Image credits: PEMEX
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Analysis

Reframing the Role of Recovery Methods, Technologies

By Pedro Alcalá | Wed, 07/21/2021 - 14:13

PEMEX spent a considerable portion of 2019 talking about the significant role that EOR and IOR applications would play in its path toward achieving its production objectives but the hype was lost during 2020 and 2021. While this was mainly because of COVID-19, the industry was also preoccupied with the discovery of new assets, which became more prominent than a strategy based on increasing recovery rates at existing and mature assets. EOR and IOR applications, however, have not disappeared.

“Mature fields are of critical importance in Mexico’s production portfolio. We are heavily involved in the application of new processes and technologies that can optimize production in these fields,” says Hermes Aguirre, Mexico Country Vice President of Halliburton

Even the development approach to mature fields of a company as large and recognizable as Halliburton can be highly experimental. Aguirre says that oil field service companies like Halliburton are looking to improve their business lines in Mexico by seeking alternatives to the traditional methods of mature field exploitation. In general, Aguirre’s expectations regarding market interest for these kinds of services are quite high, both for PEMEX and private operators. 

However, demand for EOR and IOR services is often related to price conditions: field operators need to see a very high advantage in costs per barrel extracted to consider exploring all the recovery services that could be at their disposal. This favors a low-price environment, which is not ideal as EOR and IOR service providers would need to lower their prices, as well. These companies benefit from a high-price environment because that allows them to charge a higher premium for their services. “With lower prices, regardless of how much more appealing our services might become, our prices still have to go down, which means our entire supply chain might have to be compressed and rearranged to keep profits coming,” explains Chairman and CEO of SERTECPET Eduardo López. “Our advantage in this context is that we possess the technological capabilities that can adjust our tools and solutions to each well. This flexibility gives us more options to make our operations more efficient.” The ability of operators and EOR/IOR service providers to adapt to new price conditions is as important as their ability to adapt to the different and evolving conditions of each reservoir.

Vicente González Dávila, Director General of Geo Estratos, argues that price and general industry conditions unfavorable to recovery technologies actually predate the crisis of 2020 in Mexico. “Our company is dedicated to the development of new recovery technologies and to adapting to market conditions where the added value of cost reduction has not been as much a requisite as it should be. This has been the unfortunate case of the Mexican context since 2017.” 

In Dávila’s view, the price crisis might have steered the industry in the right direction. “The entrance of new operators into the market has created a new and more positive outlook regarding cost-cutting technologies that we see growing over time. This growth has been exacerbated by the recent oil price crisis.”

Dávila believes that the degree to which costs can be cut using EOR and IOR technologies also depends on the degree of customization to each individual customer and production system. “This kind of customization will only become more necessary over time.” He adds that PEMEX is going to require the kind of EOR and IOR services that companies like his can provide. This is especially true for the use of water as a tool to improve recovery factors in reservoirs through displacement. “The efficient use of water for the displacement of oil and gas in assets and reservoirs will become a focal point of companies’ finances and investment strategies. This is a niche that we are quite well-specialized to address.”

The Importance of Policy Incentives 

Public sector authorities can also play a role in creating additional incentives for the application of EOR and IOR tools. Former CNH Commissioner Gaspar Franco highlights that one of the proven mechanisms to allay the additional risks and investment that EOR demands from operating companies is the granting of fiscal incentives, providing flexibility to regulatory frameworks and thereby generating win-win scenarios. 

Franco believes that EOR and IOR technologies have proven their worth as an important tool in numerous countries around the world, where their application has been essential for the optimum development of oil fields, leveraging higher production and recovery factors despite higher investments and risks involved. The use of incentives has boosted the application of EOR and IOR projects, leading nations to significant benefits, such as greater incorporation of reserves, larger local investments that benefit communities and their economy, increased production and improved recovery factors, adding attractiveness to investments, which results in better credit ratings as oil income grows, begetting an overall higher tax collection.

