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Higher Recovery Rates in Tight Oil Can Unlock 8 Billion Barrels in the U.S.

Lux Research

A sharp plunge in oil prices has shifted the focus from drilling new tight oil wells to optimizing dismal recovery rates of less than 10%, says Lux Research

BOSTON, MA – January 28, 2015 – With oil prices dipping to $50 per barrel, and new capital spending on upstream oil and gas expected to fall by nearly a third to $436 million in 2015, the future health of tight oil producers depends on their ability to improve recovery, according to Lux Research.

Optimizing recovery requires careful planning beginning with completions – choosing and inserting optimal equipment, designed to maximize production, into a fully evaluated oil well. Strategies include placing monitoring solutions downhole, monitoring fractures from the surface, and additives for improving the fracs themselves.

“Tight oil production in the United States has tripled since 2011 to 4.07 million barrels (MMbbl) per day but recovery rates range between 1% and 9%, compared with up to 70% for conventional oil,” said Daniel Choi, Lux Research Analyst and the lead author of the report titled, “Pushing Today’s Boundaries of Tight Oil Recovery.”

Lux Research analysts evaluated the short-term impact of falling oil prices and emerging technologies that can potentially raise recovery rates. Among their findings:

  • Despite spending cuts, tight oil production will rise. Due to falling oil prices, Lux projects global capital spending to drop from $600 billion in 2014 to $436 billion in 2015. However, total production from key players like the U.S. and Canada will continue to increase as projects planned in past years come online.

  • Microseismic, Ziebel and BaseTrace emerge as top companies to watch. A thorough understanding of the reservoir is key to improving recovery. Microseismic provides critical information about the completion process, such as stimulated reservoir volume and a fracture’s azimuth. Ziebel and BaseTrace allow operators to determine the productivity of different sections of the well.

  • Early movers poised to hold advantage. Many technologies to improve recovery rates are early-stage. But companies acting soon will enjoy first-mover advantage in an environment when simply drilling a new well has become unviable. Developers to watch include NaturaFrac, UT-Austin, Terves, and Texas Tech.

The report, titled “Pushing Today’s Boundaries of Tight Oil Recovery” is part of the Lux Research Exploration and Production Intelligence service.