DoE's Windberg: US shale to benefit from AI
Using artificial intelligence to analyse what is happening subsurface could have a huge impact on fracking's productivity
While no one would question the phenomenal success of US shale in terms of volume, making the country the world’s biggest producer, it has not been a great year for producers. Suffering under a relatively low oil price, rig counts have been falling for some time, and some suggest it has been a net consumer of capital since it exploded on the scene.
“What the shale revolution has done—and is not clearly understood—is that the cycle times are much shorter now,” US assistant secretary for fossil energy Steven Winberg tells Petroleum Economist, noting that 40 years ago it took three to five years to put a platform in the Gulf of Mexico and start producing. “Now, a year is probably reasonable for the unconventional oil and gas plays. They pull out quicker, they get back in quicker.”
He says the US shale story has much further to run and it may even be possible to double production by increasing productivity, according to Winberg, again basing his bullish optimism on technological development.
“We do not yet know a lot about what is happening subsurface. If you have got a 2-mile lateral [well], we know that from frack stage to frack stage there is a good deal of variability in production. Some stages do not produce at all.
“We do not really know the answers—but we have now got a decade’s worth of data in various basins to… [put in] high performance computing capability, artificial intelligence, machine-learning capability to work to understand what is happening subsurface.
“That is where our oil and gas experts think we can start improving productivity. If we can do that, we will be drilling fewer wells and producing more. That is going to have a pretty significant impact on the financial community, on how they invest in the oil and gas sector.”
Doubling oil recovery would inevitably mean an increase in associated gas to process—the removal of which is already a problem in the Permian. Charif Souki, founder of shale pioneer Cheniere as well as Tellurian, estimates that $300bn needs to be invested in infrastructure to remove the gas, even at existing volumes.
“If the decline curves are so steep—and they are pretty steep in unconventional oil and gas—then investing in pipeline infrastructure to get that natural gas to a market is economically challenging,” he says. “If, however, we can increase productivity on the tail, overall production will increase. If we have a longer-life well, with higher production in the out years, than it makes the case for the infrastructure build-out to capture that natural gas as a better investment opportunity.”
He says technology for natural gas power generation in the field, including to drive rigs and supply local communities, is also developing fast. “A combination of those things will address the issue of associated gas.”
One indisputable benefit to the shale revolution for the US is the establishment of domestic energy security. “No question about it, it has had phenomenal geopolitical implications,” he says.
The additional supply has also undoubtedly pushed down pump prices for American consumers, although this is not a policy aim of the department, according to Winberg. “I pay attention to it every day, I have been doing that for the last 35 years. But that is just because I have a passion for it. The market determines the ideal price.”
That fast-reacting domestic producers provide price stability is clearly another benefit. “Unconventional oil and gas plays have—in a positive way—been disruptive,” says Winberg. “With cycle times being shorter, you are going to see less price fluctuation in the physical market. If some global event pulled oil off the market for six-to-eight-month period, we would see producers in the United States ramping up very quickly.”
The newfound resilience of the oil market was ably demonstrated “when the Iranians hit Saudi Arabia” in September and oil prices only had a $11-12 “pop” before completely falling back to the earlier level within a week. Combined with “tremendous” inventory build-up “it was due to us having a lot of oil in our system. Our pipelines and storage are completely full. That is the shale revolution talking.”