COVER STORY ο Ι Ο
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ANOTHER SHOT Oil and gas companies seek innovative chemistry as they devise new means of accessing hard-to-reach reserves.
BACK TO THE WELL Chemistry targets COST-EFFICIENT EXTRACTION of oil and gas from mature reserves RICK MULLIN, C&EN NORTHEAST NEWS BUREAU
EVENTS RANGING FROM the natural to the political converged this year to boost the price of oil and gas to new highs. Hur ricane Katrina and the wars in Iraq and Lebanon registered at the gas pump in 2006, as did long-term systemic pressures. The steady rise in energy consumption in countries such as China and India and the limited capacity of current reserves to meet the growing demand indicate that prices are likely to remain high. Energy conservation and a push to develop alternative power sources—the major responses to the 1970s oil em bargo—are again at the forefront of energy policy and technology development. But a more immediate response is occurring in oil and gas fields, where high fuel prices have sparked renewed interest in using enhanced oil-recovery (EOR) techniques on mature wells and even on abandoned, or brownfield, wells. The effort to boost oil and gas extraction poses a range of technical and environmen tal challenges that, in turn, boost demand for oil-field chemicals. This broad category of products for drilling and maintaining wells has developed into a major growth patch for specialty chemicals such as surfac tants, lubricants, andbiocides. Several com panies have made a serious push into this service-intensive market in recent years. The Freedonia Group consulting firm projects that demand for formulated oil
field chemicals in the U.S. will increase 5.4% annually through 2009 to $5.2 billion. Among the main oil-field chemical catego ries of drilling fluids, completion fluids, and production chemicals, Freedonia sees the greatest opportunity for growth in drilling fluids, as producers push to tap more oil and gas from existing reserves. Oil industry experts estimate that only about 30% of available oil and gas has been extracted from most existing wells. The cost of accessing additional reserves is prohibitive under normal circumstances. Today's circumstances are not normal, however, and the oil and gas industry is scrambling to extract the next increment. "Oil is going to be a lot more difficult to produce," says Stephen Taylor, vice president for upstream operations at Nalco. "The easy oil is gone, as they say. We are go ing to be going to more difficult geographies and more difficult production channels." Among the latter are tar sands and oil shale deposits in Canada and the Rocky Mountain states. These represent a vast, but difficult to extract, quantity of hydrocarbons with unique processing requirements. CUSTOM DEVELOPMENT of chemicals for oil producers has become a major engine of growth for specialty chemical companies, MORE ONLINE
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Taylor says. "Innova tion is directed at how you produce more oil, stimulate wells, and al low wells to work more efficiently," he says. "There is a lot of known oil, but the economics to •l^M produce it are marginal, even at high crude oil prices. If we can design chemistry that re duces capital investment to produce oil and gas from those fields, then operators who own those licenses can develop that crude." Unlike Nalco and Baker Petrolite, which together, according to Taylor, represent about 50% of the oil-field chemicals mar ket, most specialty suppliers do not deal directly with energy companies. Rather, they supply oil-field service firms such as Halliburton, Schlumberger, and BJ Ser vices, which in turn tailor chemical supply to customers in the field. According to Jim Prestidge, vice presi dent of production enhancement in Halli burton's energy services group, the service industry's main concerns regarding chemi cals include cost, supply-chain reliability, and environmental performance. Innova tion is another key focus. "Halliburton is continuously looking for and developing proprietary technologies to address en hanced oil-recovery techniques and make wells more productive," Prestidge says. Halliburton recently introduced a line of stimulation chemicals called GasPerm 1000, which is based on a new microemulsion surfactant that removes water drawn into drilling formations during the rockfracturing process. M-I Swaco, a joint venture of Schlum berger and drilling machinery supplier Smith International, relies on its chemical suppliers for basic product development, according to James E. Friedheim, director of fluids research and development. "We used to have a chemical manufacturing plant in Texas that did some very basic stuff, and we sold that off, figuring we would just depend on our suppliers to do our basic research," he says. "But our chemists work with them." According to Friedheim, drilling fluids are new territory for a lot of the specialty chemical companies that have been drawn into the field by the upturn in drilling activ ity. Most of these firms currently supply production chemicals such as the prop-
Learn about the use of bacteria to accelerate gas production in mature wells on C&EN Online, www.cen-online.org. ΎΑ
NOVEMBER 20, 2 0 0 6
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COVER STORY
GUSHER Healthy growth is expected to continue in oil-field chemicals $ MILLIONS Drilling fluids Stimulation chemicals Production chemicals Enhanced oil recovery products Cementing chemicals Completion fluids
ANNUAL GROWTH 1999-04 2004-09 12.2% 6.3% 9.2 6.1 4.6 3.3 4.6 5.6 13.4 4.3 13.4 4.8
1999 870 460 460 355 195 160
2004 1,550 715 575 445 365 300
2009 2,100 960 675 585 450 380
2014 2,750 1,250 785 745 545 475
Total oil-field chemicals
2,500
3,950
5,150
6,550
9.6
5.4
Oil-field chemical raw materials
1.530
2,415
3,125
3,950
9.6
5.3
SOURCE: The Freedonia Group
pants, which prop open fractures in rock, and surfactants used to keep wells produc tive. "They can get their hands around oil field production chemicals," he says. "But they can't get their hands around drilling fluids. We need to educate them." Friedheim and his competitors need highly customized chemistry. "You can't just walk in the door and say, 'You need emulsifiers? Well, take these emulsifiers,"'
he says. "We often need emulsifiers for five different base oils with five different sol vency factors." Rather than get frustrated with the level of hand-holding needed in product develop ment, Friedheim says he is encouraged that new suppliers are willing to get started. "In the past, probably our better luck has been with the midsized specialty manufacturers that can modify their chemistries."
Experience with oil-field chemicals varies widely. Some firms, like Celanese and Stepan, have long supplied chemicals from divisions that service markets such as personal care but have recently launched new products or divisions with the goal of significantly expanding their oil-field presence. Others, like Rhodia and Nalco, have had oil-field businesses for decades. Both types of companies say they are busy researching new uses for their products in the oilfield,particularly the chemical-in tensive EOR segment. Mo Bayad, vice president of Rhodia's Novecare division, a longtime industry par ticipant, says the impetus is the price of oil and gas. "For many years, energy companies have been on and off again on enhanced oil recovery techniques," he says. "Those ef forts go to the back burner when oil prices go down. When oil goes back over $40 per barrel, everybody is scrambling again to find the Holy Grail." The search has been on again in recent years, and Bayad says Rhodia has been putting more of its resources into developing chemicals for EOR. Rhodia is particularly active in surfac-
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