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A PROGRAM FOR THE CONSERVAWON
OF THE OEL AND GAS RESOURCES
Q? ECUADOR, SG'UTH MAERECA

Thesis far the Degree of M. S.
MECHiGAN STATE COLLEGE

View Hugo King
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This is to C(‘I‘lilll that the

tho-sis entitled

A Program for the Conservation of the
011 and Gas Resources of Ecuador, South
America

[rl'csc'utml In]

Victor Hugo King

has‘ l)t‘€ll m‘vreptvd tmmnls fulfillment

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Geology

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TO AVOID FlNES return on or before date due.

DATE DUE DATE DUE

        

 

 

 

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MSU Is An Affirmative Action/Equal Opportunity 1
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A PBOGRAJ‘ FOR THE CONSERVATION 01‘ m: OIL AND GAS

RESOURCES Ol' ECUADOR, SOUTH AMERICA

By
VICTOR HUGO KING

A THESIS

Submitted to the School of Graduate Studiee of Hidhigan
State College of Agriculture end. Applied. Science
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Geology
19%

ACKNOWM‘I‘S

I wish to express my deep appreciation for the valuable
motion: and. aesietance given'by Dr. lilliam A. Kelly of the
Geology Department of niohigen State College. who directed thie
paper. I am grateful to Dr. Stanard G. Dergquiot. Head of the
Department of Geology. Dr. Bonnet 2. Sandefnr and Dr. Jamee I.
from of the Geology Department of Hichigan State College, for

reading and correcting the original of this paper. I am indebt-

 

: of Quito, Iona-
dor, for permitting me to study, during lbbruery 1948. ite re-
eomd files and reporte. I wish aleo to acknowledge my debt to
Dr. Lee Roy A. Shoemann, Director of Ooneervation Institute of
Michigan State College and Er. Percy J. Hoffnaeter. Director of
the Department of Conservation and Supervisor of Valle of the

State of Michigan, whose help has been invaluable.

ii
A PROGRAM FOR THE CONSERVATION OF TE OIL AND GAS RESOURCES 01‘
ECUADOR. SOUTH AMERICA

ABSTRACT

In the paper are outlined the conservation principles which
may provide effective and rational utilisation of crude oil and
natural as resources of the Republic of Ecuador. South America.
Attention is called throughout the paper to the importance of
conserving oil, preventing its waste. and to the necessity of a
controlled rate of production under a program of conservation.
Die conservation measures insure a continuous and adequate simply
of petroleum products at a reasonable cost and protect property
rights at the same time.

lconomic and technical phases are pointed out. Production
of petroleum at a rate in excess of market demnd brings physical
waste and results in serious disturbance of the industry economr.
Excessive capital expenditures. brought about by the drilling of
unnecessary wells. lead inevitably to an excessive production rate,
and frequently are opposed to efficient producing practices.

The technolog of conservation consists in the selection of
production methods which will reduce waste of oil to the lowest
amount compatible with the interests of the industry. the consum-
ing public. and the national welfare. This selection implies a
proper understanding of the practical principles of conservation
which are based upon a complete knowledge of the nature and be-

havior of oil reservoirs, and the manner in which operating con-

iii
ditions influence the recovery of oil.

A major objective of all efficient production practice is
to produce oil under the most efficient type of drive. Hence,
the oil pools should be managed according to the reservoir energy
in order to secure the Optimum recovery. The common types of
drive under which oil is produced are: water drive, dissolved-
gas drive. gas—cap drive. and gravitational segregation.

Ehe recovery obtainable from an oil reservoir depends not
only upon the nature of the reservoir. but also upon the manner
in which the reservoir is developed and Operated. The factors
include well spacing, well completion practice, and use of
pressure maintenance and secondary recovery.

Authoritative regulation is needed to prevent waste in
the oil production. Provisions of modern conservation statutes
relating to oil and gas are stated in the paper. !he allocation
recommended within pools grants each Operator an equal Opportun-
ity to recover the equivalent of the recoverable oil which under-
lies his property. preventing drainage across prOperty lines. The
allocation among pools should be observed in order that every
pool may produce at an efficient rate and have its fair share of

the total production allowable.

I

Tl-

 

 

 

 

2m

SEIKO)!

I.

II.

III.

IV.

ACUWM
ABSTRACT
CWTS
ILLUSTRATIONS
PLATES

TABLES

IMODWTION
Location of the area
mnmamm
Geologic features
a. Coastal plain
b. Andean region
c. Oriente region
Purpose of the study

Pram AND NATURAL GAS IN ECUADOR
Distribution
Geological features of Santa llena Peninsula
Oil companies Operating in Ecuador
Ecuadorean oil production
Types of production

PRIHCIPIIIS 03' PDEOLM CONSERVATION
A. General Considerations
Importance of conserving crude oil
. Meaning and objectives of conservation
3. lconemics in Conservation
Market demand
Control of dominant costs
Importance of production rate
Need of oil reserves

TICHIOIM}! or 3mm PROJECTION
A. Oil Reservoirs
Introduction
Composition and origin of petroleum
Accumulation of petroleum
Reservoir for petroleum
Occurence and distribution of oil

iv

PAGE

ii
iv
vii
viii

viii

8338888

SETIOII

Types of drive under which oil is
produced.
a. later drive
b. Dissolved-gas drive
c. Gas-cap drive
11. Gravitational segregation
B. rectors Affecting Recovery
Control of factors affecting recovery
Date of production
Production of water and gas
Well completion practice
Time of deveIOpment
C. Secondary Methods for Increasing Oil Recovery
Methods
later flooding
‘Gas-repressuring
Pressure maintenance
Stabilization of crude
D. Spacing of Oil and Gas lells
Junction of wells
Influence of geologic structure and
structural position in well spacing
[ell spacing in fields under water drive or
gas-cap drive
Well spacing in fields under dissolvedpgas-
drive
Effect of plugged send ,
I. Bumary of Good Practices in htraction of Oil

Y. CGSER‘VATIOH STATUTES
Administration
‘ Functions of the state regulatory bodies
a. Beetriction of flow
b. Balancing supply with market demand
c. Equitable @portionment
6.. Regulation of oil pool deveIOpnent
Unit Operation
Provisions of the modern conservation statutes

VI. POOL'S ALLOCATION

A. Introduction

3. Principles of Allocation Within Pools
Definition
Principles

C. rectors Pertaining to 'aste Prevention
Field rules
'ell spacing
Control of gas production
Control of water production
Unifomity of withdrawals

PAGE

$88 3 8 8&fifififi33B8388338833

assesses

$6553

$9888

SECTION

Pressure maintenance
Regional migration

1). Principles of Allocation Among Pools
General considerations
Principles
Stripper production
Restriction to prevent waste
Allocation to groups of pools
lquitable allocation to each pool

VII. CGCLUSIORS
VIII. EIOMMDATIONS
IX. IBIELIWHY

vi

PAGE

52
53
53
53
53
53

55

5?

62

Vii

ILLUSTRATIONS
PAGE
FOLLOIIEG

Figure l - Position of Ecuador and her Galapagos

Islands 1
Figure 2 - Western section of Ecuador. South America 2
Figure 3 - Interpretation of the Andean region in Ecuador

according to Wolf (1892) and the sections of the

Cordillera Oriental according to TechOpp (1945) 3
Figure 4 - Geological map of the Santa Elena and Colonche

districts. southwestern Ecuador 6
Figure 5 - Official map showing the concessions granted by

the Ecuadorean Government to the different oil

companies 10
Figure 6 - Graph showing production of petroleum in

Ecuador. 1925-1946 16
Figure 7 - Eater drive type of oil reservoir 23
Figure 8 - Dissolved gas drive 23
Figure 9 - Gas-cap drive 23
Figure 10 - Gravitational segregation 23
Figure 11 - Foo rapid rate of oil production pulls the

water into the bottom of well, and shuts out

the oil which is lighter than water 26
Figure 12 - The flow of oil and gas is not restricted in

this reservoir 26
Figure 13 - Arrangements of wells providing 10 acre spacing

adapted for exploitation of Ecuador Oilfields

Ltd... Company. Santa Elena. Ecuador 50

Yiii
PLATES

PAGE
FOLLOWING

Plate 1 - A monument erected over a point of the
equator line, in San Antonio de Pichincha,
25 kilometers to the north of mito 5

Plate 2 - A cable tool for shallow wells commonly
need in Cautivo (La Libertad) 13

Plate 3 - A standard rotary drilling machine used in
deep wells in the Tigro field (Santa Elena),
Ecuador 18

Plate 4 - The Ecuador Oilfields Ltd" Co. in La
Libertad, Ecuador. In the distance can be
seen the mating of Santa Elena 14

Plate 5 - rank for crude oil (50,000 bbl.) 1a Libertad
Ecuador. Oil tank is without sand fire wall
to prevent loss of oil or spread of fire in
case of accidental break 14

Plate 6 - A gusher. During the early development period.
wells were drilled in without any preparation

for control to prevent waste. oil pollution,
or fire hazard 49

W

Table I - Stratigraphic column of the formations in
Santa Elena 8
Table II - Survey of Ecuador Oilfields 13

Table III - Petroleum production in Ecuador, 1946 15

fiction I

IRTRODUO TI 0N

_§Eo_cation of the area: - The Republic of Ecuador lies between
Colombia on the north and Peru on the south and southeast. It
occupies the northwestern part of South America (see Fig. 1).

The country takes its name from the fact that the equator
crosses the country approximately 25 kilometers from Qiito, capi-
tal of Ecuador (see Plate 1). Continuing westward into the Pacific.
the equator line crosses her island possessions. the Archipelago of
Colon. better known as the Galapagos Islands. (1)

The country is in the trapics. extending from 1°21 F. lati-
tude to 5° 3. Fortunately, nearly half of the area is occupied by
the mountains and high plateau of the W; so that it on-
Joys a temperate climate.

The area of the country, since the protocol of Rio de Jan-
eiro of January. 1942. is 267, 844 square kilometers. his cypher
includes the 13 Galapagos Islands lying 600 miles west of the
Ecuadorean coast. which have an area of 7,844 square kilometers.

The population of Ecuador has been estimated at 3,740,871
(Teran, 1943 p. 174).

W: - Ecuador comprises three sharply-defined
tapographic divisions: (a) the coastal plains or £2535. (b) the

Andean region or is . and (c) the Oriente region to the east

 

1 Name “Galapagos" derived from Spanish word meaning tortoise for
which the islands are noted.

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Figure 1.- Position of Ecuador and her Galapagos Islands.

 

of the Andes.

The coastal plains is a relatively flat country of tropi-
cal aspect. interrupted occasionally by groups of hills and ranges
of less than 1700 feet altitude. Many'of these hills are the spurs
and outliers of the Andes (see Fig. 2).

The Andean region is the mountainous section between the
coastal region and the flat Amazon basin of the Oriente region and
extends the entire length of the country. It is comprised of three
ranges known as the Cordillera Occidental to the west, the Cor-
dillera Central in the middle. and the Cordillera Oriental to the
east (see Fig. 3). d

The two principal ranges of the Andes. the Cordillera Occi-
dental and the Cordillera Central. form a double row of peaks about
so kilometers apart with a high plateau between, and maintain this
form to a surprising extent until its ranges become irregular and
diffuse again near the Peruvian frontier to the south. At cer-
tain intervals the double row is Joined by a crosswise ridge. or
'knot' which forms connecting links between the Occidental and

Central Cordilleras. Between this double row of peaks (2)

and
ridges connected by knots are the habitable valleys, called 11mg.
drained by rivers that cut through one or another of the ranges.

