The nature of United States domestic petroleum and natural gas production has changed over the years. Maturing production areas in the lower 48 states and the need to respond to shareholder expectations have resulted in major integrated petroleum companies shifting their exploration and production focus toward the offshore and foreign countries. Consequently, the role of the independent producer has become far more significant to domestic onshore petroleum production. For example, the independent share of the lower 48 states petroleum production increased from 45 percent in the mid-1980s to over 60 percent by 1995. Even more impressively, independent producers have been responsible for all of the major onshore discoveries since 1990.
The fundamental uniqueness of independent producers and their role in supplying the nation's energy must be recognized and addressed. There are thousands of independent oil and natural gas producers across the United States, and according to data from the Energy Information Administration (2006), approximately 15% of the nation's oil production comes from the well over 10,000 small producers; those U.S. companies producing less than or equal to 1000 BOEPD.
The price instability of the past four years demonstrates the scope of challenges faced by small producers. Low prices in 1998-99 resulted in the loss of 700,000 barrels per day in domestic production - largely from the permanent closure of marginal wells that become uneconomic at low prices. Cuts in capital investment led to higher oil and natural gas prices in 2000-2001. As the nation now grapples with questions of national security, it cannot afford further losses in domestic oil production and reduced domestic capital spending to find and produce natural gas. The United States needs to recognize and encourage the efforts of the small independent producer in dealing with the maturing nature of our domestic oil and gas resources. Technology to assist the small producer in developing mature resources is the primary focus of the RPSEA small producer program.
The Energy Policy Act requires that all awards under the Small Producer program element "shall be made to consortia consisting of small producers or organized primarily for the benefit of small producers." All solicitations issued will require that proposals be submitted by a consortium consisting of two or more entities participating in a proposal through prime contractor-subcontractor or other formalized relationship that ensures joint participation in the execution of the scope of work associated with an award. Consortia are highly encouraged to have a minimum of one small producing company participating with a simple partnering agreement. The primary focus of the program will be technology development in mature oil and gas fields with the objective of extending the life and ultimate recovery of these fields.
Small Producer Program Technology Themes
The Small Producer Program focuses on research that can benefit the small producer, a significant contributor to U.S. domestic production of oil and gas. The solicitations under the program have been aimed toward developing and proving the application of technologies that will increase the value of mature fields by:
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Reducing operating costs and improving margins;
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Decreasing the cost and environmental impact of additional development;
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Improving oil and gas recovery; and,
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Optimizing field management through the development of best practices and lower cost tools.
Small Producer Selection Process
Proposals submitted for the Small Producer Program are evaluated by the Small Producer Program Advisory Committee, consisting of representatives of small producers operating in various geographic areas, as well as academics and researchers with experience working with small producers on topics related to the program theme, currently Advancing Technology for Mature Fields. In addition to technical merit, alignment with program goals and capabilities of the proposer, the SPAC considers factors such as balance among technology time scales, diversity of technical approach and the geographic distribution of resources impacted when selecting projects intended to maximize the probability of meeting program goals.
