Oil Field 2.0: Innovators producing more oil with fewer employees

Joseph Dorn knew there had to be a better way. 

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In the early days of the Eagle Ford Shale boom in 2009, Dorn was operations manager for Black Creek Well Services LP, a San Antonio-based service company that built roads, drilling pads, pipelines, production equipment and storage tanks at oil and natural gas wells. In a process known in the industry as stick building, everything was done on site — measurements, design, cutting, welding and testing. 

"It was either 100 degrees-plus in the summer, raining or cold," Dorn said. "Weather was a factor but so were the logistics of moving equipment from point A to point B. Heaven forbid you forget a part and somebody or a vendor had to bring it out to you." 

Dorn and his business partners developed a modular concept where compressors, separators and flares could be made off-site, shipped via flatbed trailers and quickly assembled in the field.

Though Black Creek did not survive the downturn in crude oil prices, Dorn, John Ward and Joe Ward formed Texas Oilfield Fabrication & Pipeline LLC, or TOFP, in October 2016 and put the modular concept into full-time practice. Working in a central fabrication plant off Roosevelt Avenue, engineers use Google Earth, computer-aided design programs and 3D modeling to lay out how the equipment will look in the field. Shortly after being launched, TOFP quickly signed up Eagle Ford and Permian Basin clients. Seeing value in its concept, San Antonio-based energy holdings company Group 42 bought TOFP for an undisclosed price in May. 

"Everyone thought it was expensive," Dorn said. "We proved it was cost-effective." 

In the oil fields, automation and new processes are driving down costs, reducing project completion times and boosting per well production — with fewer people on a drilling pad. Improving efficiency and lowering per-barrel costs were the keys to remaining in business during the two-and-a-half-year drop in commodity price. Those improvements also mean that fewer people and less equipment are needed to produce the same amount, if not more, oil and natural gas.

Average crude oil production per drilling rig jumped from an average of 718 barrels per day in January 2015 to nearly 1,500 barrels per day in July. Average natural gas production per rig climbed from 2.1 million cubic feet per day to 5.5 million cubic feet per day during the same period, data from the Energy Information Administration shows.

The downturn also accelerated the growth of companies such as San Antonio-based WellAware, Austin-based IPSoft and Lubbock-based SitePro, which created devices and software that enable companies to monitor wells and pipelines remotely. 

Companies like Microsoft Corp. and Calgary-based Ambyint have taken that technology further by bringing artificial intelligence to the oil field. Capturing data every five milliseconds, artificial intelligence controllers made by Ambyint use machine learning software to take over monitoring and routine tasks normally done by engineers, lift technicians and production technicians. 

"We are effectively turning oil wells and gas wells into self-driving cars," Ambyint CEO Alex Robart told the Business Journal. 

With offices in Calgary, Houston and Midland, Ambyint's products are being used by Norwegian oil giant Equinor ASA (NYSE: EQNR) in the Bakken Shale of North Dakota, by six companies in the Permian Basin and by Sanchez Energy Corp. (NYSE: SN) in the Eagle Ford. 

“This is not replacing jobs,” Robart said. “We allow people to focus on higher value tasks. The reality of artificial intelligence is replacing tasks, not jobs. Engineers and technicians can now focus on better problems that machines are never good at.”

Some increases in oil and gas production can be attributed to smarter drilling and completion practices. Some exploration and production companies are now using the same rig to drill multiple wells on the same pad to save time and money. On the completions side of the business, service companies are now using more frac sand per well to boost production.

Active in both the Eagle Ford and Permian Basin, Canadian oil company Encana Corp. (NYSE: ECA) is trying another technique — drilling wells that target different geological formations closer together. In a oil industry practice known as stacking, Encana has been using neighboring wells to target the Eagle Ford and Austin Chalk geological layers on its leases in Karnes County. 

With the Austin Chalk resting directly above the Eagle Ford, Encana originally spaced its Austin Chalk wells 1,000 feet from its Eagle Ford wells. That distance has been cut in half with the expectation of increasing crude oil production. 

Encana reported a $151 million loss in the second quarter. During the company's earnings call, CEO Doug Suttles said the stacking projects and other ambitious growth plans will enable the company to generate free cash flow this year. To implement those plans, the company has pledged to keep two rigs operating in the Eagle Ford this year. With an average cost of $4.8 million to drill and complete a new Eagle Ford well, Encana has set aside up to $310 million for its South Texas operations this year. 

“We are carrying significant momentum into the second half of the year, and we continue to grow liquids volumes and cash flow,” Suttles said during the company’s call with investors. “We are very pleased with our results so far this year, but as always, we are working to make them better."