Shale Industry Needs to Look Within for Solutions That Save
- Trent Jacobs (JPT Senior Technology Writer)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- September 2015
- Document Type
- Journal Paper
- 60 - 63
- 2015. Copyright is held partially by SPE. Contact SPE for permission to use material from this document.
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Conference review - 2015 Unconventional Resources Technology Conference
July’s drop in oil prices to below USD 50/bbl reminded the shale industry that the hard times may be around for a while and that operators need to continue working on their cost reduction plans. At the recent 2015 Unconventional Resources Technology Conference, a major theme was how companies can improve performance without increasing the size of their budget.
Some companies are looking to work closer with other companies to share knowledge and technology that may yield higher production. Others are looking inward for ideas that may reduce risk and improve the bottom line.
Barry Biggs, vice president of onshore operations at Hess, described the lean approach that the company has adopted, which includes using “an army of problem solvers.” Counter to their moniker, this cadre of key employees are not exclusively working on problems. He said that too often, operators are focused more on finding out what went wrong in an operation rather than what went right.
“Well, flip that. What is the root cause analysis of things you are doing well?” he asked. “It is a mental shift that we can use to try to drive improvement.”
He credited this business structure with helping Hess drive down costs by 50% in the Bakken Shale from 2012 to 2015. Biggs said it has also been critical in allowing the company to develop the Utica Shale faster than the Bakken despite the geologic differences of the two plays.
Instead of dictating orders from the top down, this leadership style asks questions, welcomes debate, and relies on collaboration while still holding people accountable for meeting their goals, Biggs said.
One example of its management strategy is written on the walls of the company’s asset collaboration rooms, where team leaders post their business plans and status reports for all to see. Once a week, engineers and executives go around the room trying to solve whatever problems that are being encountered. Biggs said this visual approach of project management “is much more powerful than a report that gets circulated around.”
While operators trim their own fat, a hefty portion of the savings they are seeing today are a result of the pressure on service companies to lower their prices, in many cases by about 30% or more. “However, we can’t get to where we need to be with cost reductions alone,” said Peter Richter, vice president of unconventional resources at Schlumberger. “These cost reductions, while they are nice for the immediate economics, they are not sustainable for the long term.”
To emerge from the downturn stronger than before it entered in, Richter said the unconventional sector needs to adopt an align-and-conquer strategy. By integrating data and collaborating more on drilling and completion operations, both efficiency and production can be improved, he said.
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