How do you get a golf ball out of a Coke bottle?
Keith Schaefer, Editor
Oil & Gas Investments Bulletin
April 30th, 2016
It's a puzzle that Ken Gerbino and his team at Titan Oil Recovery solved years ago, but have yet to commercialize on a grand scale. He's hoping a new business model will find some entrepreneurs willing to fund this proven technology. Titan has had several producers use the technology on field-wide basis.
Titan breaks down oil droplets into smaller ones, so they can escape out of the "Coke bottle" - the analogy of the microscopic pore spaces where the oil is in a conventional oil field.
"The Titan process makes that golf ball into little BB's and so it can flow through the reservoir a lot easier," Gerbino said in an interview recently.
Titan's process uses naturally occurring microbes in the reservoir to break down the oil so it will flow through the pores in the reservoir rock. This process is what's called "tertiary recovery".
The industry calls whatever oil comes out of a well naturally "primary recovery". Secondary recovery would be processes like a water-flood or gas flood. Titan's microbial technology works with a waterflood, and is considered a tertiary process. The all-encompassing name for all these secondary and tertiary processes is called Enhanced Oil Recovery, or EOR. EOR is a $100 billion industry, because it is estimated that 65% of the oil in already discovered fields is left behind. That's right - when an oil field finally goes dry, there is still WAY more than half the oil in the reservoir. The Recovery Factor (RF) is rarely more than 35%, and in tight/shale oil it's often only 5-10%.
The Titan Process is designed to increase the RF - at a very low cost per barrel.
The process involves feeding microbes, which are single cell organisms so tiny that you could fit millions of them through the eye of a needle.
Titan analyzes a sample of the reservoir for the microbes, and then injects a custom food for them down the wellbore, usually in one day. These nutrients create a dramatic response in the microbes that are already in the reservoir.
The microbes multiply by 100 million to a billion times, grow larger and then shrink dramatically. The microbes also have a change in the skin structure which results in them seeking to move away from water and rock and attach themselves to droplets of oil left in the reservoir. With billions of microbes pushing themselves up against the oil droplets - they, deform and break apart, making them into smaller micro-droplets. The microbes also create a more slippery surface for the oil droplets to squeeze through the pore spaces in the rocks as they now are between the rock grains, water and oil interface.
Imagine a golf ball being stuck inside a Coke bottle. The oil droplet is the golf ball and microbes break it into smaller pieces that fit through the neck of the bottle.
The feedings should take place every 4-6 months.
The process works best on conventional fields where a waterflood program has been applied. Gerbino and Titan believes that up to 25% of the oilfields in the United States and 17,000 to 20,000 fields in total around the world would be suitable for the Titan Process.
Now, everybody does waterfloods - even in tight oil. But only one producer in the world--Pertamina, Indonesia's National Oil Company (NOC)--is now using The Titan Process - even though Titan has had some success convincing companies to give the process a try. Three of them (Husky Energy, Venoco and Atinum) each published SPE (Society of Petroleum Engineers) papers detailing their results.
All of which were very positive. But even after positive results those same companies have not adopted the Titan Process in any sweeping manner. In total the Titan Process has been applied over 300 times to over 100 different wells in almost 50 fields - and the average result has been a 92% increase in production.
The company says their process costs only $6-$10 per barrel of incremental oil recovered and I verified that figure last week when I spoke with a field manager who used the process successfully when they worked at a major oil producer.
I asked them - and they wished to remain anonymous - why they chose the process:
"It's low startup capital for mature water flooded areas, and you don't need a lot of surface equipment like with a polymer flood where you need something to carry a base (like water or alkaline) and it's a lot of facility upgrades and pipeline work required beforehand; whereas with a Titan process it's just the nutrients...... its lower risk with higher reward."
Gerbino says there are obvious financial rewards for producers, even at today's low prices.
"Our numbers we have are, if:
1) an oil field is declining at 10%
2) and the oil price is $40
3) and the Titan process can increase production by 30% for the first 2 years only
4) and with feeding the microbes every 6 months and then you go back down to that decline slowly and it's a $20 per barrel lifting cost, the NPV of that field doubles after 2 years. It's pretty cool. This would be at current rates."
But the producer mentioned above did not continue using the process. Now PERTAMINA the world's 23rd largest oil company is using the process. I asked Gerbino why the slow adoption rates from oil customers.
"It was our fault. We didn't have advertising or a marketing budget or any salesmen.
"And a lot (of engineers) were trying this on 1-2 barrels a day wells to see if they could get a miracle out of it. When they didn't they didn't want to go any further."
Another issue for Gerbino is that it's mostly large, conservative, staid producers who own the big conventional fields are very slow to adopt any form of new technology.
That has caused Gerbino to now set his sights on Titan acquiring its own oil fields and getting all the upside themselves. Their balance sheet doesn't allow them to go bid on assets immediately, so the company is now in the process of arranging external capital to help finance this plan. Gerbino says this way Titan can make sure that the process is directed at exactly the right types of oilfields applied correctly. With the oil industry in disarray he believes there is great potential to pick up unwanted, high cost oil fields for very reasonable prices.
Then Gerbino and his team can start turning golf balls into bbs and get the oil flowing - for $10/barrel or less.
The service we endeavor to provide is to analyze and clarify the nature and potential of certain North American junior oil and gas producers, and identify those situations where the market either misunderstands the nature of the company or assigns unduly optimistic or pessimistic success odds to the company. Keith Schaefer is not a registered investment dealer or advisor. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer to buy or sell the securities mentioned, or the giving of investment advice. Oil and Gas Investments is a commercial enterprise whose revenue is solely derived from subscription fees. It has been designed to serve as a research portal for subscribers, who must rely on themselves or their investment advisors in determining the suitability of any investment decisions they wish to make. Keith Schaefer does not receive fees directly or indirectly in connection with any comments or opinions expressed in his reports. He bases his investment decisions on his research, and will state in each instance the shares held by him in each company.
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March 30th, 2017
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