Intrepid Drilling believes that the most economical way to produce an oil well is to produce the well at a conservative rate, which results in a low decline in production, and a high recovery rate of the oil or gas in the reservoir. This can be done by producing the reservoir at its Critical Rate, which is the rate at which the reservoir formation will naturally flow oil into the well-bore without pulling in the Bottom Water (the saltwater underlying the oil in a formation). A study by the Petroleum Engineering Department of Louisiana State University to calculate Critical Rates for certain reservoirs is used by Intrepid Drilling, along with other research to reduce premature water coning.
Primarily, when fields are first discovered they are produced at greater rates than the reservoirs’ Critical Rate, so as to recover as much oil as rapidly as possible. Rates of production generally range from 300 to 1,000 barrels of total fluid per day. In water drive reservoirs, the Bottom Water eventually begins to cone upward bypassing the oil column and decreasing the percentage of oil produced. The saltwater is able to do this because of its lower viscosity (the resistance to flow) in relation to the oil. Even though high production rates result in an initial flush of oil, over the life of the field it is a harmful practice. Severe coning leads to a decrease in the percentage of oil produced, increasing quantities of saltwater, corrosion problems, mechanical failures, higher operating costs, higher saltwater disposal costs, premature abandonment of wells, and an overall poor recovery of the oil in the reservoir.
In the oil industry, it is not unusual for a well that started out producing 100% oil to decline to 1% oil and 99% water over its life, even though a significant percentage of oil remains in the reservoir. The cost to produce a well that makes 10 barrels of oil and 1,000 barrels of water per day are significant and often uneconomical and is the reason thousands of wells are abandoned every year.
Depending on the reservoir, Intrepid’s goal is to produce newly drilled and completed wells at conservative rates based on the characteristics of the individual formation. These rates may allow the wells to flow, which will reduce operating costs. Rates higher than this will bring in salt water and result in a poor performance of the well’s overall recovery. With a good completion, wells are expected to produce many years with a very slow decline in oil or gas production. Advantages to this operation strategy are:
- Increase in total oil or gas recovered from the reservoir
- Greatly extended life of a property
- Decrease in saltwater production
- Decrease in operating expenses
- Significant increase in property profitability