US shale oil producers are returning to existing wells and giving them a second, high-pressure blast to lift output for a fraction of the cost of a new well.
These re-fracs are taking hold as shale oil producers look to take advantage of $100 a barrel crude without making big investments in new wells and fields.
A global oil shortage has triggered calls from US President Joe Biden for shale producers to spend more of their profits on increasing output. But shale firms have been under pressure for years from shareholders to focus on returns rather than production growth.
Their reluctance to invest in more output has led to tensions between the oil industry and the White House, which is under pressure to rein in record $5 per gallon fuel prices that have contributed to decades-high inflation.
Re-fracking can be something of a booster shot for producers – a quick increase in output for smaller investment than a new well. While some producers have dabbled in re-fracturing wells in the past, the technique is winning broader adoption as technology improves, aging oilfields erode output, and companies try to do more with less.
Shortages of steel, diesel, frac sand and workers have doubled oilfield inflation since January, making this discount method of boosting output even more attractive.
A re-frac can be up to 40 percent cheaper than a new well, according to experts. Garrett Fowler, chief operating officer for ResFrac, which helps producers optimize the technique, said that it can double or triple oil flows from aging wells. His firm has seen about twice as many inquiries related to re-fracs compared to prior years.
For oil producers, re-fracs are a cheap way to add output to existing pipelines. Their shorter completion time means re-fracs can be scheduled between work on new wells.
Catherine Oster, who manages Devon Energy’s mid-continent properties, said: “You go back and find where you maybe under-completed and under-fracked in the beginning.”
She added: “We’ve made the infrastructure investment. As you learn about your resource, you get those technical learnings” that help decide which wells will benefit from a second shot.
The most common re-frac method involves placing a steel liner inside the original well bore and then blasting holes through the steel casing to access the reservoir. Fowler, of ResFrac, said that in some cases the process uses half as much steel and frac sand than a new well.
US oil production remains about a million barrels per day (bpd) below the 12.8 million bpd peak in early 2020. Limiting output is the rapid decline rate of shale wells, which can see production fall by 70 percent in their first nine months. Flat spending could restrain output to current levels.
While US oil futures are around $104 per barrel, up 40 percent from a year ago, production costs are higher on material and labor shortages. Some producers are holding back new spending over fears of a recession.
Texas shale producer Callon Petroleum said in June that drill pipe, labor and frac sand costs have driven drilling and well-completion service costs about 20 percent higher from a year ago.
Callon and Hess Corp, which drills in North Dakota’s Bakken shale, recently hiked capital spending budgets over the costs. Hess added $200 million to its spending, half due to inflation, while Callon added about $75 million.
Stephen Ingram, a regional vice president at top US hydraulic fracturing firm Halliburton, said: “Techniques like re-fracturing will allow the industry to continue to harvest the oil and gas out of these reservoirs.”
Another benefit, say oil service executives, is that re-fracs do not require additional state permits or new negotiations with landowners. The disruption to the environment is also less as well sites will already have road access, they said.
Matt Johnson, CEO of energy consultancy Primary Vision Network, said: “Considering inflation, supply chain issues, and rising wages, now is a great time for operators to start looking at wells for re-frac opportunities.”
For more information visit www.resfrac.com
