As the keynote speaker at the Society of Exploration Geophysicists annual meeting, Devon Energy President and CEO Dave Hager had his work cut out for him. Downturns are never kind to the exploration side of the business, and Hager’s task was to give a talk that was edifying and entertaining. He did not disappoint.
Couching his remarks as “an oil and gas story rather than a talk,” Hager, a former geophysicist, said that, while he’s more used to speaking to analysts and investors than technical people these days, he still thinks that getting the reservoir understanding down is as important as any efficiencies the industry might have gained through the recent downturn. “That’s where geophysics really takes hold and is so important,” he said. “Sometimes we tend to think that these unconventional plays don’t rely quite as much on geophysics as they do on horizontal drilling and hydraulic fracturing. But I don’t think that’s the case.”
Hager’s main focus was on three major technical achievements that he’s witnessed throughout his career—3-D seismic, deepwater development and unconventionals. “My career really intersected what I consider some of the interesting developments,” he said. “And I think they really changed the entire oil and gas industry.”
But he also said he expects “a fourth and a fifth” major technical advancement yet to come. “I’m not smart enough to figure out what it is, but there are people in this audience who are going to figure out what the next big thing is that will allow this industry to remain relevant for many years,” he said. “If we’d continued to do things in the way we did them before any of these changes, we wouldn’t be a business. But we’re a vibrant business because of the continuous technical innovation we’ve seen.”
“Three-dimensional seismic really started to come into play in the 1980s, and it fundamentally changed the way we go about exploring for first conventional reservoirs and now for unconventional reservoirs,” Hager said. “It has changed how we go about interpreting data. That along with the advent of the seismic interpretation workstation has led to an entire change in our business.”
Hager also was involved with the industry’s move into deep water during his years with Oryx and Kerr-McGee. Here too geophysics played a role in lowering the risk, but Hager also remembers the excitement of implementing the first spars on some of the Kerr-McGee fields.
“It was a lot of fun during that time,” he said. “If you think back on it, the onshore was dead, and everyone believed that the significant fields yet to be discovered were going to be offshore and particularly in deep water. It was exciting to be in that part of the business.”
His third achievement, the ability to produce from source rocks, is particularly apropos since Devon bought Mitchell Energy shortly before the Blakley Estate D2H well was drilled. This well was the first to combine horizontal drilling with hydraulic fracturing, kicking off the Barnett Shale and ultimately the shale gale. Neither technology could have done it without the other, Hager said.
The Blakley Estate D2H well, about 45 minutes northwest of Dallas, marks the birthplace of the shale revolution. Drilled and completed for Devon Energy in 2002 and still producing today, it was the first well to combine horizontal drilling with hydraulic fracturing. (Photo by Colter Henderson, courtesy of Devon Energy)
“As many of you know, hydraulic fracturing has been around since the ’40s, and actually in one version or another horizontal drilling has been around since the ’20s. It wasn’t until Devon acquired Mitchell in 2002 that the idea came about combining horizontal drilling with hydraulic fracturing.
“Some of the guys I work with were involved in that first project. One of them, Tony Vaughn, who’s now our chief operating officer, has a very interesting way of describing it. He was involved in the decision to drill the first horizontal wells with hydraulic fracturing. He says, ‘You know, we were pretty confident that it was going to fail.’”
Hager added that the decision to go ahead with the well despite the expectation of failure shows the entrepreneurial spirit of the oil and gas industry. To indicate just how unaware the company was of the well’s significance at the time, Hager showed a picture of the well.
“It was interesting to put this actual picture together,” he said. “I guess we don’t do as good a job as we should documenting history. Our lease operator had to take the sign from the entrance and stick it on top of the well so that we would have this picture.”
Since the Barnett’s success, he said, the shale boom expanded to other gas plays. Oil was a bit trickier. “From around 2004, and mainly in just pure shales, there was a real technical question: Will this work in the oil type plays?” he said. “Some other companies in the industry did a really good job proving that it will work in the oil plays, that even though the molecules are somewhat larger, they will move through this relatively impermeable rock, and it has expanded to the oil plays and then out of the shales.
“Now much of what we’re drilling is not a classic shale-type reservoir but reservoirs that are very low in permeability. But with the benefit of horizontal drilling and hydraulic fracturing you can make economic accumulations out of them, so they might be a siltstone or a more limey type rock, but all of these now are working. The thing that is to me very encouraging about this also is that I feel we are still in early innings on this type of technology.”
Geophysics in an independent setting
Hager showed several examples of how the company uses geophysics in its operations. In one example, a 4-D study of a steam-assisted gravity drainage project in Canada showed a change in the reservoir over time as it was heated by steam injection. Another example showed a comparison between two earth models. In the first model, the drillbit stayed within the modeled zone, and the well was a good producer. In the second example, the wellpath strayed significantly from the zone of interest.
“This is 3-D integrated generation of an earth model that allows us to predict the reservoir characteristics,” he said.
Devon also is delving into predictive analytics through the use of control rooms to monitor drilling 24/7 as well as SCADA systems in producing fields that anticipate equipment failures before they occur.
Overall, Hager seemed upbeat about the ability of technology and innovation to keep the industry relevant. He closed with a quote: “We usually find oil in new places with old ideas. Sometimes we find oil in an old place with a new idea, but we seldom find much oil in an old place with an old idea. Sometimes in the past we’ve thought that we were running out of oil, but actually we were running out of ideas.” What’s interesting about this quote, he said, is that it was said by a professor at the University of Tulsa, Parke Dickey, in 1958.
“So we’ve been here before, and this industry has continued to innovate. I’m confident there are going to be more in the future, and I think geophysics is going to be right in the middle of all these innovations.”
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