The 21st century has seen more innovation than ever before.
And the oil and gas industry has been at the forefront of this technological innovation.
New oil and gas discoveries have been found in harsh environments everywhere — the Arctic, ultra-deep waters and even shale. To get it all out, the oil and gas industry has had to become one of the most technologically advanced in the world.
And the need for high powered tech keeps growing. It’s more important than ever to maximise field recovery. Maturing basins and hard to drill frontiers add to this issue.
Sure, oil and gas exploration has always been a high risk game. But at the same time, the reward from success can be huge.
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The oil and gas business has never been as profitable as it is now. Globally, it invests over US$1 trillion per year to develop tech that can explore untapped resources.
Because of this tech, exploration risk is the lowest it’s ever been. Success has compounded because of technological innovation.
But new technology didn’t just help the development of the US shale oil story. Tech was what made the energy revolution possible in the first place.
Many thought there was oil at Spindletop Hill, Texas, in the 19th century. However, drillers had to drill through ‘salt’ to get to the oil. This meant that there were hundreds of feet of sand. Because of this, wells collapsed and hopes fell at Spindletop. .
At least until the Hamill brothers came to Spindletop, along with their state of the art drilling rig. The Hamill brothers had a reputation for being innovative. They helped find the first Texan oil field, which produced 1,450 barrels of oil in 1886.
The Hamill brothers quickly got stuck into drilling. Like previous wells, they soon hit sand. Back then, drillers used water to hold up the well walls. But at Spindletop, the sand was too fine…and water was useless.
The Hamill brothers had to improvise, using only material they had on hand — water, dirt and cows. They struck on the idea of using mud instead of water. And they created it by getting the cattle to stomp around in a nearby water pit.
As the story goes, the mud worked, oil was struck, and Spindletop became the biggest ‘gusher’ that the world has ever seen.
To me, the Hamill Brothers were as successful as Bill Gates or Steve Jobs. Sure, Bill Gates founded Microsoft. And Steve Jobs revolutionised what we call tech today. However, without the Hamill brothers’ help, the energy revolution may have come decades later.
Yes, good old dirty mud was the technological innovation that changed the energy world forever.
These days, drilling tech has made it possible to drill deeper, longer and more challenging wells. Modern day tech is also a lot more attractive than mud.
I’ll give you an example…
Let’s talk about 3D seismic mapping — my favourite tech for oilers. 3D seismic replaces the old 2D seismic and helps geologists better understand what the world looks like below the ground. As a result, exploration teams can better select future well locations.
3D seismic doesn’t remove all exploration risk. But it does generally improve the success rate.
In fact, it’s possible to use older 2D seismic tech and drill successful wells. I’ve seen this before, multiple times.
What happens next is management confidence soars. Suddenly they think they know the ground lay out perfectly. Shareholders agree and pay the company millions more to drill the next well. Everyone believes they’re going to get rich. They assume the next well will yield similar results to the last one.
You can probably guess what happens next…
The company drills a dry well and the share price crashes. Often a number of months pass by and shareholders hear little news. There’s another capital raising…and management ‘re-evaluate’ data to see what went wrong.
The end result…management typically choose to run 3D seismic over the plot to get ‘more information’.
3D seismic is more costly in the short run. But if the company had acquired 3D seismic in the first place, they may have minimised exploration time and costs in the long run. If they had all the information on hand, they might have not drilled a dry well.
You see, 3D seismic data can reduce costly mistakes. The information from 3D seismic can find crucial fault lines that don’t appear on the decades old 2D seismic. One little line can make the difference between being rich or poor.
And recently there’s been talk of another breakthrough tech in the seismic space.
The latest advance is ‘4D’ seismic. This allows geologists to assess the subsurface details but ‘adds’ time to the picture. This means companies can understand the changes in the reservoir over time, in particular how it behaves during production. If you’re looking at getting every last drop of oil out of a well, understanding how hydrocarbons move is important.
Tech is truly changing the face of the oil and gas industry. The Hamill brother’s mud idea changed the oil industry in the 20th century. 4D seismic has the potential to be the Spindletop tech of the 21st century.
Jason Stevenson+
Resources Analyst, Money Morning
Ed Note: The above article was originally published in Tech Insider.
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