Strategy, Technology, and Current Issues in the Oil
Energy Overview / Current Issues in Energy
Susan Smith Nash, Ph.D.
Skyrocketing costs in energy technology.
The costs of operations are escalating a pace that outstrips
commodities prices. Many oil and gas ventures rely on new
technologies to extract previously unrecoverable reserves, which
results in difficulties of determining ultimate costs.
Onshore operations include unconventional resources (shale,
coalbed methane, shale oil) which require the use of new
technologies in order to recover the hydrocarbons. Traditional
methods are not adequate for producing the resources, and so any
company that is involved in the new plays is compelled, by
necessity, to use high-cost methods.
Using horizontal drilling and new completion techniques to
in-field drill or re-enter old wells in mature fields and to
recover the hydrocarbons that could not be produced before has
presented new opportunities, but unfortunately, the technologies
Offshore, the costs of building platforms and infrastructure to
drill for deep, ultra-deep, and subsalt reservoirs are escalating.
Further, new technologies used for acquiring seismic data (wide
azimuth, etc.) that can be used for higher resolution images of
the reservoirs continues to escalate.
Examples of places where costs often outstrip projects include:
• Coal-bed methane: water disposal costs, low
volumes, and environmental concerns (emissions, stray gas, etc.)
can drive up costs, while natural gas prices have dropped since
2008, and they it is projected that they will continue to stay
• Hydraulic fracturing: water costs, proppants,
frac fluid, and time can exceed estimates, sometimes by 50 – 100%
• Drilling costs: often a matter of supply
and demand; drilling costs are very elastic upward
• Water costs: the cost of obtaining water
for drilling, as well as dealing with (processing, reusing, or
disposing of) flowback, produced water, and other areas.
• Infrastructure: gas gathering,
pipelines, processing, and conditioning can be much more expensive
than anticipated, particularly when chemical costs (corrosion
control, etc.) are not well estimated before producing.
Water Management in Shale Gas Plays
Faster Drilling, Diminishing Returns in Shale Plays Nationwide?
After the Gold Rush: A Perspective on Future U.S. Natural Gas
Supply and Price
Where are costs likely to escalate? What are some of the services
most likely to exhibit price volatility?
Select two or three of new technologies and conduct research
online to find information about what they are doing to help
stimulate production, and how / where they are costly:
azimuth seismic data acquisition
• Imaging and
data processing of 3D seismic
• Proppants used
in hydraulic fracturing
surveys during hydraulic fracturing
• Water sourcing
• Produced water
• Gas gathering
• Pipelines (oil
What are the consequences of rising costs of services?