Markets
10/03/2016

Smart production techniques squeeze the last drops out of older oil wells


In a market that has been glutted for the last one year, U.S. shale producers have found ways to maximize and optimize the production of oil wells.



The U.S. shale oil industry is going through an interesting phase, older well which should normally gush out their contents before petering out are not being made to functioning in this particular way.
 
Industry experts and analysts are of the opinion that a smart few drillers are subtly flattening the "production curve" of shale wells, by adopting measures that either limit the initial surge or by squeezing a few additional barrels out of older well.
 
These measure offer differing benefits.
 
While maximizing the last drops of an older well is a lot more economical way to increase volume and immediate revenues by capitalizing on existing investment, while by choking the output of the newly fracked well, drillers hope to ride out the current fall in prices in hopes for higher prices in the future.
 
Baker Hughes Inc., the third largest shale oil producer in the U.S., has cited its artificial lift business as "one notable exception" to a sector-wide slump in its latest quarter, which grew by 4% while other revenues from shale oil fell by 10%.
 
"Companies still want to grow production, they want to generate cash," said Wade Welborn, vice president of artificial lift at Baker Hughes whose business expertise offers "a means to increase that cash flow."
 
This flattening of the production curve for the U.S. shale market will mean the long anticipated drop off of U.S. shale will be more tempered than previously anticipated. It will naturally impede the ongoing process of correcting the glut in the global oil market.
 
"Production optimization is going to be the next phase of the shale revolution. The low price environment will give companies and operators a chance to take stock of the techniques that work," said Andrew Slaughter, director for the Deloitte Center for Energy Solutions.
 
Last year when crude oil prices began their downward journey, many analysts had expected U.S. shale productions, which has significantly contributed to the global glut, to follow suit.
 
Producers such as Whiting Petroleum Corp and Continental Resources Inc. have cut down on almost all of their spending and in some instances they have even left unfinished wells in their work-in-progress state, in hopes of conserving cash while waiting for a sustained turnaround in prices.
 
However this long anticipated turning point has yet to emerge thanks to shale oil producers having a couple of more tricks up their sleeve.

Debashish Mukherjee
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