Through its Integrated Solutions effort, Baker Hughes is looking at effective, holistic strategies for improving the performance of existing oil and gas production assets.
Interview with Alex Garcia, Vice President, Integrated Solutions, Baker Hughes
World Oil (WO): Tell us a little more about what the term, Integrated Solutions, really means to you, because when I read up on it, I came away with varying impressions of different possibilities.
Alex Garcia (AG): In integrated solutions, we work together to integrate the capabilities of the programs of Baker Hughes and/or third parties. When we see that we have either technological or geographical gaps, then we bring in third parties to offer a solution for the client. And we add project management and engineers to do all the risk assessment, all the preparation, execution of the well.
Normally, we divide our workflows around four stages: plan, prepare, execute and evaluate. So, the sooner we work with the clients, understanding the drivers, the reservoirs (Fig. 1), the different concepts of how we can develop a project, the better. And then, we can select the best option for them. Preparation refers to working with the programs and third parties to make sure that we will have the equipment and people with the right competencies and time to make it work and achieve the execution. And there's a loop of continuous improvement. So, that's what we do.
When we integrate as a whole, we perform much better, because we look at a holistic solution for the client. We have different types of projects, but most of our business is on the drilling and completion of wells. We have large operations in the Middle East, Europe and Latin America, as well as in Southeast Asia, India and Africa. It's a business that is growing because clients are demanding more and more integration on a constant basis. They want to see that they can use integrated capabilities that offer better solutions that create more value. The other part of the business is mature assets. We have defined mature assets---really the definition is more of a guideline; if you go searching on the Internet, you will find different definitions. But we call a mature asset an asset that has been producing for over 25 years or that has produced over half of its reserves, B1 and B2, or proven and probable reserves.
WO: You’ve mentioned two “legs”, those being drilling/completions and mature assets. What is the third one?
AG: The third leg is new energies. We're in projects on CCUS and geothermal. There are some projects that have come up, as well, on hydrogen and lithium. As you know, the world has a growing demand for secure, sustainable and affordable energy supply, and we are focused on addressing this energy trilemma.
So, mature assets are a big theme for us. We have been working during the past few years to create the way we work with clients for optimizing these mature assets. Today, over 70% of the production, worldwide, comes from mature assets, and we believe this figure will increase to 80% by the end of the decade
WO: That's remarkable.
AG: Yes, it's quite large—around 2 million wells producing worldwide. And these wells are only getting older. Out of 2 million wells, 55% are between 11 and 30 years old. As they age, they corrode and you deplete the reservoir; you have to go to another reservoir and do a reentry. That means workovers. And around 7% of the wells that are active today are producing with over 30 years of maturity. Thus, we see a big drive for intervention. Likewise, as the wells are getting older, we saw around 14% of these wells intervened last year. We see that trend increasing to 17% by 2027. Of course, it will just continue increasing. We estimate the spend last year on intervention to be around $58 billion, globally.
WO: That's phenomenal.
AG: When we talk about mature assets, we have spoken a lot about the energy trilemma, which concerns how we help operators to bring energy to satisfy demand around the world. Of course, we need other sources of energy like the sun, the wind, you name it. But we also need oil and gas. As I mentioned, 70% of the production is coming from mature assets. Mature assets give you the opportunity to ramp up production much faster, because you have an infrastructure already there. You have existing wells.
When you intervene a well, we're talking about days, maybe a few weeks, but not months or years that it takes you to develop a basin by drilling wells, Fig. 2. And we look at existing assets, where we already have infrastructure. When you go to a greenfield for exploration, you have to shoot seismic, whereas you have certainty in a mature asset. You know that the resources are there. The big challenge that we address in mature assets is how we increase the recovery factor. A recovery factor on average today is around 35% for oil. It could be higher in some places, It could be 40% to 50%, depending on the asset. But on average, it's around 35%. The estimated ultimate recovery for gas is around 70%, of course it's higher. But when you were talking about 35%, it means that you're leaving at least 65% of a resource's value in the ground.
If we were to increase the recovery factor by only 1%, we could generate enough production to satisfy two to three years of global consumption. So, I think there's a great opportunity in mature assets. Second, of course, since it takes you a few days to intervene a well, as opposed to months, the cost is lower, and also the carbon footprint is lower. It's pretty much aligned with us all addressing the energy trilemma.
By talking with clients and the different challenges that we face with a mature asset, we created a team. That's what we're doing different today. So, we normally have this distinctive portfolio. We have light well intervention, while some of our main competitors don't have that technology. It means that we can go offshore into deep water, intervene a well without the need for a rig; just a vessel. So, that's faster, cheaper, and it drives efficiency.
We also acquired Altus Intervention last year, which has great tools for wireline intervention, Fig. 3. They are big in Europe, and we also see the opportunity for expanding into other regions. And that, combined with some other traditional portfolio items that we have in Baker Hughes, sets us apart from the competition in the marketplace.
What we're also doing differently is that we arranged a team of Subject Matter Experts (SMEs) from different disciplines to tailor solutions with a holistic view around five solutions themes:
If I were only selling a particular technology, say a pump or a chemical, I would sell you that pump, no matter what your problem is. What we have assembled now is a team around solutions. What that means is that we have people that understand the reservoir, that can first talk to a client, understand the problem, and then propose solutions. Once we understand the problem, then we can look at the solution from a holistic point of view. That may be one technology, or it can be a combination of technologies. In that way, we look at driving innovation for our clients.
