Turning the industry on its head

In the better times of higher commodity prices, the cost of finding and producing oil and gas is under less pressure than in times of low oil and gas prices. However, it remains management's responsibility to maximize shareholder value, through rigorous cost control, whatever the oil and gas prices.

In the better times of higher commodity prices, the cost of finding and producing oil and gas is under less pressure than in times of low oil and gas prices. However, it remains management's responsibility to maximize shareholder value, through rigorous cost control, whatever the oil and gas prices. Put simply, costs and value should be reviewed with the same vigor when the oil price is at $35 per barrel as when it is at $10 per barrel. In itself, this seems an obvious enough statement, but it is surprising how many companies do not follow this approach.

In such a competitive marketplace, it is no longer acceptable to question costs only when times are tough, rather they should be monitored continually - it is this approach that will enable the industry to continue to reduce its costs without compromising quality or the spectrum of services and technologies available to meet the ever-challenging needs of our global reservoirs. In fact, by opening the market up to innovators who are individually trying to use technology to make a real difference in costs, the industry can still make huge leaps forward within a relatively short timeframe.

Evaluation

In the case of well evaluation, we have seen that the desire to run more and more esoteric measurements rises and falls in relation to the profit stream of the E&P operators. But are the higher costs of these esoteric measurements necessarily justified at any level of commodity price?

Technology should be employed to reduce costs and to add value to petrophysical and geophysical measurements. Technology should not be used solely to add to lists of services and contractor's revenue streams. So, prior to developing new services, we ask ourselves two questions: Does the development reduce the cost of well evaluation? And, does the data provide additional understanding of the reservoir that will, in turn, enable the operator to produce more oil and gas at a lower cost? With either or both of these fundamental questions answered in the positive, we must use new technology to bring more creative solutions and innovative services to the industry marketplace. Embracing technology and employing it appropriately is key to adding value.

Size Matters

Consider the perception that 'bigger is better,' a notion, which apparently still applies to technology used in the open-hole logging market. In the early 1990s, cost-reduction industry bodies such as the UK's CRINE were sending out clear messages about the need to improve efficiency in operations. This, coupled with the knowledge that wireline logging is a mature activity operating in a mature environment, has led two international service companies to start developing and operating smaller, lighter equipment in recent years. Extensive engineering and research, and the application of this technology have ensured that advanced compact logging equipment is able to offer high-efficiency solutions to all open-hole well styles. The result is greater flexibility and improved safety, with maximum data quality and significantly reduced costs (often up to one third).

However, despite a three-year track record of notable successes, there is still an unwillingness to change from some corners. This attitude is unfortunately typical of the upstream industry, not just in open-hole logging. Taking this line then, we have to ask ourselves how open-armed to technical innovation we really are. Not only is this attitude detrimental to the development of new technologies that could prove hugely beneficial, but it also maintains inflated prices among established technologies.

Ironically, irrespective of the oil and gas price, the pressure to accelerate developments also frequently leads project teams to miss out on critical processes, which would better position them for both the long-term and short-term outlook.

Take horizontal logging, for example. Obtaining log data from horizontal wells has either been overlooked or been considered a difficult and expensive task by many. Added to this is the question of whether horizontal log data generates any value as far as reservoir understanding, production enhancement, or completion techniques are concerned. The perception that the expense of logging cannot present an economic return has resulted in only a minority of horizontal wells being logged. Interestingly, for three years now, there has actually been a clear demonstration of the value of logging in horizontal wells, brought about by improving perceptions, but mainly by improving the technology capable of carrying out this work with viable economic returns.

Key steps such as this should be seen not as an expense, but as an investment. It is the technology that holds the key to making them worthwhile. For those visionaries who are interested in being part of an exciting and continually advancing future, we need to look at what we're doing today to determine the opportunities and successes of tomorrow.

John Boyes
Reeves Oilfield Services

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