Shale Gas Optimization

To some, “optimization” may simply be a word to use when “better” won’t do. But to Ignacio Grossmann, professor of chemical engineering, optimization is the key to unlocking huge cost savings for shale gas companies, who often weather price volatility when a drop in crude oil market prices takes a toll on oil and gas production and distribution. While not without historic precedent, these ups and downs pose economic challenges.

Grossmann’s process engineering strategy, for which PITA provided seed funding, uses novel mathematical programming models to save companies money, time, and resources. Grossmann, along with his previous Ph.D. students Markus Drouven and Linlin Yang, and Universidad Nacional del Litoral Associate Professor Diego Cafaro, pioneered research in this area. They spent four years focused on the strategic planning, design, and development of the shale gas supply chain network, including water management in shale gas operations.

When world crude oil and domestic natural gas prices declined dramatically in 2015, threatening the profitability of many operators, it resulted in more than 65,000 layoffs throughout the industry, according to Forbes Energy. Grossmann and his team used their optimization techniques to try to reverse this trend by helping companies make better investment decisions that relate to the planning of drilling shale gas wells. As part of this research, the group determined the most cost-effective drilling and completions schedule for a shale gas development area in Southwestern Pennsylvania that contained over 18 well sites and 40 prospective wells. This research was published in the AIChE Journal in 2016.

“In this project, we used novel mathematical models [known as mixed-integer programs] and related optimization software to rigorously evaluate millions of possible development strategies and then provide clear recommendations for action,” explains Grossmann. “It is very exciting for us and our industry collaborators because there is currently no similar computational strategy for planning in the shale gas industry.”

Currently, spreadsheets are used to plan out decisions, such as when and where wells should be drilled. Companies do not have the capabilities to use strategic computer tools like the ones that Grossmann’s group uses to make long-term development and planning decisions.

Using these optimization techniques, Grossmann and his group were able to increase the overall gas production and profit while decreasing the number of wells needed. Their recommendations also improve equipment utilization for pipelines and compressors.

“There is a lot of pressure on upstream companies [focused on production and exploration] to remain profitable when the price of gas decreases. This means that the role of optimization becomes even more important to help make better economic decisions for these companies and our communities at-large,” says Grossmann. “We hope that the research we are doing will help grow businesses and promote growth in regions that rely on shale gas production as an important economic driver.”

For this project, Grossmann and his team had the unique experience of being able to work with Pittsburgh-based EQT Corporation, an industry collaborator and largest producer of natural gas in the county

Grossmann emphasizes that this work could not have been achieved without PITA, as PITA provided the seed funding, which in turn helped him to apply for a grant from the National Science Foundation. The funding from both sources supported Drouven for his Ph.D. degree over a four-year period. Drouven was later hired by EQT to begin the project.

“PITA funding has been a mechanism for seed funding to explore projects, which in the case of shale gas later led to major funding. It gives us the freedom to explore,” explains Grossmann. “This project with PITA was also very nice because it led to EQT hiring my student, and he has been charged to put together a new group for optimization.”