Low Price Of Oil Is a Time For Refinement
What we do with our business plans during times of the low oil prices as is happening now is how we can prepare ourselves for the inevitable upswing in the market when it comes. We can’t control commodity prices along with supply and demand but what you can do is prepare for the inevitable upswing in the market that always happens in the history of the oil Industry.
This is the time when production is down and so are costs so the cost and energy should go in to innovating new processes. You are forced to find new ways to get the oil to market as currently the average break even cost is $60 per barrel where as it was $75 per barrel a year ago. This goes to show how fast technology and new ways of thinking are proceeding and adding to the overall balance sheet. New innovations can be anywhere from variable speed pumps that are in use only when needed to new methods of energy use and consumption. The less we use people and equipment the less need there is of related tasks such as repair and maintenance. As production slows the business plan should be switching in to a different direction such as investment in creating a more lean business environment
Oil 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. This is being achieved using rigs that can move on tracks or legs, they are drilling and completing several wells at a time therefore slashing the time it takes to drill each well. This is not unlike a production line used in a processing plant with the idea applied to the drilling of oil wells. Not a bad idea at all.
Another example is Statoil who 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 to get more oil to the surface. This along with different depths of wells where it makes sense to extract the black gold. Statoil is also 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.
Due to some of the techniques listed above the decline in domestic shale oil production has not been as much as it could have been,
These innovations will help provide long term sustainability for the Industry at least for those companies with the fore site to implement these changes.
Terry Smeader
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Tags: Business, Low oil prices, Planning
