Sustained Low Prices Research Articles

Technology Focus: Reserves/Asset Management (December 2017)

Technology Focus While the oil and gas industry has largely come to terms with the sustained low prices, it is clear from our review of the reserves/asset management papers published during the past 12 months or so that many companies are continuing to challenge many aspects of their business to manage the cycle. These challenges have been at the strategic, tactical, and operational levels, with companies not just trying to remain viable but also positioning themselves to take advantage of improved conditions when they return. The papers highlighted in this article cover technical assessment of unconventional resource plays, portfolio optimization, and technology development, all very relevant in today’s environment. Paper SPE 185053 advances a large body of work dealing with building type wells for unconventional resource plays. In particular, it recognizes that, early in the life of a resource play, it can be very difficult to build representative type wells because of the limited number of wells and the limited production history—something especially true outside of the United States. The paper presents an integrated work flow, including relating geological differences to drilling and completion type, assessing biases, and evaluating the key uncertainties that drive economic value. Paper SPE 187162 provides a simple example of the issues associated with portfolio optimization, in particular obtaining a balance between a short-term operational focus and a longer-term outlook for capital project selection when there are marginal and complex projects to choose from. The temptation for companies in survival mode is to focus on the short term. The process explained within the paper provides an innovative approach and argues that decision makers need to consider the complexities of the system in portfolio management. A factor not addressed but that we recommend you consider when assessing project maturity is how these projects fit within the framework of the SPE Petroleum Resources Management System (currently under revision) and how the range of uncertainty is represented for better decision making. While technology development has been and will continue to be a hallmark of the oil and gas industry, paper OTC 27806 argues that it has not been as effective as it could be. With the current challenging economic times, it has become more critical to make fewer mistakes and mitigate the “valley of death”—the virtual chasm that separates innovation from commercial demonstration. The paper argues that holistically addressing technical and commercial factors in an integrated way can improve the efficiency and effectiveness of developing new technologies, and it presents some thought-provoking pillars of success for industry to cross the chasm and remain commercially competitive. Recommended additional reading at OnePetro: www.onepetro.org. SPE 185496 Are We Reasonably Certain That Reasonable Certainty Adequately Defines Uncertainty in Our Reserves Estimates? by B. Harrison, Lloyd’s Register, et al. OTC 27949 Bringing Upstream Projects to Final Investment Decision by Sandeep Khurana, Granherne, a KBR company, et al. SPE 185056 Historical Terminal-Decline-Rates Review of Unconventional Reservoirs in the United States by Brent W. Hale, William M. Cobb and Associates, et al.

Technology Focus: Reserves/Asset Management (December 2015)

Technology Focus The oil and gas industry has undergone dramatic change in recent times. On one hand, technology has driven an increase in availability of supply, primarily from unconventional sources. Concurrently, global economic and political influences have resulted in sustained oversupply of oil and gas, despite declining demand. The effect on the industry has been to return to operating conditions not seen for decades, with sustained low prices and sluggish demand forecast to continue at least in the near to medium term. The solution space for oil and gas companies to stay viable during this difficult period is challenging and cannot be reliant on external factors of rapid price increase, uplift in demand, or reduction in supply. Instead, companies need to find efficiencies within their capital- and operating-cost base and to examine closely and make optimal use of their assets. “Business as usual” no longer exists, and companies must challenge every aspect of their business—at strategic, tactical, and operational levels, underpinned at all times by sound and unbiased technical and commercial work. The suite of papers in this feature addresses various aspects of these critical business requirements. At the strategic level, the importance of using a robust framework for ranking exploration, appraisal, and development projects in order of commercialization maturity, as embodied by the Petroleum Resources Management System promulgated by SPE, is discussed in paper SPE 170747. At the tactical and operational level, the importance of systematic application of standards and guidelines for technical work and of maximizing the benefit by a truly multidisciplinary approach to decision making and development of a road map to show the way forward to optimize recovery and maximum value is described in paper SPE 175004. Furthermore, the value of look-backs and calibrating performance, to extract value from lessons learned to be used in development of realistic learning curves, is assessed in paper SPE 172973. The need for cost and capital efficiency calls for careful integration of technical and commercial elements. Many companies will be able to cite examples of disconnect between these elements, with resultant destruction of value and loss of opportunity. Recognition of uncertainty and sound technical input into commercial and financial models are critical and, when done correctly, allow effective portfolio analysis to be conducted. Paper OTC 26061 provides an excellent overview of the elements of such an analysis. These papers highlight the critical importance of application of overarching strategic frameworks within operating and service companies as key enablers to realizing required efficiency improvements. These frameworks must include mechanisms to consistently and objectively assess portfolios of assets, to identify their strengths and weaknesses, to provide confidence levels that reflect the inherent risk and uncertainty that exist within oil and gas projects, and, above all, to ensure best use of human capital and incorporate lessons learned from past experience. JPT Recommended additional reading at OnePetro: www.onepetro.org. SPE 175527 Validating Analog Production Type Curves for Resource Plays by Mark McLane, Rose & Associates, et al. IPTC 18063 Is Your Trap Filled To Spill? by Douglas Peacock, Gaffney, Cline & Associates IPTC 18128 The Art of Balancing the Cost and Value for Field Development by Keng Seng Chan, Petronas, et al.

The Global oil market after 9/11: On the brink of a crisis?

The 11 September 2001 attack on the US once again underlined the connection between the oil and politics. While the global economic slowdown developed recessionary trends, it also had its fall‐out on the oil market. Demand dropped to a nine‐year low, which in turn caused prices to fall by 20 per cent since pre‐11 September days. This article discusses the impact of sustained low prices on the international oil market, its impact on producers which are dependent on oil revenues, and the possible political repercussions it may have on the world's most important producer, namely, Saudi Arabia.