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Oil service firms focus on making shale profitable again

04th February 2015

Shale operators aren’t going to lightly abandon massive unconventional exploration and production investments because of low oil prices

Shale operators aren’t going to lightly abandon massive unconventional exploration and production investments because of low oil prices
Hydraulic fracturing across North America has contributed to a glut in oil supplies

Some of the world’s largest oil and gas service and technology providers are bringing out new services and technologies specifically designed to reduce operating costs at North America’s major unconventional oil and gas plays.

Already this week both Baker Hughes and Weatherford have introduced new offerings which specifically focus on frack well optimisation in a bid to keep North America’s shale boom flowing.

Baker Hughes has offered a service package that assesses and manages hydraulic fracture wells for operators in order to optimise well efficiency.

“When unconventional wells are not performing to expectations, operators often try to meet production targets by continuing to produce at low rates, drilling more wells, or refracturing the existing wells using a ‘pump and pray’ approach,” said Hans-Christian Freitag, Baker Hughes vice president, integrated technology. “In today’s oil price scenario, however, operators need a more economic and consistent method of improving recovery.”

Likewise, rival Weatherford has tried to capitalise on a technology hungry shale market by offering technology that optimises reservoir output using advanced algorithms.

Whilst Schlumberger, the world’s largest service provider, has recently bought a huge chunk of Eurasia Drilling – a company focussed on unconventional drilling in Russia where government official hope to supplement declining output from conventional plays in Western Siberia with a North American-style shale boom.

Last week Saudi Aramco’s chief executive, Khalid al-Falih, remarked that OPEC’s refusal to cut oil production in November was done in part to crush North American shale producers that have threatened the cartel’s hold over oil supplies.

“Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed,” said al-Falih at a press conference in Riyadh.

Production of oil and gas from unconventional wells has a far higher operating cost than conventional exploration and production. Many analysts believe that most unconventional plays will be unable to sustain commercial production with oil prices below USD 60 a barrel.

BHP Billiton already announced last Wednesday that it was cutting its onshore North American rig count by 40 per cent.

Reducing operating costs has become an imperative for oil firms with major shale interests where investments were made on a USD 100-a-barrel assumption.

Technology and service providers are in high demand to provide solutions such as better pumps, advanced imaging software and reservoir optimisation tools that dramatically reduce the cost of exploration and production to a level that aligns with lower crude oil prices.

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