Manufacturing Mindset Drives Innovation in Shale Plays
Traditional oil & gas plays have been high-risk, high-reward scenarios where the priority of speed from SPUD to production trumped upfront costs due to time value of getting production online ASAP. Shale production volumes on the other hand are strongly correlated with the amount of completion work done on the wells; the shale development paradigm is therefore more akin to the manufacturing environment than traditional oil & gas production.
In other words, modern technology has created confidence around the locations of hydrocarbon rich shale, and the initial production curves, but turning shale into a productive asset requires a significant amount of completion work up front. Return on investment in a shale play (given a level of lease/surface/drilling costs and a somewhat fixed level of production per unit of completion work done) relies on reducing variation and costs in completion overall.
As with any new technology, the fracking innovators & early adopters paid top dollar for D&C to produce first gas, but as we move into the era of an abundant supply of shale sourced hydrocarbons, downward price pressure will drive innovation in well completion techniques. The best in class results will belong to those who are nimble enough to adopt the latest innovations across their value chains with the disciplined behavior to standardize their systems and processes in service of low variation and decreasing costs.
At Evolve, we specialize in helping our clients improve performance and reduce variation across their value chain. Please feel free to reach out to discuss how we can help your business achieve better results than you thought possible.
For those interested in learning a bit about what is going on in the upstream oil and gas business, this is an interesting piece demonstrating the recent volatility and slide in oil prices will likely create innovation rather than a dip in production:
James Elliott is a strategically focused process implementation management consultant specializing in oil & gas.