Marginal field development

If the expected cost of the development is larger than the value of the hydrocarbons you are going to produce, a field becomes marginal. Adding volumes to a reservoir takes dinosaurian time, so what oil companies compete on is reducing costs of field development.

Well costs are up to 80% of smaller field development projects, and the risk of well investments is massive. Not only is time difficult to prognose (about 50% of wells are outside the expected min and max range), but projects typically don’t even measure the quality of wells because of the low precision in execution.

Add to this that the operators have faded out their skills of technology implementation that boosted the industry in the early 2000’s, it becomes clear that there is a large upside in improving how the operators work.

Examples of room for improvement are found in the audits carried out by the Petroleum Authority in Norway - Havtil. 

In one case, they say that the efficiency of the primary emergency barrier - the Blowout Preventer - is not documented. In another case, listening to a wall is the best way to monitor the mud pumps.

In many cases, for example this case, the problem is that unskilled teams are operating safety equipment. 

One story that repeats in almost every report is that the operator has pushed the responsibility of safety and decision making to the service company through contracts.

The operators have kept the high-margin decision structures that worked in the pioneering phase of the industry, which was good for being able to deliver a well operation. By measuring things like meters drilled per day and total cost, the operators are saying “we celebrate what we managed to do”.

For marginal fields, the operators need to deliver consistent quality on a portfolio of wells. New KPI’s that ensure that every well delivers on time, cost and quality. KPI’s that measures performance and allows for improvement.

Operators are saying 70% of their time is inefficient, looking for data, and that planning is not value adding. Let’s discuss how to outcompete this.