Oil And Gas Operations Can Save Costs Through Better Management
Oil and gas operators can reduce the costs of constructing, drilling and completing unconventional wells, as well as the overall time it takes to complete them, by up to 40% through better planning and management of logistics, contractors and materials, according to an oil industry report.
For high performers, on a $6.5 million well, this could result in a reduction of $1.3 million to $2.6 million in costs. These cost savings can be acheived by adopting a more integrated planning process, better management of service contractors, and improved logistics and materials management for fresh and reused water, and installed equipment.
This approach can also reduce the time to deliver an average unconventional well by up to 40%. In one example, this meant an estimated reduction of up to 170 days, taking the overall cycle-time down from 464 days to 254 days.
Achieving high performance in unconventional operations: Integrated planning, services, logistics and materials management is based on a survey of leading operators across multiple basins and in-depth interviews..
With Eagle Ford shale as a model, the study found that while operators in the top quartile spend about $6 million per well, some struggled to deliver wells for twice that amount.
To generate the maximum savings and efficiencies, operators need to carefully balance their investments in technology, continuous improvement and people, and in the low-margin environment of unconventionals. For example, some trade-offs will need to be made, like considering if investments in new rig technology are a better decision than offering incentives to service providers to ensure crew consistency.
The report covers several planning and management issues and ways operators can improve performance, including:
Integrated Planning – with hundreds or thousands of wells in a single field and production forecasts largely driven by drilling new wells, the lack of an integrated planning approach in unconventional operations can lead to missed production targets and capital overruns. To avoid this, operators will need to apply planning tools, simplify planning schedules, break down organizational silos and integrate service providers into the planning process.
Logistics Management – At 5 million gallons and 1,000 truck movements per well, efficient water use and movements continue to provide a competitive advantage in unconventional operations. But there’s also an opportunity to improve non-water movements such as aggregates. Also important is to make the best use of rail, road and pipeline transport to select the most optimal locations for permanent and temporary storage.
Management of Drilling and Other Service Contractors – Unconventional development is characterized by a large number of service providers and a large number of handovers on site. Operators will need to ensure better collaboration between contractors and apply strict financial controls and management to meet risk, commercial and operational requirements.
Materials Management – Given the number of wells on a multi-well pad and 24-hour crews, an unconventional operation requires a much higher volume of materials than a conventional one. The management of these materials needs to be efficient and agile to ensure timely delivery in order to minimize downtime; avoid tying up working capital; and racking up needless storage expenses.
Research suggests that large independent operators are in the best position to implement these improvements, as they tend to have a trade-off mind-set when it comes to investments in technology, continuous improvement, and people.