These valleys form only about three-eighths of the mountainous

 

2 Among these peaks is an unequaled group of snowcapped volcanoes.

most of them extinct. Some of the more important peaks are the
Chimboraso (20,702 feet), the Cotopaxi (19,498 feet), and the
Cayembe (19,160 feet). (Grosvenor, 1941).

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3.3,”: W _ 3.

 

 

 

 

 

 

 

 

 

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Figure 2.- Western section of Ecuador, South
America. (5:33: Kigg I Jung 125g. p.10)

region. but they are the habitat of more than three-fourths of the
population of Ecuador. The other five-eighths of the Andean Cor-
dillera include land over twelve thousand feet in height on which
grows only paramo grass.

The third cordillera, the Oriental. is less high and con-
pact than the others. more irregular. and disconnected from the
Cordillera Central. It was discovered in 1945 by the aerial survey
of the Shell Ecuador Oil Company (Tschopp, 1945).

The Oriente region is divided (Teran. 1948 p. 135) into two
sub-regions: one known as the region of the flanks or hdean pla-
teaus. which slopes down from the base of the Cordillera Central,
at about 4,000 feet altitude to the Cordillera Oriental: the other
sub-region is the low, flat Amazon basin which extends to the Peru-
vian border, at about 850 feet altitude. The Oriente region is a
vast region little known and inhabited by a sparse, partly Indian
pepulation.

W8 - he geolog of Ecuador has not been
worked out in detail except in a few limited areas. At present
only most general statements can be made. me broader geologic
features of the western part of the country have been fairly de-
termined, principally through the works of Rolf (1892 and 1912)
and Sheppard (1927. 1937, and 1946). he eastern part of the
country has been studied lately by the Shell Company geologists
(Tschopp, 1945).

a) thal plain: maternary tablasos and Recent marine

sediments occur along the western edge of the littoral belt. The

-3-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in; to lolf (1892) and the sections of the Cordillera Oriental

Figaro 5.- Interpretation of the Andean region 'in Ecuador accord-
ecoording to Teohopp (1995)-

 

 

 

1

erer

u, -m 44.-

known Tertiary rocks on the Pacific coastal plains are of Eocene.
Oligocene. Miocene, and Pliocene ago. hey are dominantly marine
and are chiefly sandstone and shale. In general, Eocene and Oli-
gocene rocks make up most of the coastal range. except in the ex—
trene‘north of the province of Esmeraldas. where Oligocene and Mio-
cene formations are emosed at the surface.

b) M: Volcanic rocks of Tertiary and post-Ter-
tiary age form almost a continuous mantle over the Andean region.
Associated with the volcanics are Cretaceous sediments which may
be observed throughout the entire length. Intrusive rocks. which
authorities state are pre-Cretaceous in age. consist chiefly of
diorites and porphyrites (Rolf. 1892: Miller and Singewald. 1919).
It is in these ancient intrusives and associated intruded rocks
that nearly all of the mineralisation thus far known occurs.

c) W: The Oriente region belongs to the vast
geosyncline which extends from the eastern Andes of Venezuela to
Argentina. The sedimentary rocks. of this geosyncline in Ecuador.
range in age from Triassic to Recent. me Ecuadorean Santiago
marine formation of Triassic and Jurassic age has been reported
by TechOpp (1945, p. 21) to have characteristics for source rocks
of petroleum. And the Rape formation of Cretaceous age has been
compared to the Cogollo-Luna-Colon formation in Venezuela and
Villeta of Colombia. both productive petroliferous sense.

0 of the : - The purpose of this paper is to
present the results of my studies of the petroleum industry of

Ecuador. This paper points out principles which may provide
.. 4 ..

effective utilization of the oil and natural gas resources of Ecua-
dor. and recoumnends factors that should be considered in the proper
application of these principles.

The report is submitted in the hope that it will serve a use-
ful purpose in promoting general recognition of these principles
and the acceptance of these factors by the regulatory bodies of

Ecuador in administering conservation lass pertaining to oil pro—
duction.

 

Plate 1.- A monument erected over a point of the equator
line, in San Antonio de Pichincha, 25 kilometers to the

north of Quito.

 

 

 

 

figction n

PETROLEUM AND NATURAL GAS IN ECUADOR

W . Though oil and natural gas have been re-
ported from the eastern slopes of the Andes in the Oriente region
of Ecuador (Sinclair and ”lesson. 1927; TschOpp, 1945) and oil
springs in the coastal plain in the provinces of Esmeraldas and
Manabi. and in spite of efforts to encourage further emloration
in the province of E1 Oro (see Fig. 2), the only region of promise
thus far discovered and developed is that of the peninsula of Santa
Elena, about 64 miles west of Guayaquil in the Guayas province (see
1'13. 4).

The principal oil accumulation occurs. in Santa Elena. in
sandstones ranging in age from upper Cretaceous to lower Eocene.
The source of this oil is controversial and it is believed that
the oil itself is indigenous to the formation in which it now
occurs (Thomas. 1946 p. 20).

Sheppard (1937. p. 250) assumed that the oil had its origin
in the silty shales which make up the greater part of the Tertiary
sediments. Seepages of petroleum and productive sands range from
the upper Eocene to the Oligocene. and although it is'quite possible
that certain shales of the latter formation may have been the
cause of the oil in these beds. it is the opinion of Sheppard that
the majority of the oil occurrences which are found higher than
the Eocene have been occasioned entirely by upward seepage. or
migration, along Joint or fault planes.

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ecologiml .139 of t'te neuron :21 as an; -3101 cie clan-iota,
.Soutl.uee'.ern .cuédor. ’Aiter e. e Azrrd 1 j)

 

Geolggical features of Santa Elena Pegnflla: - The Santa

Elena region comprises plateaus. known locally as tablazos. and
rugged hills generally less than 1.000 feet.

Below this surface formation. composed of soft sedimentary
rocks of Qaeternary age. a greenish-grey sandstone is found which
passes laterally into sandy shales. and in certain localities
(Anson) the formation is saturated with a heavy, dark-colored oil.
These sandstones and shales are distorted and crushed which makes

it almost impossible to map the district satisfactorily. From

 

the viewpoint of petroleum it is important to note that the most
saturated oil sends in the Santa Elena region occur in these ex-
cessively shattered zones. and are often in close contact with
the igneous dyioes intruded into the Tertiary sediments.

The thickness of the Tertiary formation is not known. he
earth's crust has been broken up into innumerable independent
rock blocks. The main blocks are separated from one another by
large feailts (Report of the International Ecuadorean Petroleum
Company. 1948). These fault-blocks have been tilted in various
different directions and have undergone different vertical move-
ments. so that some have sunk down while others have been up-
heaved. This region has been complicated by igneous intrusions.
apparently dykes and sills. that have considerably baked and
silicified the adjoining rocks.

In general the geology of this area has been very difficult
to interpret owing to unconformities. faulting. intrusions. and
the lack of diagnostic fossils which have impeded a correct age

.. 7 -

determination of its geological formations.

Geologists of the Ecuador Oilfield Ltd. Company have divided
the peninsula into two areas: a) the north area and b) the south-
east area (Geological report submitted by the company to the Bur-
eau of Mines of Ecuador, 1940).

The north area (see rig. 4) has sporadic occurrences of

m
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J

dolerite - a volcanic rock - and chert. Ems beds in many places
dip very steeply as a result of past tremendous disturbances and

crushing forces. The region has a fossiliferous formation. the

 

‘t’iiln -.- .

gab-lame; of Quaternary age. Its thickness varies from 15 to 300
feet. Shallow wells drilled into the buried cherty low masses
have found commercial oil accumulation in fissures.

The south-east area has sandstones, conglomerates. and clay
of Eocene age. In this area are found the I'Seca Shales' and 'So—
corro Series” - productive formation in local areas - of the upper
locene age. These formations are covered mainly by deposits of Oli-
gocene sands and shales. Below the Socorro Series lies the "Clay
rabble Bed” and below that the Atlanta formation of shales and.
sandstones which is the deeper pay in the important Tigre field
area. The "Atlanta Sandstone" of the lower Eocene is over 3,000
feet thick, and wells usually penetrate this for 300 to 400 feet
before reaching oil.

The stratigraphic formations of the Santa Elena Peninsula
are shown in Table I, page 9.

Q1 Cmanieg gperatipg in Twp}: - The principal 011 com-

panies Operating in Ecuador are: The Anglo—Ecuadorean Oilfields,
.. a ..

 

 

Table I
STRATIGRLPHIC COLUMN 0? THE IOBMATIONS IN SANTA mm”

Geologic age Eggs gf fgfltiog Thickne gg fit.) @racter

)

- 11.1-1‘l"
. q<

 

Maa- Li.-

Pleistocene Tablasos 80 0 Calcareous
deposits 8:
gpsun.

Hiocene Progreso rm. - - Sandstone 1

(local) ‘

Oligocene Ancon rm. l+00 - Sandstone

(local) 4

Oligocene Oligocene Shales - 2850 Clay a shale

Eocene Seca Shalee 600 0 Clay with
concretions.

Eocene Socorro Series 1100 0 Clay as sand-
stone (Petrol-
iferous eerie).

Eocene Clay Pebble Bed 2200 100 Breccias 8.
clay

Eocene Atlanta Shale 2700 1000 Dark shale d:
quartsiferous
conglomerate.

Eocene Atlanta Sandstone 3570 2500 Hard sandstone
a. some clay
(Petroliferous
eerie .

Eocene San Jose Shale N00 1000 Hard. black
clay.

Eocene San Jose Sandstone - 314-60 Hard sandstone
a. some clay

(Shows oil traces)

 

(3) Taken from geological reports submitted to the Bureau of mines
and Petroleum of Ecuador by the Ecuador Oilfield Ltd. Company
and the International Ecuadorean Petroleum Company (Colon 1939.
pp. 112. 128) . and the Anglo Ecuadorean Oilfields Ltd. (Piedra

19‘”. p. 81)-
.- 9 -

 

Ltd., and The Ecuador Oilfields Ltd. which have a backing of Brit-
ish capital. The Shell Company of Ecuador and Esso Standard Oil
Company of Ecuador are American-owned concerns. The domestic com-
panies are: Gompania Petrolera Ecuatoriana. Carolina Oil Company,
Petropolis Oil Company, Concepcion Oil Company, Tompkins Concession,
and. lag. Hidalgo Concession (see Fig. 5).

Iith the exception of the Shell-Essa companies, which are

 

exploring in the Oriente region, and Compania Petrolera Ecuator-

iana. which is exploring in the lowlands of the El Oro province 2

 

in the southwestern part of the country. the principal activity

'1

is confined to the Santa Elena Peninsula in the Guayas province.

