Roughneck Mag

TNW: A New Way Forward for Producers with High Liabilities

By Katy Alderson

Challenging times very often lead to innovative solutions.   The collapse in energy prices during the last three years has hit Alberta hard.  Insolvent producers, inactive and abandoned wells, and the associated public liability, are significant and growing problems.  Meantime, however, Alberta is at the forefront of advancements in innovative technology which could provide the answer to the impending crisis the province faces.  New technology and approaches can improve the life of a well, maximize recovery, and reduce operating costs, whilst minimizing the effect on the environment.
One oil and gas services company, TNW Group, headquartered in the United Kingdom, says it has methods and technology to revolutionize the oil industry and bring hope for a new way forward.  The company specializes in enhanced oil recovery (EOR) from existing wells using innovative sonic well-cleaning technology and integrated well remediation services.  The technology, combined with bespoke [commissioned to a particular specification] chemistries designed for each well, significantly increases oil recovery with minimal investment, by improving the flow efficiency of the wellbore and surrounding reservoir. It not only cleans the wells of debris, but also accesses missed pay. The addition of vertical seismic profiling and the latest advancements in radial jetting means that it cannot only reclaim original oil production rates from inactive wells but also significantly increase production – so that wells are outputting at well over 200 per cent of pre-shut-in rates.
TNW Group believes it holds the answer for many struggling operators with high liabilities. This is because it is offering its ground-breaking services at no upfront cost to the operator, in return for a share of the increased production. On top of this, the company includes a provision that five per cent of the increased revenue goes into a fund designed to pay for future remediation of that well. Working closely with a provider of innovative bio-remediation solutions, TNW has designed a plan to ensure a sustainable future for the wells and protect the operator from future liabilities.

450,000 Alberta Wells Awaiting Abandonment

There are more than 450,000 oil and gas wells in Alberta; one for every 10 people. Economic pressures have led to thousands of these wells becoming inactive. Once an operator has finished actively producing from a well, it is required by the government to clean, cap and “reclaim” it (return the land to its original state). It is estimated that over 330,000 wells in Alberta either need to be cleaned up immediately, or will need to be abandoned in a few years. However, the cost of reclamation can range from $50,000 to millions of dollars per well. Taking into account the full accounting of clean-up liabilities, the majority of Alberta’s oil companies no longer have enough producing wells to finance the clean-up of their inactive ones.
As depressed commodity prices force operators into bankruptcy, abandoned wells then become the responsibility of the province and the Orphan Well Association — and ultimately the taxpayer. There are now 3,458 “orphan” wells on the orphan inventory, only 833 of which are currently under reclamation.

Spate of Bankruptcies Anticipated

The recent $235.0 million loan from the Alberta government will accelerate the clean-up, but will only pay for the clean-up of a third of its current inventory of inactive sites.  There are many more producers being forced into receivership by the Albert Energy Regulator (AER). The inventory is set to grow even higher, after the Alberta Court of Appeal upheld in April, 2017 an earlier ruling (Redwater Energy Case, May, 2016) that money raised by selling the assets of bankrupt energy producers should go to their creditors first before being used to clean up their well. There is a sense that this is just the beginning of a serious crisis.
The increasing problem of orphan wells has led the AER to introduce the Licensee Liability Rating (LLR) program which evaluates companies in terms of a Liability Management Rating (LMR); a comparison of assets with liabilities. The asset value is based on the company’s production and the liability value is based on the average cost to abandon a well multiplied by the number of wells owned by the company. Companies whose LMR falls below 1.0 faced forced receivership, whilst companies who wish to buy producing assets must demonstrate an LMR of 2.0 or higher.
Roughly two-thirds of companies licensed to operate in Alberta fall below this level. Cash-rich producers can post security with the AER to buy themselves some time to turn around their assets. However, ultimately, if a company wants to lower its LMR, it must transfer or abandon the assets that are producing the liabilities. This is a lose-lose situation for many producers as the cost of properly abandoning assets is often as much, if not more, than remediating the low-producing wells.
TNW Group say it has the answer. The company is offering a ‘third way’ to struggling oil producers in Alberta with a critically low LMR by remediating abandoned and low producing wells and making them profitable again.
According to Paul Landers, chair of TNW Group, the company has a suite of patented tools which are at the cutting edge of new approaches to oil recovery.  “We also have an integrated service capability which is a game-changer in the oil and gas industry. The science is there to do it but oil companies are up against it and can’t afford these new technologies. What we are saying is – we can clean these wells and get them producing again, and if the company can’t afford our services, we will do the work at our own cost and take our payment from the increased production.”
Landers concludes, “With more than 88,000 abandoned wells in Alberta, and counting, TNW is committed to giving some of these existing wells a new lease of life. There is so much recoverable oil and gas still in the ground – we believe it is wrong to leave it there. We are on a mission to find a new way forward which works for everyone. The company is dedicated to providing bespoke solutions for oilwell owners.”

For more information please contact Paul Landers,

Katy Alderson is a freelance writer and marketing maven, specializing in new downhole technologies and the latest innovations in EOR.   Katy lives in Wales, UK, but travels extensively and has a particular interest in Alberta, Canada.

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