanan Krishnamoorti, told Bloomberg. However, how successful the technique will prove depends on the nature of the rock formations targeted, among other fac- tors. For example, according to Krishnamoorti, the rock is “not particularly good” in at least one section of the Permian – the Wolfcamp zone.
In addition, very little information has been disclosed about how e ective such EOR techniques have been to date. EOG said in its rst-quarter report that last year it “converted” 54 wells, bringing the total to 150. But other drill- ers trialling shale EOR have said very little, mak- ing it di cult to predict how much of an impact the method could have in the coming years – when its use becomes more common.
The use of EOR in shale formations does appear set to become more popular as drill- ers attempt to maximise their oil output from wells that have typically rapid decline rates, and another option for using excess gas is a welcome one in the Permian. But full commercialisation of this method could still be a few years away, and does not o er producers in the basin the short- term relief they are looking for. Smaller pipeline projects, which can be built more quickly, could be a good alternative, and it would not be sur- prising if more developers decide to proceed with these in the coming months.™
Very little information has been disclosed about how effective such EOR techniques have been to date.
The growing glut of gas has spurred pipeline operators to propose and start building new takeaway capacity out of the Permian.
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