In 1937. the Shell Company of Ecuador obtained a concession
of 33,615,000 acres in the Oriente region of Ecuador. it the
end of 1948. the Eeso Standard Oil Company of Ecuador Joined in
oil exploration in the eastern region of Ecuador, where Shell has
been working for some time. Under the concession Shell and stand-
ard were authorized by the Ecuadorean Government to transfer be-
tween themselves any of their rights (The Oil and. Gas Journal.
vol. 47 n! 29. Nov. 18, 1943).

Tremendous difficulties and costly problems associated with
thick vegetation have been a serious retarding factor in develop-
ing the oil exploration in eastern Ecuador (Showler. 1947). The
Shell is carrying on .‘ limited geological and geOphysical survey
in this region. Since 1937. four wildca’ts have been completed,
two of which reached depths of 5,281 feet (Vuano s2 1) and 7,019
feet (Hacuma 39 1) (Moore 1947 p. 106). no tests were dry. The

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p 1 . . “' :

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Figure 5.- Official flap showing :Le concessions Lrnnt d Ly tic
Ecuadorean Lovernnent to the different oil comfanico (After {iedra,

124z u. 1%)

 

 

actual exploration for oil in this region is extremely difficult
and results may be slow in materializing. but the outlook for
possible large production is more favorable than in the already
producing region of Santa Elena. If and when production comes
about. it will be accompanied by improved transportation facili-
ties that will Open the way for general economic development of
the region.

During 1947, the International Petroleum Company completed
its extensive search for oil in the coastal regions of Ecuador in
the provinces of Gnayas. flanabi and Esmeraldas. In ten years of
exploration the company drilled 20 wildcats. two of which reached
depths of 13,205 feet (Badada :2 1). which is the deepest well
drilled in South America, and 10,485 feet (Rodeo s9- 2) located in
the hauls-Guayas concession of the Guayas province (Piedra. 1947
p. 104). All tests were dry.

The Anglo-Ecuadorean is Ecuador's largest oil producer.
From 1935 to the present, shallow and deep drilling and deveIOp-
ment of the important Atlanta Sandstone formation at about 4,200
feet, have lsspt Anglo-Ecuadorean's yearly production at about
2,000,000 barrels. This company has a refinery, built in the
north side of the peninsula at La Libertad. with a daily capacity
of 2.700 barrels.

The Ecuador Oilfields Ltd. is the second largest producer
of the country. This company discovered the important field. El
Tigre. situated near the town of Santa Elena. Part of the Atlanta

sand oil sons in its Tigre field has been developed into produc-

-11..

 

 

tion at the rate of 1.400 barrels per day. The company has a small
refinery at Cemtivo. near La Libertad, with a daily capacity of
500 barrels. The company manufactures gasoline, naptha. kerosene,
diesel oil and residual fuel.

The domestic companies are unimportant because of their in-
significant production.

Emg g1 Production: - Petroleum in Ecuador is locally
important and of unusual interest because the oil seepages of the
Santa Elena peninsula seem to be the locality of the first dis—
covery of petroleum in South America. The petroleum workings are
of great antiquity. There is evidence for the belief that they
were known to the Indians and later Operated by the early Span-
iards about 1500. In 1700 oil was reported fras dng pits at Santa
Elena (Eager. 1939 p. 30). In 1917-1922 the annual output ranged
from 50,000 to 60,000 barrels, all derived from shallow pits. In
1923. a 45-barrel well was completed and the annual production
rose to 87,000 barrels. At that time numerous hand-dug pits were
made in San Lorenzo (in the Santa Elena region), the pits being
grouped closely together. and the majority of these started in the
Quaternary surface rocks. The pits were excavated to a depth of
15 to 50 feet. At the time when the pits of this area were in
full operation (1926) the annual output was 350,000 barrels. The
low costs of labor and production. and the steady narlset made this
business very profitable in those days. However, after heavy rains
in the years 1925-1926, these pits were completely flooded and the
maderity were mined and abandoned. In 1928, deeper drilling,

- 12 -

>WF

 

11?». “.K

 

usually to 1500-2500 feet. showed other producing areas and zones
and the output was 1,000,000 barrels. In 1937. it was 2,000,000
barrels. (Thomas. 1946 p. 26). enrlng 1945. a soc-barrel well was
completed. at 4200 feet in the northern part of El Tigre field.

or Ecuador's total production in 1946 (about 2,322,603 barrels)
a single coupany, the Angloquadorean. accounted for almost 75%
of the total production. The company's annual production in 1946
was reported to be 1,673,915 barrels. Of this company's production,
about 1,240,779 barrels were exported to Argentina and Uruguay,
and. the rest was refined and marketed in Ecuador (see Tables II
and III).

Ecuador's cumulative production at the end of 1947, all
from the Semta Elena peninsula. has been reported (Weeks, 1948
p. 1093) to be about 41,800,000 barrels. The annual production
in the same year was 2,281,000 barrels (Egloff, 1948 p. 263).

of odnotionx - Shallow production to depths of
laoo'rect. and of relatively minor importance. is obtained by
digging by hand or by drilling with cable tools at 'El Tambo,
Gmtivo. Carolina, and Santa Rita fields in the peninsula. The
shallow production is obtained from Quaternary to upper Eocene
beds (Socorro Series). (see n... 2).

The deeper production, to depths of 5000 feet. is the more
important and is drilled with hydraulic-rotary system at Con-
cepcion, Anson, and Tigre fields. nose wells are producing from
theAtlanta Sandstone formation of lower Eocene age (see Plate 3).

The oil which is produced from both the shallow and from

-13..

1mm“ 5 -4

 

 

 

 

 

Plate 2.- A cable tool for shallow wells
Commonly used in Cautivo (Le Liberted).

 

Plate 5.- A standard rotary drilling machine
used in deep wells in the Tigre field (Santa
Elena), Ecuador.

 

 

flame of field. glowing M

Table L;

SURVEY or ECUADOR on. FIELDS (1“)

roduci

wells well; do the ft

 

 

Ancon 39 hlh 1200-3800
"Cautivo 28 500-1200
Carolina 15 30-600
Concepcion 10 3000-14000
El Tambo 6 1200
Santa Rita 3’4 500-1200
Tigre L0 1 2350-1550
W 1&9 512
lemm%::§o 92%,, ‘ pflaosggsgg
35,000,000

m.
Production

bbl

“750
30
95

30

10
165
320
6000
Ancon

Tigre
Total

£13,
A.P.I.

36-h].
35
13—23
38
39
23

39

 

 

(14) Taken from The 011 and. Gas Journal. Doc. 28 19%. Vol. 148. p- 191.

-14..

[1117'- w. <M

 

 

Plate 4.- The Scuador Oilfields Ltd. Co.
in La Libertad, Ecuador. In the distance
can be seen the Eggtilla of Santa Elana.

 

Plate 5.- Tank for crude oil (50,000 bbl.)
La Libsrtad. Ecuador. 011 tank is without
sand fire wall to prevent loss of oil or
spread of fire in case of accidental break.

 

 

the deep wells, of the Santa Elena region of Ecuador. varies in
color from black or brownish-green to green color. Although mixed-
base types of oil occur. the majority fall into asphaltic-base
oil and paraffin-base 011(5). he specific gravity of the Ecua—
dorean oils range from 18° to fl° 1.3.1.“) (see {cable 11).
Although the gravities of the oils derived from the respect-
ive deep and shallow wells of the Santa Elena fluctuate between
certain limits there are always slight differences in the oils
from different wells. even though the wells are close together.
i'he depth factor and more probably the phenomenon of faulting
account for gravitational differences and paraffinic quality in

the oil obtained from the same drilling area.

(5) m is the predominating residual element held in solution in
a petroleum. Petroleums are generally classified as to their
predominating bases. his. the four principal divisions of
crude oils are those of paraffin base. asphaltic base. napthen-
ic base. and mind base where both asphalt and paraffin quali-
ties are included.

(6) W is the relation the fluid bears by weight to

the same volume of water. later has a specific gravity of 1.

As petroleum is lighter than water its specific gravity is ex-

pressed by decimals less than unity. Gravity of crude oil is

determined with a hydrometer. The Wdrcmeter. invented by

Emma. is a glass column marked with graduations from 10 to

100. The scale bears an inverse ratio to the specific gravity

scale. as is indicated in the degrees. which permits the trans-

lation of name gravity to specific gravity. [hen floated in

pure water. the Beans hydrometer indicates 10 Bmme. while the
specific gravity scale reads 1000. The modulus 140 serves for
liquids lighter than water. while a modulus of 145 is employed
for liquids heavier than water. The standard scale used in the

United States is called the LPJ. (American Petroleum Institute)

which is a variation of the Beans scale. using a modulus of
141.5 to specific gravity at 60°F.

- 140
“p' 3" ‘ ISO-Be.

-15..

 

T'I

 

‘V‘f‘k‘

 

 

3.5“”

‘- wd~e

m “I

 

 

 

rot-1
19M

 

fl sauna (M 11.91.93 ‘

3&o”?~3o”‘o¢b :.uun- 3.- ‘72

t l l

 

 

 

 

flfim;

 

 

 

Gripe. m
petal“

red-sun
h “I.

W

 

 

 

fiction 111

PRINCIPLES OF PETROLEUM CONSERVATION

A. General Considerations

laggtancg of congervipg mg; 011: - Crude oil is a natural
resource of great value. The mply now available is finite; it

cannot be used without being consumed. it the present time Ecuador
is depleting its reserves rapidly as is shown in figure 6.

The nation's known reserves of crude oil were estimated in
1944. by Petroleum Administration for Iar (Ropcrt of Subcommittee
concerning investigations overseas. 1944 p. 8) at about 45,000,000
barrels. Theoretically. if the rate of Ecuadorean production is
in excess of 2.000.000 barrels a year. the estimated known reserves
will be exhausted in about 22 years.

The question thus arises as to what should be done in order
to diminish the output of this product and thus mains petroleum
last as long as possible. since under tlm most favorable circum-
stances the period that it will be available will be very short
as compared with the life of the nation.

Iith the oil accumulation found in the Santa Elena penin-
sula. it seems certain that others will be discovered in the favor-
able sedimentary basins of the Esmeraldas and nanabi provinces as
yet undrilled on the coast of the country (see geological report
of the International Ecuadorean Petroleum Company concerning the
“Miners Concession '. 1948). or in the promising Oriente region
* (TechOpp. 1945). But while mch finds may be made effective. we

 

 

120
110
W
90
so
70
60
,0
ho Proved and indicated reserve as of
January 19% 3 99,000,000 barrels
’0 Crude l roductiont
2° Churcnt daily average: ‘ 7.5
Enmtad yOEiI'd dlye EVE; 7e‘
Estimated ye are total: 2.706
10 (In thousands of barrels)
a A

 

   

 

 

1925 as at we: use assets

Figure 6.- Graph showing prediction of petroleum in Emadcr.

1925-1916. (Data frca Ecmg Pegglerg'.
vol. 1, N2 2, p. 58)

1.2““

Decaaber 19‘6.

can males no predictions regarding them.
as d ob ect of con e t on: - The conservation
policy according to Pogue (1942. p. 60) is:
“to beep crude oil flowing to the consumer at low prices

as long as possible, to encourage its wise use without im-

posing srbitrary restraints. and to rely upon the technolog-

ical ingenuity of future generations to solve the inevitable
problems of scarcity and high prices."

