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Now is the time to Core:Mature Basins, Improved Technology, Reservoir Stewardship and the Counter Cycle

Over the last decade the oil and gas industry has experienced a relatively smooth growthtrajectory. As a result Exploration & Production companies have been paying a premium forequipment and skills, as activity levels outpaced the ability to supply. However, the situation hasnow done a rapid about turn and as an industry we are facing challenging times. Recent market

volatility has meant an industrywide reaction of reducing headcount and investment. Suggesting acoring operation against this backdrop can seem counterintuitive, however this really is the timeto cut a core.

In the mature basins of the world; the North Sea, Gulf of Mexico, East Texas, core data islikely to be almost archaic, and surviving cores in poor condition. Acquisition of new core datashould been seen as vital to extend the life of these mature basins, utilising new technology toaccurately reassess the reserves left in place, and increasing production efficiency.

An essential part of proper reservoir stewardship, and reservoir modelling, is accurate data,especially as exploration moves towards unconventional reserves. Key to calibrating acquired data,and ensuring data accuracy, is core. In relation to this, one of the arguments against coring hasalways been the time and associated costs required to cut a core. In the current market place wehave seen a dramatic reduction in rates, and an increased availability of premium products andpersonnel, at a reduced cost. This leads us nicely on to the argument for counter cyclicalexploration, companies with available cash to invest can take advantage of the current marketplace.

Mantra’s in vogue within the oil industry, the classic “do more with less” springs to mind,revolve around efficiency, improving current operations, and optimising production. As part ofthis E&P companies are turning their attention to the rejuvenation of mature fields. E&Pcompanies are focusing on lower risk, mature fields and evaluating opportunities available in thegap between production levels and potential capacity, combining this with utilising newtechnologies for enhanced recovery. In brownfield reservoirs significant reserves remain, eitherlocked in place in tight sections of the reservoir, or bypassed completely. Maximising productionlevels and increasing the estimated ultimate recovery has been on the agenda for E&P companiesfor a while, but the change in the industry landscape has now made it a priority. This requiresintegration and cooperation between all disciplines, the handling of a large, complex dataset,

leading to an improved understanding of proper well placement and design, in turn maximisingreservoir efficiency and stability.

In order to properly assess mature fields and look to enhanced production, accurate datais required, with a focus on porosity and drainage capillary-pressure measurements. Detailedgeological, geophysical and reservoir analysis is vital, and crucial to calibrating acquired data andaccurate modelling is core. It is almost a certainty that the core recovered from the explorationand appraisal phases is not in a condition to carry out worthwhile analysis on. Significantenhancements have been made in all aspects of coring technology, improved coreheads, coringsystems and wellsite procedures are enabling the recovery of higher quality core. Fresh, high qualitycore allows for a much improved data set. This in turn will enable E&P companies to takeadvantage of the general improvements in coring and core analysis technology, whilst taking the

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opportunity to utilise specialist coring equipment. With better data E&P companies are able tooptimise production and generate better reservoir models, through characterisation of poresystems, based on core analysis and information gathered by measuring reservoir porosity,permeability, fluid saturation, grain density and lithology.

The reassessment of mature fields is one of the ideal applications for improved “oil inplace” evaluation technologies such as, Sponge Coring, SOr, & Liquid Trapper. The informationobtained from quality core can be used to identify reserves left in place, bottlenecks, and to reassesskey reservoir descriptors allowing for the optimisation of redevelopment plans. High quality coredata allows for the development of models that can lead to genuinely world class well and reservoirmanagement.

Those E&P companies that invest in industry leading modelling can expect a 15% increasein production compared to the industry average. This is based on full and complete formationevaluation to truly understand the performance and capacity of a reservoir. Despite the current

climate, care does need to be taken over cost cutting. Reducing formation evaluation investmentcan have significant impact on future revenue.

The majority of data obtained for modelling is collected using electronic methods such asMWD/LWD & wireline tools. Although these methods utilise sophisticated and impressivetechnology, the reality is that these tools are limited by their calibration and how finely they cantake measurements. The only way to carry out direct, intricate measurements on the reservoir rock,and to truly understand the complexities of a reservoir, is by taking a core. Only through taking acore can you properly understand the depositional environment of the formation, and provideinformation on the presence, distribution and recoverability of hydrocarbons. Cores provide the

information to properly calibrate logs, model the reservoir and reveal parts of the lithology thatmay be undetectable by electronic logging methods.