Still, Franco sees a bear market for EOR and IOR in the country. “Mexico practically does not have any EOR projects. Consequently, the country’s average recovery factor barely reaches 20 percent, which is almost half of the worldwide average. The granting of incentives for the application of EOR methods is still incipient and scant.” 

Franco points out that Canada, Brazil and Norway have all created a comprehensive incentive program for EOR and IOR projects, with the general aim of increasing recovery factors, which have all proved significantly successful. In Norway, recovery factors for some of the fields exceed 60 percent. “Ekofisk, one of Norway's main and most famous examples, began its productive life in the 1970s. Production increased and declined but due to the judicious application of an EOR process, it generated a second peak of productivity. This effect had a positive impact on profitability, contributing to an increase in the value of its Government Pension Global Fund to about US$1 trillion.”

Updated Technology, Expertise Offering

While the application of EOR and IOR tools in Mexico has been uneven, the technologies involved have continued to be refined and perfected throughout the years. Today, these tools and the data they generate can be used in larger digital platforms. “Digital transformation plays an increasingly important role in this search. Through new technologies, we can incorporate enormous amounts of historical data on these fields into new reservoir models,” says Aguirre. 

Advances in exploration technology have been implemented into EOR and IOR applications. Digital tools that allow the acquisition of new data using innovative exploration techniques and completely accurate evaluations in shorter time frames can later lead to more effective well intervention strategies, according to Aguirre. “The more we use digital tools to analyze available data on these fields or even generate additional data, the more we can explore the applicability of the latest technologies to each well and potentially increase overall recovery.”

The sometimes-experimental nature of EOR and IOR technologies can generate pushback from operators in the Mexican landscape, however. “The industry believes its tried-and-true empiricism to be reliable and is unlikely to innovate as a result. On one hand, our job can be simple: find, analyze and solve the technological challenges involved in increasing a field’s productive life. On the other hand, it can be complex, for example, we are particularly interested in finding new ways of applying conventional technologies to the extraction of unconventional resources,” says Dávila. 

While unconventional resources remain a bit of a political taboo in Mexico, Dávila believes that his company has found a number of ways to uncover areas of opportunity within these kinds of fields and assets through reservoir characterization and through the study of fluid mobility and transport in naturally fractured porous mediums with active aquifers. Companies like Geo Estratos have also focused on developing technologies that can cut costs through real-time monitoring that creates new chains of decision-making that do not significantly increase OPEX, while allowing operators to apply new AI technologies to field management. “This has all made us competitive in the development of new tools that go well with our expertise in horizontal wells, which leads to higher levels of accumulated production in less time.” 

EOR and IOR applications are also about creating advantages for operators that are applicable for medium- to long-term field prosperity. In general, companies like Geo Estratos accelerate the pace of innovation in the field of EOR and IOR in a way that makes operators responsible for keeping up with the newest tech. “We earn new patents every year so we are still developing new technologies based on short-term development cycles but we are restructuring ourselves to rely more on services and applications that allow us to be a long-term partner for our clients,” said Dávila. 

Christian Rodríguez, Mexico Country Manager of Core Lab, also emphasizes the importance of constantly advancing the field of EOR and IOR technologies while also being led by the incentive to make them more accessible to operators in Mexico. “EOR and IOR have been and will continue to be a necessity for all operators, specifically PEMEX.” Rodríguez bases his strategy on the fact that it is vitally important for the company to invest in these kinds of projects, in part because PEMEX has operatorship on the majority of the underperforming mature fields, while Core Lab has already completed a number of projects with the NOC that have included the use of both seawater and nitrogen injection, along with steamfloods, smart water experiments and other techniques. “The technical groups we deal with see the importance and the necessity to find a way to stimulate wells to increase the recovery factor. The costs involved can appear to be a disincentive for some companies but you have to spend money to make money, especially considering the level of maturity of some of Mexico’s fields.”

Photo by:   PEMEX
Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst