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For Chevron, Oil Hunt Is Search For New Technology

By the Financial Times ( Financial Times) -- Chevron first began producing oil in the Permian Basin of Texas in the 1920s. That it has never left is a testament to the vast resources in the U.S.'s largest oil region, as well as the technology that continues to help the company find ways to extract more of it from the ground.

The industry routinely notes that two-thirds of the world's oil remains trapped in known oilfields -- either because it does not have the technology to recover it or it is so deeply embedded that it is not economic to do so.

Indeed, in the Permian, where 30 billion barrels of oil have been produced, Chevron estimates there are another 60 billion barrels in place.

"There is a huge target there," says Mitch Mamoulides, Chevron's manager for the Permian south. "We just need the technology to get it out."

Technological advances, in the form of what the industry calls enhanced oil recovery (EOR), have played a big role in the Permian's production.

Mamoulides says three-quarters of Chevron's Permian production is through EOR. The first 15% to 20% of oil from a well flows with conventional pumping. The next 15% to 20% is produced by flooding wells with water at high pressure, and the next 8% to 12% is the result of pumping in carbon dioxide, which reduces the bond that oil has with rock.

That leaves some 50% of the oil in each well.

"One of the misconceptions many people have is that we are drilling into a big pool of oil," Mamoulides says. "We're producing out of solid rock that is denser than the concrete on your driveway."

The next stage of extracting still more oil from the Permian will involve what Chevron calls the "I Field", or the intelligent oilfield. This will involve using the latest technology to see thousands of feet underground to where the oil remains stuck, so as to pinpoint and target a specific zone for further recovery.

"There will be other technologies," Mamoulides says, and they will not only be used in the Permian.

Trevor Wallace, president of PetroMark Energy, a small exploration and production company, has made a career out of buying old wells from big companies, such as Chevron, or from larger independents, which considered them too small to bother with.

He goes in with the latest technology, hoping to produce many thousands of barrels that would otherwise be left for dead. These days, he is concentrating on a field in California, as well as some under-developed Texas properties.

"We want to put together a precisely tailored program," Wallace says. On the California field, he is looking at targeted fracturing of the rock for certain formations, and applying a chemical "wash" that loosens oil from rock for others.

"You can really go in and make the most of the opportunity," he says.

It is something other major oil companies, are doing globally.

"Energy demand is expected to double over the next 40 years," says Val Brock, Royal Dutch Shell's manager of improved and enhanced oil recovery. At the same time, the International Energy Agency projects production will decline by two-thirds over the next 20 years.

"There is no alternative but to pursue EOR," Brock says.

In addition to the EOR methods that Chevron uses in the Permian, Shell has had success with thermal (heating the oil to help it flow) and polymer use (that helps lift oil off rocks).

Brock says 4% of global oil production is now based on EOR. Even a 1% improvement is significant, he notes, explaining that that translates to 88 billion barrels of oil -- enough to fuel the world for three years.

The potential for EOR is huge, given efforts have long focused on onshore oilfields and the industry can begin applying some of these technologies to fields offshore. How fast it finds a way to apply new technologies depends on the oil price.

Dallas Parker, partner at Mayer Brown, the energy-focused law firm, says the industry is always investing in EOR, but focuses more intently on it when research becomes more affordable.

"Every time the oil price goes up, people find a way to get more oil out," Parker says. "It's all a function of the price of oil and the technology."

It is not an area reserved only for the big oil and gas companies. Parker points out that the boom in shale oil and gas was created by the U.S.'s small independents, which discovered it was economic to extract fuel from shale rock by combining multi-staged fracturing of the rock with water at high pressures, drilling horizontally under the ground.

"It was the entrepreneurs who kept trying to crack the code to extract gas trapped in the tight shales," Parker says. "There's still scope for entrepreneurs to try their hand at EOR."

He believes such efforts will continue. "With that much oil being left in the ground, if the price is right, people are going to find a way to get it."

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