Edward Camp, II
ShaleNavigator Team Lead at Geospatial Corp
Oil and gas companies are more stable and predictable because of big data analysis forecasting of new efficiencies and opportunities.
The advent of horizontal drilling coupled with hydraulic fracturing technology is rapidly changing the global energy landscape. The new efficient technology has made once uneconomical extraction profitable across the US in both known – and yet to be discovered -shale geographies that, combined, cover hundreds of thousands of square miles over 22 States. As a result of the technology, oil and gas companies have been rapidly leasing, drilling, and producing in areas across America to capitalize on the opportunity that is predicted to ultimately lead to American energy independence by 2019.
A secondary but significant outcome of the technology advancement is the proliferation of data – the information related to all aspects of the energy revolution. From lease offer information to well production results now can be accessed with the right data mining tools and techniques. This wealth of data, if properly managed and analyzed, can create new efficiencies for energy companies as well as opportunities for those in the supply chain. Even with more limited resources, mineral rights owners and buyers can also use the “Big Data” to create opportunity.
Some examples of these opportunities are:
- Property values are being greatly affected by fast-moving oil and gas development. Factors such as pipeline proximity, comparable property lease offers (bonus, royalty, and term), oil and gas well results, and new oil and gas permitting now all have a profound effect on property values. Once scattered and difficult to acquire information is now becoming more available to those who know where to find it. Used properly, this data can be the key information needed to appraise or negotiate lease offers received, to renegotiate leases at time of lease expirations, or to negotiate the sale of mineral rights.
- Service providers in the oil and gas development supply chain who need to know where and when well permitting is occurring can also locate and use data for real-time service delivery and where to target their marketing efforts.
- Property investors and mineral rights buyers need to know where and when shale development activities are occurring to project “paths of development” and where future value might be found today. Big data combined with mapping systems are now facilitating that need.
As more and more well production data becomes available, geologists can now assemble and analyze over five years of data in the three-state Marcellus & Utica Shale geography. The data availability, often collected and published by state permitting agencies, allows geologists to assemble decline rate curve models, a key analysis for drilling companies to pinpoint their leasing and drilling efforts. For landowners, the same information can also help predict royalty income into the future years of well production. This metric can be a foundation for their wealth management strategies and mineral estate valuation.
Big Data leads to efficiency and cost savings for operators
In addition to mineral valuation, Big Data will be a key resource for oil and gas drillers in the next wave of shale energy production. Energy producers will use Big Data to significantly cut their overhead costs and survive and adapt to commodity price fluctuations. Specific examples are as follows:
- The current low commodity (oil and natural gas) prices are putting pressure on oil and gas companies to identify specific “sweet spots” within the shale plays. They can use historical performance data to predict the potential of future wells. Knowing how to analyze the data properly is key.
- Because drilling and completion methods are continuously being improved, it is crucial for drillers to know what “vintage” wells are from when reviewing their performance. The massive amount of well data allows one to discern modern wells from less-optimized wells.
- Using big data analytics to improve existing fields is now as good, or better, than making a new discovery. There is plenty of upside left in the already-identified U.S. shale plays and software analytic products will be in demand far into the future.
- Some analysts consider the current low commodity prices to be more historically-normal. The recent oil price slump has set the stage for the market to come up with ways to significantly reduce costs and improve performance to make the reserves worth producing. As a result, the industry may be smaller, but more stable and predictable going forward with the use of Big Data analytics.
Data Sources and Availability
Many public sources of data exist, with one of the more obvious being state well permitting agencies. Depending on the State, permit data in addition to well production data can be accessed by the public. Frequency of data updates depends on the source. Pipeline data can be found via a variety of public and private sources as well, bearing in mind the same data limitation of currency and spatial accuracy. The table below shows sample data and who the data sources are. With the proliferation of data now underway, the table is just a brief example of data availability.
Other nation-wide data resources can be found through various Federal Agencies such as the US Geological Survey (USGS) National Geospatial Program and the US Energy Information Administration (USEIA). As with all data, accuracy and currency depends on the data source, an important consideration when assembling data for analysis.
Putting it all together – Analyzing Big Data
The below sample map displays geologic sub regions, well locations and type (Modern, Conventional), and major gas pipelines for Washington County, Pennsylvania. Well production statistics were used to develop the geologic sub areas. This is an example of the base data that can be used for a variety of purposes. Adding new permits by date is also helpful in revealing activity trends. Adding other surface features such as rail and highway networks and transloader facilities may also speak to likeliness of development and future well production.
If a mineral rights investor, for instance, chose to use this program to evaluate available properties, prospective investments could be examined for the attributes (positive and negative) that affect value. Some of those considerations this analysis would answer are:
- What is the subject property proximity to pipelines (gathering & distribution) (actual and planned)?
- Where are the nearby well permits, and how recent are they?
- Where are the nearby wells?
- What is the production of nearby wells? (or are they plugged waiting for a gathering line?)
- Where are nearby compressor stations?
- Is the subject property located in or near a gas storage field?
- Is the sale parcel in a well spacing?
Analyzing the sale properties in this context would provide the example user with a “360 degree” view of considered investment properties.
Data related to all aspects of the American energy revolution are becoming more and more available to the public. With the right data mining knowledge and techniques, this wealth of data can create new efficiencies and opportunities for energy companies, those in the supply chain, and mineral rights owners and buyers. The opportunity, however, also comes with a responsibility to thoroughly understand the data. Awareness of variation in data accuracy and frequency of updates from the data source providers should always be considered when assembling a system for analysis.