By Ernest Scheyder
HOUSTON (Reuters) – A small group of U.S. oil producers has been trying to exploit advances in DNA science to wring more crude from shale rock, as the domestic energy industry keeps pushing relentlessly to cut costs & compete with the world’s top exporters.
Shale producers have slashed production costs as much as 50 percent over two years, waging a price war with the Organization of the Petroleum Exporting Countries (OPEC).
Now, U.S. shale producers can compete in a $50-per-barrel oil (CLc1) market, & approximately a dozen shale companies are seeking to cut costs further by analysing DNA samples extracted from oil wells to identify promising spots to drill.
The technique involves testing DNA extracts from microbes found in rock samples & comparing them to DNA extracted from oil. Similarities or differences can pinpoint areas with the biggest potential. The process can assist cut the time needed to commence pumping, shaving production costs as much as 10 percent, said Ajay Kshatriya, chief executive & co-founder of Biota Technology, the company that developed this application of DNA science for use in oilfields.
The information can assist drillers avoid missteps that prevent maximum production, such as applying insufficient pressure to reach oil trapped in rocks, or drilling wells too closely together, Kshatriya said.
“This is a whole new way of measuring these wells and, by extension, sucking out more oil for less,” he said.
Biota’s customers include Statoil ASA (STL.OL), EP Energy Corp (EPE.N) & more than a dozen other oil producers. Kshatriya would not detail Biota’s cost, yet said it amounts to less than 1 percent of the total cost to bring a well online.
A shale well can cost between $4 million & $8 million, depending on geology & other factors.
Independent petroleum engineers & chemists said Biota’s process holds promise if the company can collect enough DNA samples along the length of a well so results are not skewed.
“I don’t doubt that with enough information (Biota) could find a signature, a DNA fingerprint, of microbial genomes that can substantially improve the accuracy & speed of a number of diagnostic applications in the oil industry,” said Preethi Gunaratne, a professor of biology & chemistry at the University of Houston.
Biota has applied its technology to approximately 80 wells across U.S. shale basins, including North Dakota’s Bakken, & the Permian & Eagle Ford in Texas, Kshatriya said. That is a tiny slice of the more than 300,000 shale wells across the nation.
EP Energy, one of Biota’s first customers, insisted on a blind test last year to gauge the technique’s effectiveness, asking Biota to determine the origin of an oil sample from among dozens of wells in a 1,000-square foot zone.
Biota was able to find the wells from which the oil was taken & to recommend improvements for wells drilled in the same region, said Peter Lascelles, an EP Energy geologist.
“If you’ve been in the oilfield long enough, you’ve seen a lot of snake oil,” said Lascelles, using slang for products or services that do not perform as advertised.
Lascelles said DNA testing helps EP Energy understand well performance better than existing oil field surveys such as seismic & chemical analysis. The testing gives insight into what happens underground when rock is fractured with high pressure mixtures of sand & water to release trapped oil.
Biota’s process is just the latest technology pioneered to coax more oil from rock. Other techniques include microseismic studies, which examine how liquid moves in a reservoir, & tracers, which use some DNA elements to study fluid movement.
Venture capitalist George Coyle said his fund Energy Innovation Capital had invested in Biota because it expected the technique to yield huge improvements in drilling efficiency. He declined to say how much the fund had invested.
“The correlations they’re going to be able to find to improve a well, we think, are going to be big,” he said.
For a graphic on ‘DNA sequencing in the oil industry’, click – http://fingfx.thomsonreuters.com/gfx/rngs/USA-OIL-DNA/0100407J0H0/DNA.jpg
(Reporting by Ernest Scheyder; Editing by Gary McWilliams, Simon Webb & David Gregorio)
Commodity MarketsDNA testingDNA samplesshale rock