Exxon's New Natural Gas Frac Process

By ELIZABETH SOUDER / The Dallas Morning News
esouder@dallasnews.com
http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-exxon_26bus.ART.State.Edition1.3cf4b5d.html

RIFLE, Colo. – Dozens of workers mill around a jumble of pipes and whirring equipment surrounding 10 natural gas wells operated by Exxon Mobil Corp.

At this well site in the desert, 80 miles west of the Rocky Mountains tourism hive, the men load cranes, operate pumps and monitor little red lines on computer screens. The work must happen simultaneously, in a carefully orchestrated ballet, to keep the well costs low – and profit high enough – to be worth the effort of the country's largest oil company.

"We're about 15 minutes away from a new frac being born," Randy Tolman, Exxon's project coordinator for the Piceance Basin, shouts over the noise. He invented this faster method of fracturing, or "fracing," the underground layers of rock and sand to unlock natural gas.

Exxon aims to export the new process to the unconventional natural gas reserves it is accumulating around the world. Drilling for more natural gas could make Exxon a lot of money as Americans demand cleaner fuel because natural gas doesn't emit as much pollution or greenhouse gases as oil and coal when burned.

"It's the bridge fuel," said Amy Jaffe, associate director of Rice University's energy program, adding: "It's going to be a 20-year bridge."

Exxon forecasts that natural gas demand will rise 50 percent by 2030 and outstrip demand for coal.

"Clearly, we anticipate that natural gas will grow much faster than oil or coal. So we see a pretty healthy demand out there in the future for natural gas globally, but even here in North America," chief executive Rex Tillerson said during an analyst meeting earlier this year.

At the gas well site in the desert, Exxon has drilled 10 holes, five of which already produce natural gas. The company's rigs in the Piceance (pronounced PEE-awns) Basin don't have to be reassembled between wells. Instead, the drill can move horizontally and laterally to reposition. This speeds the process and cuts the cost of rig crews.

As with many so-called unconventional natural gas fields in the U.S. and around the world, simply drilling a well here won't produce much gas. Operators must fracture the underground rock or sand around the well to allow more gas to flow out.

"This is a very complex reservoir, one of the most complex I've worked on in my 33 years," said Jim Branch, project executive with Exxon Mobil Production Co.

From months to weeks

In the 1980s, frac jobs could take months. Now a complicated frac typically takes a couple of weeks. Exxon's Tolman developed a method to fracture a Piceance Basin well in three days, and he thinks he can compress it to 24 hours.

The key is to conduct every activity simultaneously. Everybody thought that was impossible until Tolman persuaded his colleagues to experiment.

While working on a natural gas well in La Barge, Wyo., in the 1980s, Tolman noticed something strange. Natural gas was flowing out of the well without pushing out or damaging the wire that operators had dropped into the well.

Years later, while descending an elevator at Exxon's corporate building in Houston, Tolman had an idea. Why not use this phenomenon to perform simultaneous functions on a well? That's exactly what he is doing at the site in Colorado.

Plenty of other natural gas producers operate wells in the Piceance Basin, but Exxon controls the sweet spot on land owned by the Bureau of Land Management.

The company has been producing small amounts of natural gas in the basin since the 1950s, with interests on 300,000 acres, holding enough gas to heat 50 million homes for a decade.

Exxon began a significant expansion here in 2007, after scientists developed drilling and fracing methods that could make the operations profitable. Exxon now operates seven rigs in the Piceance Basin and produces 100 million cubic feet a day. Project executive Branch said the company could eventually increase to 1 billion cubic feet a day.

Long-term outlook

The current lull in natural gas prices won't deter him.

"We're taking a long-term view," Branch said, repeating Exxon's mantra. He won't say whether the operations are profitable, with natural gas future prices trading below $4 per thousand cubic feet. Last summer, prices rose above $13.

Chief executive Tillerson said he's not specifically aiming to become more of a natural gas company than an oil company. Right now, Exxon's production is split about evenly between the two, and the company's strategy is to simply pursue the best projects each year.

"We don't have a deliberate strategy to change the oil-gas mix," Tillerson said during a news conference after the company's annual meeting earlier this year.

Analysts say a shift is evident and necessary.

Exxon's total natural gas sales have declined four out of the past five years, dropping 1.5 percent in 2008 to 10,812 million cubic feet per day. Production dropped 3 percent last year, although the company produced more natural gas than it discovered.

"By the time Exxon shifts, it will take three to five years before you see anything that's noticeable," said Oppenheimer & Co. analyst Fadel Gheit. "There is no instant gratification in anything they do."

The company has announced adding a number of unconventional resources to its books during the last few years, including fields in Germany, Eastern Europe, Canada and the Marcellus shale in the Northeast U.S.

"The future of unconventional shale gas, there's a pretty bright future," Tillerson said after the annual meeting. He said he's considering other fields as well, where Exxon can use its strategy of getting in cheaply, holding the resources for a long time and applying fresh technology.

Many of Exxon's new fields are shales, similar to the Barnett Shale in North Texas, where Exxon had a joint venture but sold out. The Piceance Basin isn't shale but sand. The company hasn't tried the new technology on shale reserves, and officials won't say where, exactly, they will try the process next.

"We haven't done it yet" on shales, Tolman said. "But I think there's a great opportunity."

Frac central

At the desert well site, workers wearing fireproof jumpsuits and hard hats in the summer heat have positioned the wire in the well. The frac water is flowing, and the pressure is building.

The frac specialists inside a (mercifully) air-conditioned trailer – some of them Halliburton employees working on a contract for Exxon – prepare to shoot electronic pulses from the wire.

The men watch colorful computer screens to monitor pressure created by pumping a mixture of sand, water and chemicals into the well. When the pressure is just right, they shoot the frac gun, then drop rubber balls into the well to plug the frac holes, and immediately repeat the process.

"Nineteen hundred until ball drop," says Ron Campbell, an Exxon workover superintendent manning one of the computers in the trailer. He's talking to the outdoor crews over a radio while staring at screens that monitor well pressure and tension on the wire lines.

Five other workers inside the trailer check computer monitors and scour instruction booklets. Scattered around the desk are bottles of water and Gatorade, a hard hat, a calculator and a half-eaten bag of Uncle Bob's Party Mix.

The red line on one of the screens rises. Over the radio, somebody says: "Shot is fired."

The red line wiggles as the rubber balls reach their holes and pressure inside the well builds.

"The frac is being a little bit fussy," Tolman says.

The men will fire the frac gun seven times today. While one gun is shooting the first well, they will load the second gun for well No. 2, back and forth, so that the men and the equipment are constantly working.

The natural gas will go through a treatment facility for cleaning, then into the U.S. pipeline system, bound for home cooktops, power plants and chemical facilities across the nation.

Most energy experts agree that demand for natural gas will surely rise if a bill to cut greenhouse gas emissions becomes law. The bill passed the House and awaits consideration by the Senate.

Renewable fuel sources can serve only a sliver of U.S. demand. Until more wind farms and solar arrays can be installed, Americans would have to rely on natural gas to comply with the new regulations. Natural gas emits less of the greenhouse gases thought to cause climate change than coal.

And, thanks to new drilling technologies, the U.S. has plenty of natural gas to meet the rules. According to the Energy Information Association, proved U.S. natural gas reserves in 2007, the most recent data, have risen by one-third to 237,726 billion cubic feet since 2002, just as the new techniques were becoming popular.

In fact, most experts agree that new technology, such as the Exxon process, offers the only hope of immediately meeting the greenhouse gas emissions goals outlined in the bill.