Operators Experimenting On Ways To Cut Costs; Increase Production -- May 11, 2015

From my early days blogging about the "Bakken" I spoke about the Bakken as representing three distinct "things." First, the obvious, the nuts and bolts of drilling for oil. Second, the Bakken represented the relationship among oil companies, the state regulators, mineral owners, surface owners, etc, simply to get the job done with the best possible outcome. Third, the Bakken was a laboratory in which operators studied ways to get better results. 

Today The New York Times has an absolutely fascinating article on the third "Bakken" -- the Bakken as laboratory, the link sent by a reader, thank you.

We've all known in a general sense that operators were testing various methods to cut costs, but it's incredibly interesting to see some actual data points as examples. The article begins:

These are lean days in the South Texas oil patch, with once-bustling roads and hotels now empty as the price of oil has plunged and rig after rig sits idle.

Still, production has barely declined, a testament to the rapid gains that oil producers are making in coaxing ever more oil from older wells and the few new wells they are still drilling — and doing both while investing far less money.

For example: 

The Norwegian oil giant Statoil, for instance, is experimenting here in the Eagle Ford shale field with a host of new drilling tools and techniques.

It is trying out different grades of sand to blast along with water and chemicals to better loosen the hard rock deep underground and increase a well’s production, and varying the depths of wells to squeeze out even more oil. It is using new well chokes that technicians can operate remotely from a computer or even a smartphone to quickly adjust flows to maximize production without overtaxing pipelines.

Even as the company cut the number of rigs it runs here from three to two since last year, it has managed to lift production by one-third, a feat that would have been unimaginable a few years ago.

This is interesting:

It has cut the average cost of drilling from $4.5 million to $3.5 million a well, in part by reducing the time it takes to drill from an average of 21 days to 17 through better planning and laying off slower crews.

Laying off slower crews. Hmmm.

 
More:

But a majority of the major companies are managing to survive by increasingly using techniques traditionally more common to manufacturing plants than to oil fields to achieve economies of scale.

In some shale fields where companies typically drill up to eight wells on each production pad, companies are no longer drilling one well at a time. Using rigs that can move on tracks or legs, they are drilling and completing several wells at a time, slashing the time it takes to drill each well.

The result has already been a slower decline in domestic shale oil production than many experts had expected.

And the result?

The Energy Department still expects the average daily production for the year to be moderately higher than in 2014, rising from 8.7 million barrels a day to 9.2 million.

With regard to "laying off slower crews" I've heard from others in the Bakken that employers are now able to hire the best employees.

Much more at the link. By the way, the number of days to drill an Eagle Ford well was stated to be 17 days on average. Sounds about the same for the Bakken, although some are reaching total depth (TD) much sooner. 

Saudi Arabia has a bit of a different problem. The myth (or world view) is that is it "dirt cheap" to drill for oil in Saudi Arabia, that it costs them a couple of dollars per bbl to drill. I have no idea now true it is. But let's assume it's accurate. If that is true, Saudi's problem is not cost of drilling but but managing a national budget that "requires" $100-oil. It's one thing for Statoil to look for ways to cut costs in the Eagle Ford, it's something completely different to tell Saudi Princes that instead of $100 oil they will have to do with $60 oil.

Back to the article, break-even prices?

“You are more efficient because you are forced to be more innovative,” said Patrick Pouyanné, chief executive of Total, the French oil and gas giant. Mr. Pouyanné estimated that the break-even price for operating in 75 percent of the shale oil fields a year ago was $75 a barrel, but that is now down to roughly $60 because of innovation and lower service company costs. He predicted that the break-even cost could go as low as $50 before long.