New Oil Recovery Techniques Will Benefit Texas Royalty Owners

EOG Resources has been experimenting with enhanced oil recovery (EOR) techniques that may be good news for Texas mineral and royalty owners. Specifically, EOG has been using injections of natural gas to increase oil production on approximately 15 wells. They report that the new technique can result in producing 30% to 70% more oil from the Eagle Ford shale, at an additional cost of about $6 per barrel of oil.

EOG cautions that the technique may not be suitable for all wells in all reservoirs, however the early results from the EOG wells have resulted in attempts by scientists and other oil companies to study and duplicate the EOG results. For example, David Schechter, a petroleum engineering professor at Texas A&M University, has altered his lab that has been used to test carbon dioxide (CO2) for EOR to safely observe how natural gas affects reservoir rock. BHP Billiton and its partner Devon Energy have two EOR pilot projects in the Eagle Ford. Marathon Oil and Core Laboratories are also reportedly beginning pilot projects.

In addition to the initial 15 test wells, EOG has a second 32 well test added in 2016 and plans to add an additional 1000 wells to the EOR program in 2017. According to EOG, the natural gas EOR requires a formation that is able to contain the high-pressure gas, wellbores that are in contact with the most productive rock in the reservoir and a well completion that maximizes the fractured area within a restricted zone around the wellbore.

Natural gas is abundant and inexpensive and so this may be an interesting lower cost EOR technique that will result in increased value for oil companies, but also increased value for Texas mineral owners and increased income for Texas royalty owners.