GRAND PRAIRIE, Alberta – In its effort to ride the environmental bandwagon, Grand Prairie-based Small Rod Drilling Services hopes to create a new market for its latest drilling technology that it calls MicroWells™.
The company has created a special drilling rig and drill pipe that enables it to drill 1/2″ diameter wellbores. It claims that companies using its new MicroWells™ technology will be able to significantly reduce their environmental impact. The company’s President & CEO, Mr. Dick Halfapush, former COO at Friends of the Earth, explains,
Well, we took a bit of a leap of faith on this project, hoping that forward-thinking PNG operators would see the environmental light that we see moving forward. We expect operators to reduce their environmental impact by at least 87% and improve their image 4-fold. – Dick Halfapush
According to the company’s promotional material, the 1/2″ drill pipe, which come in 1 metre lengths, is able to drill 55% faster than traditional sized drill pipe thanks to its smaller diameter, significantly reducing drilling costs. Costs are further reduced on the completions side with 1/4″ tubing. “We are excited about this, and we believe that we have considered all aspects of this new technology,” Mr. Halfapush continues.
Well, it turns out that Halfapush overlooked the most important factor: economics.
An engineer from Hollimorton’s drilling division plugged in some basic inputs into Value Explorer and it calculated that one of these MicroWells, despite its lower costs, would need an initial production rate of at least 50 bopd and produce 70 Mbbl of oil in its lifetime to reach only a 7% before-tax internal rate of return. The problem: his simulator estimates that the most a MicroWell could ever produce is 0.03 bopd (and that’s on a good day).
Sure, these wells are very small, but so to are their economics. It just goes to show again how grand visions of an environmental utopia clouds the objective judgement required to make sound technical and business decisions. Silly environmental nut-jobs. Sheesh. Rolf Tracee, P.Eng.
After a categorical failure at the Northern Alberta Oil Expo held last weekend, where Small Rod Drilling Services had 7 people stop by its booth to chat (out of an estimated 175,000 who attended the event), the company decided that MicroWells might not be such a good idea after all. But what the company was able to do is garner all sorts of praise and from the Pembina Cardium Institute and Green Peace. And really, is there anything more important nowadays than being in the good books of the eco-types?