Technology shift to high efficiency production making the difference in oil patch

Fuel Fix:
The technological shift to high-efficiency oil and gas drilling is the single biggest change in production since oil prices crashed, the chief executive of an industry analytics company said this week.

Allen Gilmer, chairman of DrillingInfo, says the best oil and gas operators are getting as much as 50 percent higher returns compared with the average producer, and two to three times the production of the least-efficient operators.

Before the crash, with oil at $100 a barrel, companies were made or broken by their access to cheap cash, Gilmer said in an interview at this week’s North American Prospect Expo, now called NAPE.

MORE ABOUT NAPE: Hard times can’t dim hopes for oil and gas as NAPE opens

Now with oil priced at about $40, the difference between success and failure isn’t inexpensive loan rates, he said: “It’s really how efficiently you can extract the hydrocarbons.”

Gilmer and his company have compiled data on oil and gas formations, drilling and production over the past nine years. It shows the shale boom and corresponding price collapse changed the way companies operate, he said.

Companies had to cut tens of thousands of workers and reduce other costs. That forced many to find more efficient drilling and recovery processes.

The new technology is even prompting big oil companies like BP and Chevron, which weren’t as active in fracking, to devote new divisions to U.S. shale production. They hope to innovate as quickly as smaller independent producers.
American technology has put OPEC in a bind that it will have difficulty recovering from.  First came the shale revolution that shook OPEC's grip on its  monopoly pricing cartel.  OPEC responding with predatory pricing in a losing battle to control market share.

The response to that was a drive for greater efficiency in US production.  That has reduced the cost of US production in some fields to below that of nearly all OPEC countries.  The attempt to push a market share battle has resulted in an ever shrinking ceiling on the price OPEC can demand for its oil.

The cartel is in deep trouble.


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