In view of the importance of crude oil. its efficient and
rational utilization is obviously necessary. conservation of pe-
troleum resources is necessary; first. to insure a continuous ade-
quate supply of petroleum products at reasonable cost; and second.
to protect property rights. J'or this reason. the economic phases
of the conservation problem are equally as important as the tech-
nical phases. and must be given adequate consideration in a con-

servation program.
28. Economics in conservation

We - Production of petroleum at a rate in excess
of marloet demand not only brings about appreciable physical waste,
but also results in serious disturbance of the industry's economy.

“afloat demand is defined by the Michigan Law. Act 61. P..l.
1939. as follows:

'(m) the words "market demand” as used herein shall be

‘ construed to mean the actual demand for oil from any parti-
cular pool or field for current requirements for current
consumption and use within or outside the state. together
with the demand for such amounts as are necessary for build-
ing up or maintaining reasonable storage reserves of oil or
the products thereof. or both such oil and products and shall
not be less than the actual purchasing commitments for oil
from such pool or field."

-17..

Storage for petroleum is expensive to build and to maintain,
and the cost of such storage in excess of that required for working
stocks is a burden which an industry. obliged to make its products
available at a reasonable price. should not be forced to carry.
Furthermore. oil is subject to deterioration in storage. and may
lose some valuable components through evaporation. Storage sub-
Jects the oil to the hazard of destruction by fire. In other words.
unnecessary storage on the surface is uneconomical and inefficient.
whereas the natural reservoirs provide the mast efficient storage
house for 011 until the oil is required for current consumption
needs. ’

Centre; of develonpent cogtgz - he economic pressure to con-
vert an oil reserve into capital encourages a policy of haste and
waste. Excessive capital expenditures. brought about by the drill-
ing of unnecessary wells. lead inevitably to strong pressure in
the way of excessive production rates. and frequently go against
the use of efficient producing practices.

Igportw of production gatg: - Crude petroleum has a ver-
lation of costs because of the varying nature of its occurrence.
Some oil fields are shallow. others deeper: some have thick sands
under high pressures and yield their oil easily. others are in
thick sands and give up their oil reluctantly. Naturally these
conditions are. not subject to control. There also exists an
additional factor: an unregulated rate of production that distorts
costs. creating low costs in the flush period and consequently
high costs thereafter.

-18..

The technology of conservation consists in the selection of
an Optimum producing and operating method which will reduce waste
of oil. The prevention of waste is accomplished by the applica-
tion of the most efficient production methods known and economic-
ally available. In the following section it will be shown that
the control of production rate is essential to any effective method
for improving production efficiency and. therefore. production
rate is perhaps the most important single factor which not be
regulated. The efficiency of a conservation program rests upon
the ability to control pr0perly the rate of production.

less!‘ of oil regerveg: - If the production rate must be con-
trolled in order to prevent waste. it follows that productive
capacity should always substantially exceed reasonable marIcet
demand. Therefore. there must be a reserve of oil capable of
supplying the merlnet demand within the range of the efficient pro-
duction rate. To meet fluctuations in the demand and to hedge
against the uncertainties of the discovery of new supplies. a
reserve somewhat larger than that required to achieve a physically
efficient rate of production should be maintained. It follows
that the discovery of new reserves becomes an essential part of

a comprehensive program of conservation.

-19..

gc ti on IV

TECHNOLOGY 01' PETROLEUM PRONCTION

1. Oil Beeervoirs

Introduction: - A preper understanding of the practical
principles of oil conservation must be founded men a knowledge
of the nature and behavior of oil reservoirs. and the manner in
which operating conditions influence the recovery of oil. Accord.-
ingly. a brief review of the pertinent composition. origin. and
technology of petroleum production is pro sented herein.

gmogitiog and origin of petroleum: - Petroleum is a mix-
ture of naturally occurring hydrocarbons which may assume either
the solid. liquid. or gaseous state. These three phases of petrol-
eum are transmutable. one into the others by the application of
moderate changes in temperature and pressure. Comonly. petroleum
occurs in the liquid phase. as an oil somewhat lighter and more
viscous than water. varying in color from black, through various
shades of brown and green. to a light amber. The naturally occurr-
ing solid forms of petroleum include the mineral waxes. paraffin.
and asphalt. Gaseous forms of petroleum. commonly called "natural
gas“. consist of mixtures of’hydrocarbon gases and vapors. the
more important of which are methane. ethane. prepane. butane. pen-
tens. and hexane. all of the paraffin series (on saw).

The origin of petroleum is still a subject of scientific
controversy between chemists and geologists. Some of the theories
seem to offer plausible explanations of the source and manner of

-m-

formation of specific deposits. but apparently none are of general
application.

The various theories dealing with the origin of petroleum are
classified into two groups: the so-called “inorganic" and I'organic"
theories. *' The former attempt to explain the formation of petrol-
sum as a result of geochemical reactions betwwn water or carbon
dioxide and various inorganic substances. such as carbides and car-
bonates of the metals. he organic theory is generally accepted
by most scientists as being the most logical one to explain the
origin of oil. This theory assumes that petroleum is a decomposi-
tion-product of vegetable and animal arganisms that existed with-
in certain periods of geologic time. -

tio and tion of e leum: - Whatever the
theory accepted in explanation of the origin of petroleum. the
rocks in which accumulation occurs are seldom those in which the
petroleum was formed. and accumulation is occasionally found in
formations stratigraphically unrelated with those containing the
parent material. as in the case of the Santa Elena oil (see page 6).

The question of migration of oil has proved to be a con-
troversial one among oil geologists. Some of them believe in
vertical and lateral migration and a minority believe that there
is practically no migration. except when a source bed is in direct
contact with the reservoir (ithy. 1929).

Migration has been subdivided by Clapp (1927) and Heald (1940)
into primary and secondary.-

Prinary migration is tln initial process of oil and gas

.. 21 -

movement by which the gas or fluid moves from the source rock: to
the reservoir rock. The process is selective in that the oil and
gas enter coarser and more porous rocks in preference to fine com-
pact ones.

Secondary migration is the movement of fluid within the
coarser rocks. by which the gas. oil. and water are separated and
come to rest in the reservoir rocks.

hgervoi; for mtgolm: - Oil and gas migrate from the
source rock. in which the present organic matter was deposited. to
the reservoir rocks in which they are accumlated and stored by
nature. Upward escape of the reservoir fluids is prevented by an
inpervious “cap rock". in essential condition in the formation
of a commercially important oil or gas accumulation. according to
Urea (1945. p. 13). is that there must be:

'a porous. fractured. cavernous or creviced stratum in

which the fluids may accumulate: and this must be overlain
by an impervious cap rock which prevents escape of the
fluids after their concentration and segregation have been
affected.“

The lithologic preperties of the reservoir rock are import-
ant in determining storage capacity. resistance to flow and the
rate at which fluids may enter the wells. file size and shape of
the pore spaces. their continuity and their percentage of the total
volume of the rock are also important factors.

Torces causing migration of petroleum tend to concentrate
oil and gas in the upper portion of folded porous strata. parti-
cularly in the crest of anticlines or domes or other structurally
high portions of the reservoir rock to which they have access.

-22..

mmence and distribution of oil: - Oil is commonly asso-
ciated with water and natural gas. Iater underlies the oil and

exerts a pressure on it (see rig. 7). Gas occurs dissolved in the
011 (see fig. 8) and. in some cases. as a gas cap overlying the
oil (see fig. 9). Both the pressure of the water and the expan-
sion of the gas provide energy for moving the oil through the sand
to the sell outlet and thence to the surface.

The amount of gas which can be dissolved in a certain
amount of oil depends chiefly upon the pressure under which the
oil and gas are confined. Under the pressure and temperature of
the reservoir. all the gas associated with the oil may be in
solution. on the other hand. more gas may be associated with
the oil than the oil can dissolve: in this case the excess gas ‘
accumlation forms a gas cap. is the pressure in an oil reservoir
is lowered. oil saturated with gas releases gas from solution.

The gas also has additional qualities. Its presence in
solution renders the oil far more liquid than the oil we see above
ground. In addition dissolved gas lessens the tendency of the
oil to stick to grains of sand. It follows that an oil pool
should be so managed that the maximum utilization shall be made
of the reservoir energy and of the presence of the gas itself.
Hence. production should be restricted to a rate that will re-
strain the gas from coming out of solution in the reservoir and
will permit the oil to be replaced by water (rig. 11 and 12).
Optimum recovery of oil depends on a production rate that is
regulated to conform with engineering principles rather than with

.. 23 ..

 

 

Fig. 7 - Hater drive
type of oil reservoir
(water under oil)

 

 

 

 

 

 

Fig. 8 - Dissolved
gas drive

(gas in solution with
oil)

 

 

 

 

 

 

 

Fig. 9 - Gas-cap
drive
(gas over oil)

 

 

 

 

Fig. 10 - Gravitation-
al segregation
(gas. oil and water)

 

 

 

 

Figures 7-lC.-Typee of drive under which oil is produced

the dictates of economic supply and demand.

we; of drive undo; which oil 1; produce : - Regardless of
the geology of a particular reservoir. two major conditions are
necessary for the production of oil: (a) the concentration of oil
in the pore space of the rock must be high enough to permit the
movement of oil in preference to. or at least along with. other
fluids (Uren. 1946 p. is); and (b) energy must be available to
move the oil from the reservoir into the sell outlets through
which the oil is recovered.

011. as it is produced. is displaced in the reservoir prin-
cipally by water or gas. The nature of the displacing medium and
the mechanism of its action upon the oil largely determine the amount
of oil recovery. Accordingly it is convenient to classify oil re-
servoirs according to the type of drive. or the mechanism by which
the oil is displaced. Naturally. few oil fields operate under a
single type of drive. and usually all of these mechanisms play some
part in the production from most fields.

According to the type of drive. oil reservoirs have been
classified by the Central Committee on Drilling and Production
Practice (1942. p. 20) as: (a) water drive. (b) dissolved-gas
drive. (c) gash-cap drive. and (a) gravitational segregation.

a) m: In the water drive, oil is displaced by
water. 'ater is a more efficient displacing fluid than gas in
that it is denser and adheres to particles of sand. forcing oil
from the pores. for this reason a properly controlled water drive
is one of the best means available for the extraction of oil. 1'0

-24-

secure the greatest ultimate recovery of oil requires restricting
the field's producing rate to hep pace with the pressure of the
expelling water. A low rate of production is usually necessary
for utilization of a potential water drive (see fig. 7).

A restricted rate of oil production from an oil field per-
mite an even rise of water into the reservoir body. he water
in its slow movement from its own porous rock bed will filter
through the oil-bearing rock. Its pressure will reach into nooks
and crannies. slowly flushing the oil from the rock pores. driving
it ahead toward the well Opening.

