With oil peaking someplace north of US $66/bbl, and with no end in sight, public and political rhetoric is heating up - in many cases it's reaching alarming proportions. The question is, can we look outside the box for production solutions, or do we let government and the public into the box with us? I think you know the answer.
This morning, while riding to work, I tuned my car radio to a national news station whose reporter was addressing rising gasoline prices, interspersed with man-on-the-street interviews with concerned citizens. The views expressed were remarkably similar and unremarkably one-sided (following the well-known Media Mantra that "dog bites man" is not news). While aware of the general naiveté of the general public on anything dealing with energy, particularly oil and gas, I was nonetheless astounded at the "solutions" offered by the interviewees, who at least sounded as if they were well-educated.
"It's all Bush's fault," steamed one. "He can open the valves if he wants" (which valves, or their locations, were not specified).
"Congress passed the Energy Bill," said one blithe spirit, trustingly. "That should solve the problem in a few weeks."
The reporter more or less agreed with everything the people said, and why not? His entire line-up was of cloned opinions. I'm sure we could get all the help we need, and then some, if we just invited folks like this into our tent. And since its omnipotent prescience was recognized by the previous respondent, we ought to invite the Congress in as well.
That would be the same Congress that authorized $397 million to study the California salamander, or made the day of their lone colleague from Alaska by earmarking more millions to build a bridge from Ketchikan to nowhere. I would like to be a fly on the wall when our nation's legislators try to explain to parents, whose sons and daughters were blown to bits because their HumVees lacked sufficient armor protection, that armor would have to wait while we study salamanders. Do we really want these lawmakers in our box?
Unfortunately, just when the oil and gas industry should demonstrate its leadership and vision by jumping into the breach with some practical solutions to production improvement, many seem content to dither. If these folks hesitate to act at $66, what will it take to get them off their overstuffed chairs?
Obvious to us, while not so obvious to outsiders, is that there is no quick solution to the energy problem. But some companies are taking positive steps in the right direction. And these steps require thinking outside the box.
Take Kerr-McGee, for example. It is busy drilling five-spot patterns in Wattenburg field, Colo. Taking advantage of a change in the well-spacing rules by the Colorado Conservation Commission, the company has identified 9,000 drilling prospects, more than 22% of which are fifth-spot locations, and are busy drilling them 24/7. While this is not rocket science, it demonstrates that when a company is focused on long-range solutions and is willing to act on them, it can make an impact on production - 40% of the wells have virgin pressure, indicating that the previous four-spot development scheme would not likely have ever drained the stranded reservoirs.
Offshore, the company is investing in intelligent well systems to optimize production from multiple deepwater reservoirs. While others grouse that "IWS is an over-priced fad," Kerr-McGee is making money on it by optimizing production while reducing or eliminating intervention costs.
Taking a different tack, Shell is investing in technology, sponsoring or partnering with several companies whose innovative ideas show great promise. Under the umbrella of Shell Technology Ventures, the company is making advances on a broad front. Some of its initiatives, such as the solid expandable tubulars now provided by Enventure Global Technology, have found traction and have taken on a life of their own. Others are still in their infancy. Most benefit drilling and production. By funding independent companies, Shell's approach is intended to make the new technology available to everyone, hopefully hastening the ability to bring more production online, cost-effectively.
In the short term, the perception of increased supply potential has the best chance of pushing down prices. Hiding inside the box isn't going to cut it. Nor is depending on Washington to do anything, except continue to pursue their re-election goals.
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