http://www.latimes.com/technology/la-fi-recovery24jul24,1,757847.story?coll=la-headlines-technology
Squeezing Oil From Deserted Wells
Independent companies use specialized techniques in fields where
'low-hanging fruit' is long gone. With prices at $60 a barrel, the
intensive effort can pay off.
By Dana Calvo
Special to The LA Times
July 24, 2005
FORT WORTH Engineers who specialize in finding leftover pockets of oil
are the Zen masters of the oil industry.
They know they'll never hit the big strike, and that's all right. Instead,
they methodically and patiently flush petroleum from wells that have long
since been abandoned by the energy giants.
"We go out to these large fields where the big companies took the
low-hanging fruit," said Jeff Johnson, chief executive of Fort Worth-based
Cano Petroleum. "In our blue-collar way it's not sexy but we're
bringing these fields back to life."
Cano is one of 5,000 independent oil companies that are picking up the
scraps left behind by larger corporations using expensive and risky
techniques that the industry calls "enhanced oil recovery" EOR for short
on old, low-production wells. For every barrel of oil produced in the
United States there are two barrels left behind, and with a per-barrel
pricetag of nearly $60, the hunt becomes even more lucrative.
With U.S. oil production on the decline, and energy from alternative
sources still a small part of the supply picture, experts are pulling for
companies such as Cano.
"Renewable energy is a great idea, but the fact is that we're not there
yet," said Alesha Leemaster, spokeswoman for the Interstate Oil and Gas
Compact Commission, which represents the governors of states that produce
oil and natural gas. "It's so important that we get those extra resources
out of the ground."
This spring, Cano acquired a field in Central Texas that was abandoned
nearly 20 years ago. Wooden derricks that littered the storied Desdemona
site during its oil-boom heyday of the 1920s had long since been sold for
firewood when Johnson laid down $8 million for the field, which covers more
than 10,000 acres.
Today, Johnson's company is using enhanced recovery techniques to pull 80
barrels of oil a day from Desdemona's 60 wells, or about 1.3 barrels per
well. These are known as stripper wells wells that yield less than 10
barrels of oil a day and Desdemona is riddled with them.
"Stripper wells are huge in this country," said Jeff Eshelman, spokesman
for the Independent Producers Assn. of America. "They're the equivalent of
what we import from Saudi Arabia each year."
In 2003, according to the most recent data available, the nation's 393,463
stripper wells produced 313 million barrels, or about 15% of domestic,
onshore oil production in the contiguous 48 states. Most of the country's
stripper wells are in Texas, Oklahoma and California, with half of
California's 42,000 oil wells classified as strippers.In contrast to the
stripper wells' output, many larger wells that are being worked over by the
likes of Chevron Corp. yield more than 100 barrels a day, according to Iraj
Ershaghi, director of the Center for Interactive Smart Oilfield Technology
at USC.
"There are going to be more and more companies looking at" enhanced oil
recovery, Ershaghi said. "The new enhanced oil recovery processes were not
put into practice in the '80s and '90s because it wasn't cost-effective
they were expensive processes and oil was affordable. But now, you have to
explore different environments or revisit mature fields."
But not everyone is convinced enhanced recovery on these stripper wells can
have much effect on the nation's oil production.
"The problem with a lot of these things, it's actually very small numbers
in the grand scheme of things," said Leta Smith, senior consultant for IHS
Energy, an oil and gas consulting service.
Johnson, who in a former career raised financing for energy projects, has
heard the doubts for years. After all, he founded Cano in 1999, just before
the price of oil crashed to $10 a barrel.
Even when critics said it was too expensive and not profitable, Johnson
continued to gear Cano entirely toward enhanced recovery from proven fields.
"They said, 'Why isn't anyone else doing it?' " he said.
Now, the Lubbock native is heading a 14-person company with $17 million in
assets, 3.6 million barrels of proven reserves, and no long-term bank debt.
He is also in charge of properties on which there is no exploration risk:
All Canos wells once were proven producers.
In a corporate rite of passage, Johnson rang the opening bell of the
American Stock Exchange on July 12. Cano went public last year and in May
migrated to the Amex.
There are a variety of methods by which to grab hold of remaining oil
pockets in a well. Companies pump carbon dioxide, water or steam into old
wells to push more oil out of the rock and up to the service. Sophisticated
computer simulations can spot caches of oil hidden inside rock that can
then be accessed by drilling out from a nearby well.
Cano mostly relies on a process known as alkaline-surfactant-polymer, which
is used to get the last 16%-25% of oil out of the rock.
First, the wells are flooded with water and then a soap-like chemical is
pumped underground that loosens the oil molecules from the rock like
dishwashing soap prying greasy residue off a lasagna pan. Finally, the oil
is separated from the water and sucked up out of the ground. Sometimes,
engineers actually use an industrial-sized vacuum to pull the hard-to-get
oil caches out.
Using this technique, Cano's 2,601-acre field in Nowata, Okla., is
producing 77,000 barrels of fluid a day, out of which the company is
pulling 250 barrels of oil daily. "This isn't thick and tarry oil," said
John Lacik, Cano's production, safety, health and environmental
coordinator. "It's real pretty, greenish-gold and real lightweight."
Cano's active fields are mainly in Texas and Oklahoma, and the company is
on the prowl for more. "There are good opportunities in California, and
we're looking at acquisitions there," Johnson said.
Johnson estimates that Desdemona has almost 100 billion barrels of oil in
place, waiting for advanced extraction strategies.
Enhanced recovery isn't foolproof, though. In its stock prospectus, Cano
warns investors that the volume and present value of its reserves "may
prove to be lower than we have estimated." The prospectus also says Cano
faces "strong competition from larger oil and natural-gas companies, which
makes it difficult to conduct profitable operations." The company is not
yet profitable. For the nine months ended March 31, it reported a
$2.1-million loss on revenue of $3.8 million.
Another difficulty for the enhanced recovery industry is the shortage of
specialists. In recent years, natural gas became the industry's darling. So
even though enhanced recovery training remains a requirement for
undergraduate petroleum engineers, few have been exposed to actual
implementation of the process.
Enhanced oil recovery "takes specialized training," Smith said. "It's going
to take a little bit of effort on somebody's part to bring in a consultant
to do certain types of EOR."
That leaves two types of enhanced recovery specialists in the market:
recent graduates who have scant job experience or veterans of enhanced oil
recovery and there are few old hands available. Cano managed to lure its
vice president of operations and engineering, Tom Cochrane, away from Exxon
Mobil Corp. last year.
"I have an expertise in mature oil properties," he said on a recent
afternoon at Cano's office in downtown Fort Worth. "And it was either learn
some new tricks or go someplace where they value my expertise."
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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