Skip to content

Efficiency in production is where it’s at

“Stay where ur to and I’ll come where ur at.” - Newfoundlander expression
George Sutherland
George Sutherland says you need to find ways to be more efficient, particularly in production, to survive this downturn.

Regina – “I’ve basically chosen not to participate in the downturn.”
Those were the words George Sutherland, a geologist, said in winding up his presentation to the Williston Basin Petroleum Conference supply chain forum on April 28 in Regina.
You see, he’s been through these things before, and has learned a thing or two.
For instance, being a geologist, you need to be an optimist. And that means looking for opportunities where you haven’t found any before.
Sutherland is the president of the Petroleum Training Institute, and formerly was the head of the Petroleum technology department at the Southern Alberta Institute of Technology for eight years.
He started his presentation with greetings in several languages.
“You may say, ‘Why would you start that way?’ Well, we’re looking for opportunities,” Sutherland said. “Opportunities are not what’s in front of your nose, what you’ve been looking at the same way for the last 15-20 years! Opportunities are something that may be in front of your nose, but you didn’t realize it.”
“Opportunities are something you didn’t perceive as an opportunity before. The issue is how to realize it’s an opportunity.”
He picked up on a Newfoundlander expression. “Stay where ur to and I’ll come where ur at.”
“That’s where we’re at! You are there, and I am going to stay where I am to, so you, as a group of suppliers, better figure out where I am at, or you’re going to have difficulty in this market being successful.”
“If you don’t know where you’ve been, I don’t know how you are ever going to map where you are going to.”
And that would be to increase their business, he said.
“We know the industry is sometimes up, and sometimes down.”
He recalled the summer of 2008, when oil got into the $140 a barrel range, but by October it wasn’t looking that good.
“The past industry picture, back to when I started my career, was ‘find more oil and gas,’” he said. That included Lloydminster in 1934, and Leduc in 1947. “Wherever it is, we’ve got to find more of this stuff. And the only way to do it is to drill more wells.”
Basically companies keep drilling and let the good times roll. He recounted the famous bumper sticker calling for God to grant one more oil boom and I promise not to screw it up today.“Everybody in this room is more than aware exploration activity is down. How many geologists and geophysicists would you like to hire today? It wouldn’t take too much effort to get a room full of them. I don’t mean they’re not good people, there’s just simply not that activity. If you don’t get a big exploration picture, we know the number of drilling rigs that are operational (will be down).
“Drilling activity is down. So if you are a company that is in the oil and gas business, what do you make your money from? Production. So production, historically, just rode along. Profits were great. We watched closely our exploration budgets, our drilling budgets, and we made profits. But, I just took the first two off the table, so now we’re on the production cycle. That’s where you’re going to get your money from.”
“What is the trigger for this to go another direction? WTI is higher lately, a positive thing? What does the sheik in Saudi Arabia think? What’s on the table? We won’t get into what’s under the table. I think that has a bit to do with it today also, but that just may be my opinion.
“Right now we have a huge supply and lower prices. Pretty much anybody who’s got more than a one-litre or one-gallon bucket has it full (with oil), because you can buy it at a really good price. That’s where we’re at. That’s what we have to deal with. It doesn’t matter how long you’ve been in this industry. You have to put up with, right now, lower rates of exploration, lower rates of drilling. So who is it that’s doing anything? That’s where you are going to get your work,” Sutherland said.
“The current focus is on production, because that’s where cashflow comes from. But since the first two are off the table, companies have a cost reduction strategy, particularly for production and operations. They want more for less.”
He noted anyone who sells from pencils on up has had companies have been asking for price reductions. Companies granting those reductions are, in turn, asking for long term contracts to make up for it, so they can ride this out. “That’s a possible option,” he said.
Shale gas in Sask?
As a geologist, Sutherland suggested there might be a possibly of development of shale gas in western Saskatchewan.
“Is it economically viable? Does it have the light liquids with it like northeastern B.C.? But if you look at a geological map, there’s quite an area that might have some potential.”
Better mousetrap
“If you invent a better mousetrap, you can’t be putting a lot of capital in it,” he said, adding you will have to charge more for it. That is problematic in an environment where clients are demanding paying less, so you have to be careful.
He laid out a graphic of the cost of production in various basins (including Lloydminster at US$47/barrel for heavy oil). “Whether we like them or don’t like them, that’s the way it is.”
“Can you do it more effectively, more efficiently? Can you lower your costs? Or can you come up with a new trick of how to do it? We need more efficient, longer lasting pumps. So, do we need a new mechanism, an different metal, a different packer, a different something that, all of a sudden, makes it better?” he said.
Faster and less costly pump replacement is another possibility he suggested.
“More effective and less costly emulsifying is another area of potential interest. Reduction of transportation costs is another.”
Using steam as a recovery and drive mechanism is another area. Producing that steam above ground means losing a lot of energy on the way downhole. Some companies are looking at pumping the water, air, and gas underground, creating combustion at the reservoir face, and producing the steam underground, he said. This is being done in Saskatchewan, he noted.
He added this was not a toe-heel air injection or fireflood concept.
One company, in particular, is hoping to move into a full-fledge pilot scheme this fall, he said. “They have made it work, here in Saskatchewan.”
North Dakota has new environmental regulations in place, and those regulations are not optional.
“Do you have methodologies to help companies address these new environmental requirement, keeping the cost down and addressing the requirement?
For gas recovery, Sutherland said the rules basically are now in North Dakota, “No. 1, don’t flare. No. 2, didn’t you read No. 1? And No. 3, you must be really dumb, please go back and read No. 1 and get out of the business.”
Summing up, Sutherland said, “We need operational and logistical efficiencies. It is time to refocus. The industry is not focused on exploration and drilling. I don’t mean forget everything you knew about that, but you need to focus on production, which produces money. Environmental requirements are stricter and stricter and there’s technology and services and people required to do that.”
His company is training many people who are now laid off.  

push icon
Be the first to read breaking stories. Enable push notifications on your device. Disable anytime.
No thanks