Oil and Gas: Inside the Well

Stimulation Business

By Andrew Beattie | August 7, 2015 10:56 AM EDT

The environmental debate surrounding hydraulic fracturingalso known

as frackingwas all over the news before the slide in the price of oil from
more than $100 a barrel to below $60. Now most of the chatter is about the
prospects of the companies that were working over the shale formations in
North America rather than the technology and its long term impact. That's
not surprising given that well stimulation services are more likely to be in

demand when the market price for oil is strong, a fact that helps justify oil
companies putting more effort into tapping what they're after.
That said, in the current market, the stocks of drilling and oil and gas
exploration companies are idling in tandem with weak demand/low prices.
Let's take a look at fracking and the broader industry of well stimulation that
it belongs to.

Well Stimulation Basics

Popular belief pegs hydraulic fracturing as the only way to tap some of the oil
and gas reserves trapped in shale formations. While this is true, fracking is
more properly classified as a method of well stimulationa proven method
of boosting well production. In other words, not all of the fracking is being
done to access new reserves. Fracking is also used to bring the production
of an existing well back up after a drop off. Stimulating the well allows for the
reserve to be drawn out and sold sooner than later. When market prices are
high, it makes sense to draw down a reserve at the stronger priceseven if
it shortens the production life of the well.
Acidization is the other widely used method for well stimulation. That's where
acid is pumped down the well to dissolve some of the rock to allow the
reserve to flow faster. Different types of acid may be mixed together
depending on the nature of the rock in the formation. Fracking and acidizing
can also be combined with the acid being pumped down the well at fracking
pressures to further open channels that exist or have been created by a
previous fracking.
There has even been some experimentation with re-fracking wells. This is
when a well is fracked multiple times as production rates start to drop. This is
attractive to oil companies because they can increase their production
without having to invest in drilling new well. However, this relatively new
method may only be economically viable for certain types of formations.

There are other services, such as steam injection, that are sometimes
referred to as stimulation methods. However, these heating and
displacement services act on the oil itself and do not physically alter the
formation like fracking and acidizing do. Steam injection, miscible flooding
and so on are techniques for enhanced oil recovery, not well stimulation.

The Tech Providers

Well stimulation is, of course, an oilfield service. So it is no surprise that
Schlumberger Ltd. (SLB), Halliburton Co. (HAL), Baker Hughes Inc. (BHI)
and all the other large oilfield service firms offer stimulation services.
Halliburton has the longest history in fracking specifically, and the proposed
purchase of Baker Hughes, still subject to regulatory approval, makes it a
true competitor to Schlumberger.
As mentioned, though, well stimulation services are more likely to be in
demand when the market price for oil is strong and the additional cost is
easy to justify for the extra production. In the current market, the demand for
well stimulation is lower than it was just a year or two ago.

The Bottom Line

Essentially, companies stimulate wells in ideal market conditions to increase
the production to take advantage of the price. Although not really new, these
stimulation technologies have fundamentally changed the market through
their widespread adoption in North America. Theyve enabled a short-term,
agile supply of oil and gas that can be brought to market whenever the price
is right. This has changed the focus of oil exploration and production in North
America from a long-term lifecycle to a much shorter and much more price
sensitive one.