technology to the rescue in a world of low oil and gas prices, by andrew gould
TRANSCRIPT
21/10/2016
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Technology to the Rescue in a World of Low Oil and Gas Prices
Speaker Andrew Gould – Board Member, Saudi Aramco
Moderator Herman Franssen – Executive Director, Energy Intelligence and Conference Chairman
Costs are coming down fast but this is cyclical
NON-OPEC SUPPLY EX-US (6/7)
Current crude prices are below cash costs in most of the world. Currency, over-capacity in the service market and a focus on propping up near-term production has played a large role in reducing operating costs across 2015 and 2016.
Global cost curve $ per barrel
Source: Company data, Energy Aspects analysis
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Process & Efficiency Improvements US Shale and
Tight oil plays
Increasing Costs Decreasing Costs
Play margin delineation Derisked geology
Drilling/completion/
stimulation surprises
More efficient drilling/
completion/stimulation
Competition for leases Consolidation of leases
Supply chain bottlenecks Supply chain optimization
Infrastructure bottlenecks Infrastructure buildout
Service cost increases
o Equipment shortages
o Personnel shortages
Service cost discounts
o Amortization of CAPEX
o Service efficiencies
o Increased competition
Early in development cycle
Late in development cycle
Downturn-Driven Efficiencies US Shale and Tight Oil Plays
Asset High Grading
No more exploratory drilling
Ultra sweet spotting
Completing DUCs
Only the best rigs and crews
Intelligent
Downsizing
Technical Innovations
Pad Drilling
Site construction efficiencies
Well construction efficiencies
Creeping rigs
Supply chain simplification
Factory Mode
Super Fracks
Longer laterals
Tighter fracture initiation points
More water
More proppant
Even More
Brute Force
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Process and Efficiency Improvements are
“Every Day Innovations” that Continue Through Business Cycles
5
https://www.eia.gov/petroleum/weekly/archive/2016/160602/includes/analysis_print.cfm
U.S. Shale Gas & Tight Oil Plays
Year
Wel
l Co
st (
$ m
illio
ns)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1950 1960 1970 1980 1990 2000 2010
Average water depth - offshore discoveries outside US (m)
5-year average In the year
Source: Rystad Energy
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-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1950 1960 1970 1980 1990 2000 2010
Cost per boe discovered - outside US (real 2015 $/boe)
Source: Rystad Energy
Learning integration from other industries
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Johan Castberg
Source: Company data, Goldman Sachs Investment Research
Mad Dog II
Source: Company data, Goldman Sachs Investment Research
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When Oil & Gas Prices are Falling or Low
Academic & government O&G research winds downs
Industry R&D shrinks
o Hiring is cut
o Less emphasis on novel techniques
o Efficiency improvements prioritized
o Some innovations are lost
Technology development outsourced
o Downsizing of risk
o IOCs Service Cos Start Ups
Technology leaders of the next up-cycle shrink the least
o Industry-changing innovations develop over 10 - 20 years
o Technology true believers carry on through thick and thin
Innovation & the Business Cycle
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