If the oil well is Operated at too high a rate. gas separates
from the gas-oil mixture and forms a cap in the dome of the reser-
voir. lhen gas separates from oil. the oil becomes heavier. less
fluid. slower flowing. and less capable of draining. In such case
the gas escapes out the tubing of the well. leaving more of the
oil clinging in the rock pores. lost. and wasted underground.

b) W: In the dissolved-gas drive. gas es-
capes from solution within the oil upon reduction of pressure and
expels the oil from the sand. A unique feature of this type of
drive is that the displacing gas is liberated from the oil itself.
and forms throughout the oil sons. The gas. when it first appears.
exists as isolated bubbles throughout the pores of the sand. held
immobile by capillarity forces: and. therefore. it cannot flow to
the well. However. a comparatively small quantity of gas in the
pore spaces is sufficient to establish channels through which the
gas may flow. mice such channels have been established. a rapid

.. 25 ..

production of gas occurs. Dissolved-gas drive fields are charac-
terized by comparatively rapid decline in reservoir pressure through-
out the producing life of the field.and by a gas-oil ratio which
begins to increase early in the life of the field. It increases

at an accelerating rate. reaches a maximum. and thereafter declines
as the gas remaining in the reservoir is exhausted. Because gas

is a relatively inefficient medium for displacing oil from a partly
depleted oil sand. and because the amount of gas is limited to

that initially dissolved in the oil. the dissolved-gas drive gives
couparatively low oil recoveries (see fig. 8).

c) mzcg drive: - In the gas-cap drive. oil is displac-
ed by the overlying expanding free gas. In most cases the effi-
ciency of such a drive is less than that of an effective water
drive. but greater than that of a dissolved-gas drive. Drives of
this type often are brought about by pressure-maintenance opera-
tions (see Fig. 9).

d) ngitatigg gmtion: - Gravitational segregation.
which is the stratification of gas. oil. and water according to
their densities. is a factor which modifies all types of drive.
usually in such a manner as to improve efficiency. The effect of
gravitational segregation opposes the tendency of encroaching
water or gas to advance irregularly into the oil some and. hence.
reduces somewhat the harmful effects of coning. channeling, and
by-passing of the displacing fluid within the oil zone. The effect
of gravitational segregation is to drain the upper part of the pro-
ducing formations of some of the oil which otherwise would not be

.. 26 -

 

 

 

 

 

 

 

 

Figure 11. Too rapid rate of oil production pulls
the water into the bottom of well. and shuts out
the oil which is lighter than water.

 

Figure 12. The flow of oil and gas is not restricted
in this reservoir. (After Interstate Oil Compact
Commission. "Oil in.your future“ p. lfi)

recovered. m. oil replenishes the lower part of the producing
formations which have been partly depleted. and permits additional
oil to be recovered from the replenished section. Depending upon
the reservoir and the rate of production. the effect of gravita-
tional-segregation may be either insignificant or highly important.
Cooperative’ly permeable producing formations. intercommunicating
freely. coupled with a reasonably slow rate of withdrawal. are

essential to effective gravitational segregation (see l‘ig. 10).
28. Factors Affecting Recovery

Qontro]I of factogg gfectigg recovegy: - Ihe recovery obtain-
able from an oil reservoir depends not only upon the nature of the

reservoir. but also upon the manner in which the reservoir is de-

veloped and operated. l'or this reason it becomes important. in a

study of petroleum conservation. to inquire into the factors which
control the recovery of oil. these factors are:

[1131: here is a group of uncontrollable factors. such as
the geological and physical prepertiee of the reservoir and of the
fluids themselves. These factors determine what sources of energy
are available to produce the oil. and the effectiveness with which
the oil can be produced. Among the more important of these are:
(a) the general geology of the area in which the field is located
that influences the potency of the ‘water drive. which may act on
the field: (b) the amount of oil and gas in the reservoir: (c) the

nature of the reservoir rock. its porosity. permeability. uniform-

-27-

ity. and the amount of water retained in the oil and gas sands:
and (d) the pmsical properties of the oil and gas. particularly
the viscosity. since a highly viscous oil is much more difficult
to extract than a light oil.

$9.22.: there (are the factors involving the develOpment of
the field. which. of course. can be controlled. Of these. well
spacing. well completion practice. and the possible use of pressure
maintenance and secondary recovery are particularly important.
These are discussed later in more detail.

M: There are the factors which can be controlled during
the production of the field. in some degree at least. Discussion
of the most important of these factors follows.

gt; of productiogz - A major objective of all efficient
production practice is to produce oil under the most efficient
type of drive. he most effective method of control is regulation
of the rate of production. In many fields a sufficiently low rate
of withdrawal permits a water drive to be effective. whereas. at
higher rates. it would not be effective. Even in the absence of
any effective water drive. a low rate of flow is desirable. inas-
much as it may bring about a desirable gravitational segregation
of the oil and of the gas released from solution. tending to con-
vert a dissolved-gas drive into a more efficient gas-cap drive.
file extent to which recovery can be increased‘by maintaining a
proper or optimum rate of production depends. of course. upon the
nature of the field.

hogtion of Etc; g9, 53: - Careful regulations of gas
- m - r

and water'production are necessary for adequate control of oil
reservoirs and. hence. of the efficiency of oil extraction.

Production of excessive quantities of gas has three possible
effects won an oil reservoir: first. the rapid exhaustion of the
pressure: second. a reduction in the size of any gas cap which
may exist. causing oil to migrate into the area formerly occupied
by the gas and to soak up into dry sands - from which a substantial
part of the oil cannot be recovered - : and third. undesirable
changes in the physical properties of the oil.

In certain water-drive fields having limited water. the pro-
duction of excessive quantities of water may reduce the effective-
ness of the water drive. may accelerate the reservoir-pressure-de-
cline. and may even result in the production of the remaining oil
by the less efficient dissolved—gas drive. However. there may be
circumstances under which production of water. as a practical matter.
cannot be controlled. and where such water production is not parti-
cularly harmful. The effect of water production upon the recovery
of oil must be carefully investigated. and such remedial measures
as may be necessary and practical should be employed.

In searching for methods by which to control water and gas
production. it is well to bear in mind the limitations imposed by
the prevailing reservoir conditions. The relative production of
the several fluids from any rock is controlled by the concentration
of the various fluids present in the pores of the rock. and by the
viscosities of the fluids. fines are affected by the entire pro-
ducing history of the reservoir. and are not subject to substantial

.. 29 .. ’

modification by any Operation conducted within the well bore. Ac-
cordingly. if high gas—oil ratio. or high water production. is due
to absorption of oil by the sand. the condition cannot be corrected
by mechanical means. It should be remembered. however. that proper
control of the reservoir may prevent absorption. However. excessive
water or gas production may be due to the entrance of water or gas
through only a portion of the sand open to the well. and in this
case the condition can be remedied by shutting of that portion of
the sand. throudi which the water or gas is flowing.

1211. emission pmtigg: - Numerous methods have been de-
vised for preventing water intrusion (oil-well cementing. oil-well
shooting. acidisation. gun perforating. etc.) and for plugging back
wells with cement to shut out bottom water. (Brantly. 1940 p. 116:
Millikan. 1940 p. 251: Suman. 1940 p. 160: Uren. 1946 p. 559). i'he
success of any of these practices depends primarily on proper con.-
ditioning of the well for the Job and on using the method most suit-
able for conditions in the well.

Preper practice in handling multiple producing zones in the
same field is important. Usually. each producing some should be
regarded as a separate reservoir. and controlled as such in order
to obtain the maximum economical recovery (Bonnet. 1942 p. 9).
he Opening of multiple producing zones into a single flow string
deprives the OperatOr of an Opportunity to control the reservoir
behavior of any sons; hence. such practice usually is to be con-
demned as being potentially wasteful (Alcorn. 1942 p. 18: Lewis.
1941 p. 52; Uren. rob” 1944 p. as).

som-

Several satisfactory methods are available for handling
multisone reservoirs. and in most cases one of these methods pro-
vides for the efficient and economical production of tin field.
These are: (a) dual completions where mechanically feasible. pro-
viding for the separate production of two zones through separate
flow strings of a single well: (b) successive production of the
several zones. accomplished by recompletion of wells in a producing
some after the exhaustion of the sons in which the well was com-
plated originally: and (c) drilling separate wells to each some.
or course. if any of the zones are not sufficiently permeable to
permit completion of a commercial well. sufficient pay section
must be included in each completion to support production at an
economical rate.

If possible. all the operators in each field should agree
upon the promising intervals to be separately maintained. and the
casing and water-exclusion program necessary to accomplish it. A
uniform program is advisable to prevent possible interconnunica-
tion of fluids from some to zone through differently cased wells.
According to Uren (l‘eb.. 1944 p. 82: 1946 p. 86) this is parti-
cularly important in the vicinity of actively encroaching edge 7
water which might develOp troublesome water incursion in “go wells.
to the detriment of continued production from other oil-yielding
strata in the same producing interval.

Me of develwntx - Under competitive conditions. there
are powerful incentives which compel the operator to drill and pro-
duce his wells as rapidly as possible. Manama ultimate recovery

-31-

is secured by prompt and complete development of wells especially
when the field is procbiced under water drive or gas drive. Where
expulsion of oil from the reservoir rock is primarily by gas ex-
pansion. the early wells enJoy the advantages of high reservoir
presnre and greater production time. and their initial and ul-
timate productions are substantially greater than those of later
drilled sells. In unrestricted fields (Uren. Jan.. 1944). delay
of even a few months may mean substantial losses for the later

drilled wells.
0. Secondary Methods for Increasing Oil Becovery

39¢th - Secondary recovery has been defined by forrey
(19”. Fe 289) 8.8

“the application of various methods and processes for
artificially increasing the production of oil.“

'I'he two most commonly employed secondary recovery methods
are rater-flooding and gas-repressuring. Closely allied to gas-
repressuring are pressure maintenance and crude stabilisation.

W: - Under certain conditions. water-flooding
is the most efficient method devised for increasing oil recovery.
and in some instances effective water-flooding results in better
recovery than is obtained by natural flow or pumping.

Intentional water-flooding should be clearly differentiated
from natural water-flooding. or water encroachment. in that water
is introduced into the send by artificial means. Under conditions
of efficient production control. uniform water encroachment tends
to maintain the bottom-hole pressure of the field. thereby prolong-

.. 32 ..

ing the flowing life of the wells as well as increasing oil re-
covery by the flushing action of the water.

i'he most successful results that can be realized from water-
flooding naturally will be obtained where the producing formation
is a continuous and uniform body. Marked variations in porosity
and permeability. in thickness. and in shale breaks will be re-
sponsible for irregular flooding action. he presence of appreci-
able quantities of water in the producing formation is unfavorable
for successful water-flooding. since the water will reduce the oil
content of the sand and the excess water endangers the effective-‘
ness of the water drive. In addition to increasing recovery. water-
flooding has been adapted as a satisfactory method for the dis-
posal of salt water.

W: - Gas-repressuring for increasing oil re-
covery has wider application than water-flooding. nany of the
geologic factors that must be considered in water-flooding opera-
tions. and espedially the geologic structure of the field. have
equal importancd in gas-repressuring. although their actual effect
on the success or failure of either method may be quite different.

Gas-repressuring is useful under the following conditions:
(a) In fields which have no active water drive. in order to avoid
production by the inefficient mechanism of a dissolved-gas drive.
(b) In fields with potentially active water drive. vhich fields.
for various reasons. must be produced faster than the rate at which
the water drive is effective. (c) In fields with a large gas-cap
in which the gas-oil ratio cannot be controlled effectively by

-33..

mechanical means. to prevent migration of oil into a contracting
gas cap. And ((1) in areas where conservation of gas for future
use is economical.

