Unconventional Resources: The Future of Hydrocarbon Production in the Energy Industry

It’s no secret that conventional hydrocarbon production has become overshadowed by the massive advance of changes in technology and influx of capital, especially in North America where unconventional resource plays are becoming the essential driver of production gains for companies in the energy industry.

The term unconventional refers to reservoirs that are generally difficult to develop, require large stimulation treatments and/or enhanced recovery techniques in order to produce and recover economic volumes of hydrocarbons. Shown below is a resource triangle – as you progress from the more conventional reservoirs at the top of the triangle to the bottom, the resource becomes increasingly more difficult to develop.  A successful outcome requires increased pricing and improving technologies to develop at a commercial level. Some examples of unconventional resources include tight oil, tight gas, heavy oil, shales, gas hydrates, and coalbed methane.

Being at the forefront of U.S oil and gas production, it is important for the industry to reflect, assess, and improve on some of the hindrances that arise from unconventional resources.

Uncertainty

Unconventional reservoirs are very complex and most are considered as statistical plays. A big part of the decision-making process in the oil and gas industry is certainty or rather, uncertainty. The basic reservoir parameters of unconventional reservoirs are often unknown or very difficult to determine with a high degree of accuracy. In addition, individual well results can be challenging to predict and early transient flow testing is often inconclusive and expensive.

Large-Scale Development

Development is typically large-scale – unconventional deposits often cover an extended area and are less likely to depend on geologic structure. In order to delineate and develop a play, it is common to drill hundreds of wells with ‘fit-for-purpose’ completions and gathering facilities. Successful development of unconventionals usually involves economies of scale and proper risk management.

Increased Pricing & Technology

We know development of unconventional resources is very capital-intensive. The development is highly dependent on product prices and necessary stimulation and recovery technologies. When oil prices began to fall in 2014, many projects that involved exploring and producing unconventionals became uneconomic.

As the industry progresses and becomes more efficient in addressing problems that arise from unconventional resources, E&P companies will continue to explore, produce and develop shales and other low permeability reservoirs that will ultimately continue to drive production gains across North America. According to the U.S. Energy Information Administration, the United States tight oil production is expected to increase from approximately 5 million to 6 million barrels per day in the next 10 years. To put into perspective, current total crude oil production in the United States is approximately 8.9 million barrels per day and is estimated to grow to an average north of 10 million b/d by 2027 (U.S. EIA); this increase in production can be primarily attributed to unconventional, low permeability oil plays. As nontight oil steadily declines in the coming years, you can continue to expect tight oil and gas development to be the future.