When we bring a solution to the client, we look at the whole thing. I think we're quite unique among the competitors in that space.
We selected our five themes based on feedback from clients and their growing demand. For instance, there's a large market and large need for intervening wells. I was looking at a report, and just in the North Sea, one of the most mature offshore basins in the world, around 53% of their wells are waiting for intervention.
WO: That's phenomenal. What is your plan to address it?
AG: It's really quite large. In the U.S., in different regions, you'll find the same situation. Wells are either idle or producing below their potential, because they're missing that intervention. Oftentimes, it's just a matter of making the point and saying, “hey, let's intervene, let's do this campaign and make it happen.” So, we have our team addressing that. The second theme is production optimization. In just about any mature field in the world, it can be optimized. And it could be a matter of well intervention or a matter of flow assurance, as you look at all your infrastructure and how you can debottleneck that production.
WO: What’s going on with the other three themes?
AG: The third theme, as we talk with clients, we see common problems around water, gas and sand management. So, we have subject matter experts just to address these items. And we have unique technologies for them. For example, water management---AquaCUT™ Plus has been quite a successful technology. It is a subsurface water conformance product that decreases the water cut in mature sandstone and carbonate wells, reducing associated processing and disposal costs while also extending the productive life of the well. So, the water stays down, and you produce more oil. That's just an example.
The fourth theme is about unlocking bypassed resources. When you drill a well, you're targeting an objective, maybe two. But oftentimes, there are different pockets of oil left behind or that are deeper in the well. While we're looking at unlocking bypassed resources, we’re also looking at sidetracking wells. Maybe we abandon another section and sidetrack to access those pockets of oil and gas.
Then, the fifth one, no less important, is well abandonment, and there are a few things here. One, we need to do it in an economically viable way. It needs to make sense for clients to either permanently abandon the well or to abandon a section and access all their other pockets of oil or gas. Another challenge that some of the operators are addressing is how do we guarantee that when we abandon a well, it is permanently abandoned. What we mean with that is let's look at 500 years down the road. I want my grand, grand, grand kids to have a clean world, so I don't want these wells to start leaking. To achieve this, we also consider geo-mechanic aspects. We look at understanding the subsurface to make sure that we leave that well permanently abandoned.
WO: I was going to say, how do you guarantee that?
AG: We'll look at the cap rock that creates a seal, the geo mechanics of it. We'll look at some of the information to make sure it's completely sealed. So, through time, if steel corrodes or cement degrades, we know that we still have a permanent barrier. Thus, these are our five themes. That's what my group is focused on, for addressing the Energy Trilemma.
WO: What do you see down the line over the next couple of years. Where do you think this is all going? I assume you see a further expansion of this line of business.
AG: I see a fast expansion, and also I see more clients asking for integration. Now, the clients say, “I know I need to do this campaign, but you, Baker Hughes, are a good integrator. I want you to assemble, with the third parties, a solution that is economically viable. Either to enhance production, or to abandon wells.”
Something to understand on well abandonment is that oftentimes, operators will have a reserve in the balance sheet for future abandonment of a field. In time, that builds into a sizable amount of money on their balance sheet. If you can conduct that abandonment in a more cost-effective way, what is left is profit for the operator. That's why they're driving that integration, in that they want innovation to drive that efficiency. As Lorenzo (Simonelli) has mentioned, "okay, we have been talking about the energy trilemma. It's probably a quatrilemma” when we include the efficiency factor. We need to be able to supply energy for satisfying demand in a safe, sustainable, affordable and efficient manner.
WO: I would think, based on the world population growth globally, that you will have an ever-expanding base of business for a while. Am I correct to say that the average well life is increasing?
AG: The well life, and the life of the reservoirs, is also increasing, because as we innovate, we keep pushing that recovery factor, and we extend the life of the field.
WO: And the industry is drilling better wells now than it was 20 years ago. And those wells are going to last longer. Therefore, the need for intervention and optimization will continue.
AG: Correct. That's a good way to put it. There is going to be more and more demand. I mentioned that 70% of the production is coming today from mature assets. By 2030, it is going to be at least 80%. Fields are just going to get older, as they will not get any younger.
WO: It's remarkable. If you go back 20 or 30 years, no one would necessarily see this coming.
AG: Correct. There was always a big drive for exploration to find new resources, for seismic for a new field. I think after the previous crisis, the operators are becoming more capex-disciplined. They say, “hey, let's focus on optimizing what we have.” And, when you do that, it's a shorter cycle, but it also reduces your uncertainty. You know that the research out there is already proven. So, you're going to see more and more optimization. You're going to see more drive for efficient recovery factors. WO
ALEX GARCIA has over 25 years of international experience in the oil and gas industry, and he joined Baker Hughes in November 2022 as vice president of Integrated Solutions. Before joining the company, he was the CEO of Vista O&G in Mexico. He previously worked for Schlumberger in management roles across their production and project management businesses. Additionally, Mr. Garcia has pursued entrepreneurial ventures with private equity funds. He earned a degree in mechanical engineering from Universidad Simón Bolívar and an MBA from INSEAD.