Mom mini-eggs: - Pressure maintenance differs from
repressuring or pressure restoration in that gas is returned to
the reservoir during the primary production of the field. line
term pressure maintenance refers only to supplying energ artifi-
cially in order to maintain pressure.

Pressure maintenance may be commenced shortly after the dis-
covery of a field. This method is particularly adapted to deep
fields where the pumping of the wells. after natural production by
flowing has ceased. presents a serious production problem.

Pressure maintenance has a most beneficial effect on retard:-
ing water encroachment: and where gas pays are present in the
upper part of the sand. the movement of the oil into these barren
pus. should the gas be withdrawn. is definitely prevented. there-
by eliminating a loss that otherwise would certainly take place.
In addition to these protective effects. when the reservoir is de-
pleted of its oil content the field will still be a source of high-
pressure gas that will be available for marketing.

lresmre maintenance in gas-distillate fields is of the ut-
most importance. In fields of this type. the distillate original-
ly occurs in the reservoir entirely in the vapor state. is the
pressure declines. owing to the withdrawals of gas. the heavier
fractions will condense. wetting the grains of the sand. mid thus
be 1.... But. 1: the gas is returned to the reservoir and the

- 34 ..

pressure maintained. no condensation will take place. and by con-
tinued recycling of the gas. most of the distillate should be
recovered.

fitabilization of 9m : - Crude stabilisation is a controlled
evaporation of the mixture of gas and oil as it comes from the well.
by which all desirable fractions of the mixture are preserved and
held in the crude rather than partly wasted in the atmosphere.

Crude stabilization can be most effectively carried on in
connection with pressure maintenance. According to Bonnet (1938)
and Torrey (1940. p. 305). crude stabilisation results in the
recovery of up to 50 per cent of the lighter hydrocarbons as salable
products. that otherwise would be lost by evaporation. thereby in-
creasing the volume cf the crude produced. In addition. the main-
tenance of the specific gravity of the crude will provide a greater
return to the Operator in fields where the oil is sold on a gravity
scale.

I). Spacing of Oil and Gas Veils

MW: - Careful studies of the theoretical and
practical aspects of the well spacing indicate that. under the
efficient operating methods made possible by restricted prohction
rates. ultimate recovery is in many cases substantially independ-
ent of the number of the wells. mallet (1940. p. 37) reaches the
conclusion that from the energy standpoint the interval between
wells is of little consequence in its influence upon oil recovery.
Shatford and Crowley (1942. p. 79) conclude that well spacing is

.. 35 ..

solely a device to prevent waste of capital. not waste of oil.

Iells in a reservoir serve two important functions: (a) that
of providing conduits from the reservoir to the surface. and (b)
that of providing connections into a reservoir. This. information
essential to the efficient Operation of the reservoir may be ob-
tained.

The relation of well spacing to ultinte recovery depends
upon many factors. such as permeability. porosity. texture. degree
of cementation and other lithologic prOperties of reservoir rocks.
The geologic structure. drainage and the type of drive under which
the reservoir Operates is perhaps the most important.

uence of o c true and o ition
W: - Geologic structure influences oil and gas accumu-
lation and drainage in many ways and should be taken into account
in planning a develOpment program. Several different types of
geologic structure are productive of oil and gas. each of which
presents its own peculiar problems of well location and spacing.
Position on structure is also an important consideration: thus.
a prOperty situated at the crest of a structure may require a
different plan of deveIOpment than another on its flank near the
edge-water line.

An accumulation on domal or anticlinal structure. producing
under hydraulic control. if Operated as a unit. may yield a high
percentage recovery if exploited by a few widely spaced wells sit-
uated along the crest of the structure. 'ells in this position will
produce throughout the economic life of the field and. will not be

-36...

flooded _with edge-water until nearly all of the available 011 has
been produced.

In a field where oil is expelled from the reservoir rock by
gas pressure and the formation pressure declines as exploitation
proceeds. there is often a gas cap at the crest of the structure.
(see Hg. 9). If there is no primary gas cap at the structural
crest. one is likely to form as a result of depletion of the reser-
voir (see Pig. 11). In a gas-cap area. according to Uren (1946.

p. 74). wells should be widely spaced. if drilled at all. Pro-

‘ duction should be taken from down-dip walls. so situated that they
will drain as little gas as possible from the crestal area. lells
should be spaced in accordance with some uniform pattern that will
mahe approximately equal areas of reservoir rock tributary to each
well.

11;; Egg in fieldgunder water-drive or gas-m-drivg: -
In water-drive and in gas-cap-drive fields. and. likewise in second:-
ary recovery Operations. the oil is displaced by an advancing body
. of water or gas pressure. and the efficiency of extraction depends
upon the completeness with which the displacing fluid is made to
advance through all parts of the reservoir. Ihe problem in this
case is to control the direction and uniformity of advance of the
water or gas. in adequate number of prOperly located wells is es-
sential for control of the movement of the displacing fluids through
the reservoir.

'here the field is under hydraulic control and the reservoir
rock is highly permeable and continuity of pore spaces permits

- 37 .-

\

rapid equalization of pressures. wells may be widely spaced with-
out adversely influencing the ultimate recovery. Late completion
of wells will not greatly influence their initial production and
rate of prohction: however delay in drilling must diminish their
ultimate production. It has often been suggested (see page 36)
that. in such a reservoir. one well situated at the crest of the
structure would in time produce all of the drainable oil. Addi-
tional wells need be drilled only when competitive conditions exist
between different tracts producing from the same reservoir. or
where it is desired to produce at a more rapid rate than is possible
with a single well. here gas energy is furnishing the expulsive
force. the interval between wells may have an influence on the eff-
ectiveness of oil recovery as a result of inefficient application
of gas energy in moving oil through the reservoir rock. and this
may Operate disadvantageously in cases where the wells are widely
spaced. it points remote from the wells. where fluids are moving
slowly through the reservoir rock. gravitational force tends to
segregate the gas from the oil: thus. ge. may escape to the wells
through oil-drained spaces without doing useful work in moving oil.
Gas drainage of this sort any occasion serious wastage of reservoir
energy that could be largely avoided by closer spacing of wells
and rapid production of Oil.

n1; apacig in field; under dilgolved gatdrive: - It has
been demonstrated theoretically that in the dissolved gas-drive
type of field. if production is carried on for an indefinitely long
time. recovery is independent of well spacing over the range of

.. 33 ..

spacing ordinarily employed in practice. However. the recovery
at some economic limit of production rate may vary with well spac-
ing. and it is probable that. if economic factors are introduced
into the problem. recovery may depend in some degree upon well
81083136.

Under unrestricted flow. or under a preration plan which
places emphasis upon number of wells or upon well potentials. a
given tract will recover more with close spacing than will similar
tracts with wider spacing. ihe greater recovery with close spacing
is due usually to the fact that the closely spaced areas produce
oil more rapidly and. through drainage from other tracts. obtain
a greater share of the total production than the more widely spaced '
areas.

W: - Under certain conditions. not
often encountered. well spacing may have a great effect upon recov-
ery. Usually these conditions arise when asphalt. paraffin. or
chemical deposits plug the sand for so great a distance around the
well that they cannot be cleaned out. High rate of production
causes release of gas from solution. a lowering in the tenperature
around the well. an excessive pressure gradient in the neighbor-
hood of the well. i'hese combine to bring about these undesirable

conditions which cause a sealing off of productive areas.

1. Sunny of Good h-actices in ktraction of Oil

gagging! fog good pmticg in all nacipg may be stated

as fall ows:

-39..

a.“ The drilling of sufficient wells and test-holes to furne-
ish adequate information of the size and nature of the
reservoir; and.

b. The drilling of sufficient wells and in such locations

as will adequately drain the reservoir in an economical
manner.

Efficient production methods can be achieved by:

a. Drilling of the necessary mmber of prcperly located
wells.

b. PrOper well completion and maintenance of wells in
prcper repair.

0. tell completion providing for separate control of mul-
tiple producing zones.

d. Production of the wells at such rate as to prevent the
escape of excessive gases.

e. Production of the wells in a manner so as to prevent
the production of excessive water and to prevent the
trmping of oil by channeling.

f. Prevention of migration of oil into gas zones.

3. Application of secondary recovery and pressure main-

tenance methods where needed and where economically
feasible.

mum

CON SERVATI ON STANTES

Ad_x_nini§tr§tiog: - The legislatures of several states in North
America have recognised the fact that conservation statutes cannot
be self-administered (American Bar Association. 1939). They have
found it necessary to set up administrative agencies to enforce the
statutu and to promulgate necessary or convenient rules and regula-
tions designed to carry out the policies of the laws.

Most state proration laws are administered by an administra-
tive agency which has been set up and has been granted broad admin-
istrative powers. In most cases the official regulatory body is
assisted by an advisory board consisting of representatives of the
industry.,

In theory tin power of the regulatory body is defined by
statute. Ehey apparently define the powers of the regulatory bodies

with some precision. but the exercise of those powers is a matter

Of diam t1 no

inaction; of the ltate Eggnog bogey - the state regula—

toryabodies have authority with respect to: (a) restriction of flow:

(1)) balance at supply with market demand: (c) equitable apportion-

ment; and (d) regulation of oil-pool develOpment (King. Dec" 1948).
a) W: Under proration each flowing well is

assigned a daily quota of production or allowable. Usually the re-

striction is accomplished by introducing a "choice“ in the flow line

of the oil well or by enforcing shut-downs in certain fields for a

.. 41 -

I i
short period of time. In most states. wells having less than a cer-

tain minimum potential production.stripper wells. are exanpted from
all restrictions on production (see page 53).

Periodic tests enable the regulatory bodies to determine ex-
actly how the bottom-hole pressure and gas-oil ratio are holding
up under various conditions of restricted flow. It is also possible
to determine with a fair degree of accuracy the location and con-
tent of the oil-bearing formations and the surface condition in the
pool.

'me regulatory bodies thus have available all the data necess-
ary for determination of the rate of flow that will produce maxi-
mum utilization of the natural driving forces and oil.

b) Balancing £2.92}! with market demand: The proration laws
are not yet administered purely on an engineering basis. In most
states the exact amount of restriction on each pool is determined
by reference to the demand for crude oil (McKeithan. 19% p. 57).
This demand is determined in the first instance by asking the pur-
chasers of crude oil in each pool for monthly I'neminations". show-
ing the amount of crude Oil they will need during the ensuing month.
The regulatory bodies then check the sun totals of the nominations
for all pools aginst monthly estimates of demand and “advisory
quotas” prepared by the Bureau of Mines.

c) Eggitable apportionment: Having determined the amount of
production which shall be permitted in a pool. the next problan is
to apportion that production among the operators in the pool by
assigning an "allowable'l amount to each pool. In assigning such

- he ..

allowables the regulatory bodies have in consideration two factors:
first, to allot to every Operator in the field an equitable share of
the oil, preventing cross-drainage from one prcperty to another. and,
second, to maintain a production pattern which will permit maximum
utilization of the natural driving forces.