Reservoirs, of course, are not uniform strata, rather they are complex entities with multiple variations in formation, permeability, porosity, and capillary pressures. They may change inpredictable ways or, as with carbonate reservoirs, vary in a random manner. This is becoming moreand more true as we move from an era of large, relatively homogenous, reserves to increasinglycomplex unconventional reservoirs, with corresponding levels of operational risk. Inunconventional reservoirs, such as carbonates, tight sandstone, and organic rich shales, we seemany more challenges, including low permeability, or complex and difficult to categorise pore

systems.

The key to successful reservoir management is a committed, cross discipline team, with asense of long term stewardship, managing high quality accurate data. Formation Evaluation data,specifically core data, is used at every stage of a reservoirs life cycle, and poor quality data affectsdecision making, further increasing operational risk and ultimately effecting the overall strategyand profitability of an E&P company.

Oil and Gas exploration is, as ever, about risk vs reward. Most oilfield companies take apro cyclical approach, meaning in times of recession they react by cutting expenditure, investmentand headcount in order to survive. This is reflected too in the estimated 40% reduction in globalexploration expenditure. However, for those companies with a healthy balance sheet, a recession

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holds great opportunities. Despite an undeniable need to preserve short-term cash, a recession canpresent a chance to position oneself for future growth and take advantage of a depressed market

with undervalued assets and services.

In short, the message of ‘buy low and sell high’ can be seen as applicable to oil and gasexploration. As opposed to the pro-cyclical methodology of investing when the oil price, and costsare high, counter cyclical investment advocates maximising the value of every dollar invested.Bowleven estimate that counter cyclical exploration saves them approximately 30%- 40% on every

well, and Faroe Petroleum are estimating savings as high as 50% on specific wells. If this is united with an approach to target the low risk - high impact projects, prospects that are commercial inthe current climate become even more so as the economy improves, with E&P companiesbenefiting from lower discovery & appraisal costs. For those E&P’s with capital the possibilityexists to partner with more experienced E&P companies to take advantage of the opportunitiesthat are out there.

Figures for bringing a field to production vary between 3 and 10 years, by which timeglobal macroeconomics will be driving the industry well into recovery. A fully evaluated field readyto be brought online will be a significantly more valuable asset upon industry recovery, and at thistime lower investment will achieve this result.

One of the common arguments against coring has always been the cost in terms of rigtime. In the current market, coring is exceptionally good value with rig rates down by a third andrecord-low service costs, the cost of a coring operation is significantly reduced. Combined withnew technologies, such as long barrel application, improved PDC Cutter technology, and Torque& Vibration control subs, this means that more core can be cut in a shorter period of time, and at

a lower cost.

The reduction in costs is only one of many benefits however. Given the global reductionin coring operations, approximately 90%, planned operations are unlikely to have to compromiseon equipment quality, or lack back-up equipment. It is also safe to assume that the most competentpersonnel will be assigned to any active operations. The overall result being a high quality coringoperation, with the best resources, for a lower level of investment.

As demonstrated above the benefits of Coring are extensive. Core data is used throughoutthe life cycle of a well to make fundamental strategic decisions. In the current climate increased

data quality is critical to reassessing reserves left in place, improving hydrocarbon recovery andmaintaining proper levels of reservoir stewardship. Target reservoirs are also getting progressivelymore complex, requiring extensive geo-modelling. These models are increasingly multifaceted andcomplicated. In order to maximise production efficiencies accurate reservoir data should beentered into these models rather than standard estimates and analogues. Despite electronic loggingmethods becoming increasing sophisticated, core data is still essential to proper calibration of logs.

The best reservoir models are built on a solid foundation of core data. Core data is of utmostimportance, though one of the arguments against it has always been the cost. With significantreductions in rig rates, service costs, improved coring technology, and increased equipment &personnel availability, it is possible to get high quality core for a relatively low price. Now truly isthe time to core.