In the early days of proration the conservation authorities
attempted to treat each well alike; i.e.. each well was allowed to
produce the same amount of oil regardless of its potential; or. the
wells were classified according to their bottom-hole pressure, re-
gardless of the nature of the reservoir rock. its porosity and per-
meability. lach well in the same class was treated alike. Such
practices, naturally. put a premium on drilling as many wells as
possible.

The present practice is to base allowables on a combination
of wells and acreage. the allowables are based upon an aptim
pattern of production preventing cross-drainage from one property
to another. The authorities have to calculate the number of acre-
feet of oil underlying each operator's plot, and apply some form-
ula which will produce: first. the maxim recovery for the pools
as a whole, and. second. the ultimate recovery by each operator of
approximately his share of the total oil in the pool.

d) tion of oi 001 me : In addition to cal-
culating marloet demand and assigning allowables. most state con-
servation mthorities have at least some authority to regulate
drilling and production practices.

Some of these regulations are merely for purposes of safety.
.. 43 ..

In Texas the conservation authorities control the drilling equip-
ment, maintain a constant guard against 'cratering", grant, as is
done in Michigan, drilling permits, and supervise the actual work
of bringing the well into production. In Arkansas they regulate
the building and use of storage facilities.

In Michigan and in other states the conservation authorities
have the power to regulate the number and the spacing of wells. pre-
venting in this way the enormous economic waste involved in ex-
cessive drilling, and so increasing ultimate recovery (Act 826, PJ.
1937; Jet 61. P4. 19:59).

Under any system of well spacing any tracts will obviously
contain less than the minimum acreage which the conservation author-
ities have prescribed for the drilling of a well. To resolve this
situation the authorities may require the Operators of two or more
small tracts to obtain their oil from a single-well-unit operation.
the authorities may also designate the tract on which the well is
to be drilled. In that case the Operators can share equitably the
benefits of production and costs.

Mt aeratig: - According to De Golyer (1942, p. 68) the
unit operation is defined as follows:

'... in a true unit Operation the various Operators in

' the field exchange their leaseholds for undivided interests
in the pool. and the pool is develOped and Operated by an
agent, trustee, or comittee representing all the holders

of undivided interests."

Unit Operation permits maximum utilization of reservoir energy
and the field is deve10ped in the best possible way. Stabler (1942.
p. 68) contends that the unit Operation results in substantially

.. 44 ..

lower production costs by lowering drilling costs. equipment and
auxiliary services. Stabler estimated that it would produce from
25 to so per cent greater recoveries than present methods of Opera-
tion.

The unit Operation or ”compulsory unitisation' has been des-
cribed by conservation authorities as the goal toward which the cone-
servation law is directed (German. 19:51). Nevertheless. to this
date such Operation has not been accepted in the United States. The
unit operation could be employed successfully in Ecuador. where an
entire pool is included. generally. in a single concession.

aggions of the Mg; rn congervation ptatuteg: - The principal
provisions of the modern conservation statutes relating to oil and
gas may be stated as follows:

a) lasts is prohibited. Such waste is defined in general and
in specific terms: usually there is included. as a specific defini-
tion of waste. the production of oil in excess of the reasonable
market demand.

b) An agency. such as a commission. is created with authority
to administer the act in the light of specific directions and limita-
tions and. subject thereto. to make such rules. regulations. and
orders as are reasonably necessary to prevent waste and otherwise
make the act effective.

c) Penalties are provided for in connection with violations
of the statute or of any rule. regulation. or order of the adminis—
trative agency.

d) Court review of the acts of the administrative agency is

.. 45 .. I

authorized specifically.

e) finally. the regulation contemplated by the statute is de-
signed to increase ultimate recovery. and to insure a continuous.
adequate supply of petroleum products at reasonable cost. Justified
in the public interest. Such regulations afford a reasonable method
of protecting and adjusting conflicting prcperty rights of individuals.

The statutes. regulations. and provisions dealing with conser-
vation discussed on the preceding pages have been taken from the
Michigan Conservation Law (Act 326. PJ. 1937 and Act 61. P.L. 1939)
and from a public hearing held by the Supervisor of tells and the
Advisory Board in the city of Lansing. on February 2. 1949. with
the purpose of hearing evidence and testimony pertaining to the

necessity of promulgating general regulations governing oil and gas

Operations in Michigan.

apgtiop I;

POOL' S ALLOCATION

A. Introduction

We have seen in the previous pages of this report (pages
19-43 ) that conservation of petroleum is the prime objective in
the control and. restriction of oil and gas production. To attain
the desired results. we have seen also in page 17. that it is not
only necessary to distribute production in a manner to permit the
greatest ultimate recovery. but also to limit current supply to
consumptive requirements. The most difficult problem involved is
the equitable distribution of restricted production to the various
pools and wells within the respective states.

he term "proration“ applies to the broad process of imposing
restrictions on production. whereas "allocation" applies to the
more specific procedure of distributing regulated production to wells
and pools within a state. Proration is essential to the attainment
ef effective conservation. and. as such. is the principal instrument
used in the prevention of waste and the promotion of good production
practices.

he need for proration has been demonstrated amply. and now
is accepted widely as necessary to the general welfare. To meet this
necessity a comprehensive plan of allocation is essential. However.
only in recent years have the principles of allocation been develop-
ed from a scientific and engineering standpoint. and these principles
have yet to be embodied firmly in the regulatory process. J‘or this

.. 47 ..

reason. prOper allocation of production is the most important and
commanding phase of the current prorati on problem.

In the following discussion on allocation practices. only a
brief outline of the principles which would provide a reasonable
basis for allocation within and among pools. will be attempted. It
is suggested that the excellent work which is done by the members
of the American Petroleum Institute (Special Study Committee on Well
Spacing and Allocation of Production) be followed closely while
applying the proration activities in Ecuador. Ehe work of the In-
terstate Oil Compact Commission of the United States in dissemina-
tion and coordination of information also should be of great value

and assistance in this effort.
3. Principles of Allocation 'ithin Pools

afgition: - Allocation within a pool is the division of
the oil currently produced from the pool among those persons hold-
ing interests in the pool. It consists in the determination of
the amount of oil which each prOperty will be allowed to produce
currently.

flincipleg: - The authorities of the state may be called
upon to regulate production of oil and gas for the purpose of pre-
venting waste and protecting property rights.

The preceding principles are too general to be of much as-
sistance in working out an allocation plan under a particular case
and for this reason more specific principles have been formulated:

a. Physical waste should be prevented (see page 49).

- 43 ..

b. Within reasonable limits. each Operator should have an
Opportunity. equal to that afforded other Operators. to
recover the equivalent of the amount of recoverable oil
underlying his property. 'I'he aim should be to prevent
reasonably avoidable drainage of oil and gas by the wells
of adJacent Operators.

c. Allocation of production within each pool should be based
on specific conditions in that pool. The producing life
of a prOperty depends partly Iqaon structural position. and
its effect on regional migration; this regional migration
must be taken into account in order to permit the prOperties
whose drainage is the result of unavoidable regional mi-
gration to recover oil at a faster rate than the prOperties
which ultimately benefit from such migration (see passes ).

(1. Under certain circumstances. some of these principles may

be incompatible with others. In such cases. compromise
or adjustment must be made (see page 53 ).

C. rectors Pertaining to Iaste Prevention

field gleg: - Rules should be established in each field to
provide for the safe drilling of wells and for prOper development
of the field. 'here the necessities of the case Justify the action.
certain equipment. such as blow-oat preventers. specifications for
the "drilling mud'. and any other special provisions necessary to
safe drilling Operations should be required.

Provisions should be made for the completion of wells in an
efficient manner. Strict regulation by the regulatory commission
of all the mechanical Operations and equipment used in drilling and
conpleting wells is impractical and undesirable. but the rules
should be sufficient to eliminate inefficient well completion due
to incompetence or negligence (see Plate 3). In some cases. prcper
well completion regulations can be enforced through penalties for
the production of excessive amounts of gas or water. Particular

-49..

 

Campamento Petrolffero de la "Anglo Ecuadorian Oilfields Ltd."
Ancdn, Peninsula de Santa E!ena. Provincia del Guagas.

Plate C.- A gusher. During the early development period. wells were
drilled in without any preparations for control to prevent waste. oil
pollution. or fire hazard. (Courtesy of the Mines and Petroleum Bureau

of Ecuador).

 

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31

attention should be given to the problem of well completion in fields
with multiple producing zones. in order that well-completion prac-
tice may provide for efficient control of the several producing zones.

W: - Drilling should be regulated in order to pro-
vide a proper number of wells and an efficient well-spacing pattern.
Oil well sites in Ecuador are arbitrarly located, and certain cue-
tus have been followed for years. Thus. a common interval between
wells in some fields of Santa Elena (Angle-Imadorean Oilfields. Ltd.
and lcuador Oilfields. Ltd. in 31 Eigre field) is 660 feet, but this
merely remlted from the fact that any well. according to the Iona—-
dorean regulations (Loy del Petroleo, hag. 6, 1937) has to be drilled
330 feet (100 meters) back from its boundary line (see l‘ig. 13).

The best method for regulating well spacing in a field order
appears to be that of fixing drilling units, or designated‘areas. up-
on which a single well is to be drilled. ms area of a unit should
be the maxim area which, in the light of all the pertinent econom-
ic and physical facts (see pp. 36-38 ), a single well can drain
efficiently.

In many fields there are tracts that are smaller than a prop—
er-sised drilling unit. In order to avoid the drilling of unnecess-
ary wells on small tracts. that have a right to a fair share of the
field's production. it is believed desirable to coordinate such
tracts with adjacent tracts in order to mine a drilling unit that
would permit efficient and economical development.

Ogtgol of gag prediction: - Control of excessive gas produc-
tion is urgently necessary for the prevention of waste. 1 common

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'8

no

is

1:

CI

practice in gas control is to fix a maximum gas allowable, deter-
mined .on the basis of a limiting gas-oil ratio which cannot be ex-
ceeded without penalty in the oil allowable. The limiting gas-oil
ratio should be adapted to the specific conditions of each field.

gontgo]I of late; productiog: - Excessive water production
suetimes may result in lower oil recovery by virtue of the fact
that the produced water cannot displace additional oil from the sand.
the effect of water production upon the reservoir behavior should
be investigated carefully: if there is likelihood that water produc-
tion is causing waste. the production of excessive quantities of
water should be prohibited.

file regulatory commissions, except in rare instances. have
not seen fit to control water production, possibly because control
is too complex or because specific cases of waste due to excessive
water production have not been forcibly called to their attention.
In some fields water production is a serious problem that needs
control. .

Eniformitz of Ethgmlgn- Excessive localized withdrawals
result in irregular encroachment or in causing the water or gas to
cone up; the result is by-passing or trapping of recoverable oil
in the reservoir. In the interest of conservation. such heavy with-
drawnls from small areas should be eliminated.

MW: - In some fields the recovery of oil
can be increased materially by returning gas or water to the reser-
voir. Usually these Operations can be conducted successfully only
on a field—wide basis. Regulatory commissions should encourage the

.. 51 .-

adaption of conservation measures of this type wherever they are
economically applicable.

Inasmuch as economic considerations dictate that most repres-
suring. pressure-maintenance, or secondary-recovery methods be under-
taloen cOOperatively by all producers in a field. a satisfactory agree-
ment among the producers is highly desirable in conducting these
Operations. If such an agreement cannot be obtained. the benefits
can be realised only by legally compelling disagreeing operators to
participate in the necessary Operations.

1 mi t o : - In the majority of the fields. efficient
Operation of the reservoir demands that the oil be displaced by an
injected water drive displacing oil @structure. an injected gas-cap
drive displacing oil. downstructure, or combination of these drives.
In any of these cases a regional migration of oil occurs. and some
properties are depleted of their recoverable oil before others.
his condition is desirable from the standpoint of preventing waste,
but the unequal life of the prochlcing prOperties leads to compli-
cations in deveIOping allocation methods that will please Operators.

he ultimate production that will be obtained by each prOperty
depends upon the producing life of the prOperty and. the rate of pro-
duction during the productive life of the property. Hence. the re-
coverycahbemadehighorlow, or the life canbemade long or short,
by the method of allocation.

If the allowable is so adjusted that each prOperty will ulti-
mately produce the equivalent of the recoverable oil underlying it,
many properties will suffer undue hardship by being assigned un-

-52..

reasonably low current allowables. Clearly, this situation calls
for compromise and adjustment. A just order would permit the prOp-
erties which are drained as a result of unavoidable regional mi-
gration to recover oil at a faster rate. The method by which this
is accomplished and its quantitative result met and can be deter-
mined only by examination of all the facts and circumstances of the

particular field in question.

1). Principles of Allocation Among Pools

general considerationgz - The problem of allocation among

peels has not received yet the intensive study that has been given
to other phases of the allocation problem.

In the present discussion it is assumed that the allowable
for the country will be fixed at a value substantially equal to the
reasonable market demand for the country. and the discussion will
be confined to the development of principles and procedure for dis-
tributing the allowable among the pools within the country.

unciplegz - The following principles should provide a
reasonable basis for allocation among pools:

a) fitgipper productig: Stripper pools (peels nearing the end
of their productive lives). which would ultimately yield
less oil due to'premature abandonment of wells if any re-
striction as to producing rate were imposed. should be ex-
empt from such restriction.

b) getglgtlon to pavegt wagte: Other pools should be restrict-
ed at least to a rate which will permit the use of the most

.. 53 ..

efficient producing practices.

It has been argued that there is an ”Optimum pro-
duction rate" at which each field will produce a maximum
amount of oil. It is doubtful that this is true. @0010-
gists and engineers have not yet deveIOped or determined
the Optimum rate with the accuracy required for allocation
purposes. It is true that a rate can be determined for
most fields at which waste would occur due to an excessive
production rate; but there is a wide range of rates in
which efficient Operation is possible, and within this
range it is not possible to select the exact point of max-
imum recovery, even if such a point exists.

Each field should be produced at a rate not to exceed
that which would bring the field up to the threshold of
waste. If this rate is more than the field's fair share
of the reasonable market demand, the rate should be re-
duced to that which would permit the field to produce only
its fair share.
gocgtion to gm; 9; peelg: The problem of distributing
the total state allowable among the pools is complicated
greatly by the facts that different pools produce different
grades of oil, and that all pools are not located sinilarly
with respect to whet and transportation facilities. Ibis.
it will be quite different to distribute the “allowables'
in the pools of the Santa llena region which is near to the
Pacific coast and the pepulated city of Guayaquil, than in

.. 54 ..

the pools (if oil is found) of the distant and uninhabited '
Oriente region.(7) ~

A practical approach to allocation of the state allow-
able on an equitable basis among pools would be to classify
the pools of the state according to a few groups of pools
producing similar grades of oil. For instance. the Ecua-
dor Oilfields. Ltd. . operating at Santa Elena. Ecuador. has
classified its oil production in three groups: light. med-
ium, and heavy oil. according to the density. The former
ranges from 36° to 39° grades l.1=.1.. the medium is of 28°
i.P.I.. and the heavy has 18° i.P.I. The allowable or the
state would be distributed among the groups of pools with
due consideration to the relative needs for the several
grades of oil.

d) Equitable allocation to each mo}: Having determined the
total allowable for a group of pools producing oil of simi-

lar grade. it becomes necessary to fix the allowable for

each pool in the group. In order that each pool may share

 

(7)

According to the Ecuadorean Hydrocarbon Laws. the state is sole
owner of mineral rights. Any person or company, foreign or na-
tional, can obtain a concession or a small pertenencia, provided
such a person or company has sufficient capital and the official
approval of the government. lhen oil is found. the land is
leased on a royalty basis. Our taxation is fixed according to
the distance between the oil well producers and. the nearest

port for its exportation. 'I‘he goverment receives from 11% to
5% of the value of the sale of the oil after deducting operating
expenses. In distances between 0 to 50 kilometers it receives
11% and this scale runs to 5% in distances of 600 kilometers or
more.

‘3- 55-

equitably in the allowable attributable to its group. the
recoverable oil reserves would provide a satisfactory pri-
ary standard for allocation among pools. It would be neces-
sary also to have in mind a reasonable adjustment of allow-
able. the Operating costs. in order to favor pools in which
develOpment and Operating costs are high. In making such
adjustment. appropriate factors such as depth may properly
be considered.

-56-

.—

gctiog n]

CONCLUSI DR S

we following conclusions have been formulated from the

studies upon which this paper is based:

1. Conservation of petroleum resources is necessary: first. to in-
sure a continuous. adequate supply of petroleum products at rea-
sonable cost: and second, to protect prOperty rights.

2. Oil produced in excess of reasonable marloet demand is oil wasted.

3. Production rate is one of the most important factors governing
oil recovery, and production at excessive rates commonly causes

waste.

4. 'aste also results frm the following causes:

as

b.

0e

0o
f.
8.
h.

DevelOpment of impr0per well-spacing patterns or with in-
proper woll density.

ImprOper well canpletion.

Improper production of ultiple producing zones.
wessive. localised withdrawals. resulting in irregular
encroachment of water or gas. or development of areas of
unduly low pressure.

Excessive production of water and gas.

Migration of oil into free gas zones.

Improper control of reservoir emery.

Failure to apply suitable methods of pressure maintenance
and secondary recovery where economically justified.

5. Authoritative regulation is needed to prevent waste.

6. Allocation of production among pools. and within a single pool.
should be on the basis of sound principles of law, economics,

and engineering.

-57-

cti
mommnons FOR ECUADOM OIL CONSERVATION

Conservation practices and legislation have been enacted in
the United States in the most important oil-producing states, such
as Arkansas. California, Kansas. Louisiana. Michigan, New Mexico,
Mahona. Tens. etc. All that need be done in Ecuador is to util-
ise the experience and progress which have been achieved in those
states. Invitations to engineers and geologists of recognized stand-
ing, but not directly associated with canpsnies operating in Ecuador
should be extended these men to rennin until a personnel of native
lcuadoreans were trained. to take over.

The success of conservation depends upon the application of

proved and studied principles.
A. taste Prevention

1. Regulation of production by government mthority for the preven-
tion of waste should be initiated.

2. lash oil reservoir should be controlled in such a manner as to
utilize to best advantage the natural agencies and sources of
energy by which oil is produced. To achieve this. a detailed
and continuous study of each reservoir should be made, beginning
with the early development of the pool.

3. A sound basis for gas conservation. adapted to the specific needs
of the individual oil fields. should be required.

4. Iater production should be controlled in those fields in which
water is an important source of reservoir energy, and in which
its production in excessive quantity would lead to waste. .

5. Pressure maintenance. repressuring. and other field-wide conser-
vation methods should be employed, whenever such methods are soo-
nomically applicable. '

1.

2.

3.

1.

1.

2.

B. Allocation Within Pools

Principles of allocation should be interpreted in a manner that
they may approach more closely the ideal of allowing each operan-
tor an equal opportunity to recover the equivalent of the recov-
erable oil which underlies his property: and to prevent reason-
ably avoidable drainage acrosss prOperty‘lines.

loll spacing should be controlled. It can be accomplished in
areas of subdivided ownership by voluntary or compulsory pool-
ing of adJacent tracts in order to permit wells to be drilled
in conformity with a prOper spacing pattern. The purposes of
this control are:

a. hotection of tracts whose recoverable reserves would not.
under a reasonable allocation formula. Justify the drilling
or ”11'.

b. Elimination of unnecessary wells. and adoption of more
efficient and economical well-spacing patterns.

c. Reduction of drilling hazards.
d. Simplification of administration.

Generally the allowable of a pool should be allocated to designated
areas or units. If there be more than one well on such a unit.

it may be necessary to distribute the unit allowable among the
wells on the designated area or unit in such a manner as to fix
definitely the allowable for each well.

0. Allocation Among Pools

i'he basic principles of allocation among pools should be ob-
served in order that all pools may produce at efficient rates.
and in order that each oil production unit may have its fair
share of the total allowable.

Do ”060”
Prosptly enact adequate conservation laws and set up the admin-
istrative machinery to carry them into effect.
the oils emortation should be controlled or limited in view of
its limited duration. l'urther exportation could be permitted
if additional oil were found in the country.

-59..

3. Orders establishing field rules and setting out a basis of

4.

6.

8.

allocation should include the following:

a. Field regulations governing the drilling and completion of
”llle

b. Specification of the location and spacing of wells and the
tolerances allowed therein.

c. Provision for penalties to be imposed on wells that produce
in such a nanner as to cause waste.

d. Provision for prevention of fires and pollution and danger
to, or destruction of. property or life.

e. A formula for distribution of the field allowable among
various units of production.

f. Provisions for testing wells in a specified manner in order
to determine:

(1) Factors necessary for the application of the alloca-
tion farmla.

(2) i'he amount of gas and water produced. in order to de-
termine whether or not the prescribed penalties are
mlimloe

(3) hat the well can produce its daily allowable.

Enact those laws which are most conducive to stimulating addition-
al exploration and development in Ecuador.

Encourage free competitive enterprise with tax reforms to provide
incentives for the risk of private capital in new ventures.

llaintain favorable conditions for foreign capital. Discourage
artificial restraints and restrictions. both political and pri-
vate, which deny full opportunity to participate beneficially

in the production and distribution of petroleum and petroleum
products.

Utilize the facilities of government and technical institutions
to promote study and research of the oil industry.

he formation of representative cooperative engineering associa-
tions or committees among directly interested operators of a
pool or concession should be encouraged. Such associations can
study a specific pool or pools. and can prepare and recommend
rules and regulations as my seem advisable. fhe formation of
such associations or comittees should be encouraged whether or

-60..

9.

10.

not the regulatory body includes technical staff engineers.

Ehe governmental regulatory body should employ. or have avail-
able for consultation, competent technical advisers. ~

the recomendations in this report concern the application of
basic principles only. Eor this reason no attempt is made here-
in to devise administration or to suggest organization of a gov-
ernmental office. Working within the framework of the principles
herein stated. operators and regulatory agencies should coOper-
ate in the deveIOpment of oil production. pr0cednres.’ and formulas
to enact technically competent and equitable conservation laws.

-61..

1.

2.

9.

10.

11.

12.

13.

§oction II

BIBLIOGRAPHY

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