E&P comparison between shale oil versus conventional oil
Shale oil production is a different beast. Meaning, there is very little lag time between capital being spent and production coming on-stream and that means cash.
Outside of shale though, the oil and gas business is very different.
Conventional production usually involves big projects that require multiple years of development before production kicks in.
This usually involve a full cycle of exploration and appraisal which cost a lot of money with somewhat low probability of actually hitting new oil.
– On the side not –
Typical upstream oil life cycle would involve
- Acquisition : the phase when it is done to obtain the right to explore a block / area through concession or contractual system
- Exploration: the phase when the activities to search for oil and gas deposits in the acquired block/area is carried out.
- Appraisal: the phase where we define and try to quantify the deposits volume and characteristic more precisely after discovery. (important that it is done right, since GIGO is very much at work)
- Development: this is when the surface and subsurface facilities is developed based on the design requirement from the result of the appraisal phase. The key goal is to produce the resources safely and efficiently.
- Production: phase where the resource are being extracted, processed and exported as per contractual agreement(s)
- Abandonment: occurs when the continuity of production is no longer economically viable or the facility is no longer safe to operate and the cost for rejuvenation of the said facility is not economics. (key words: economics & safety). Usually, every country have their own sets of rules and regulation which govern abandonment. Refer to them and do it right!
When oil prices crashed in 2014 international conventional projects that were started before the crash were seen through to completion. That has supported production globally over the past few years.
Spending on similar new projects was mothballed. The impact of that spending curtailment is really just kicking in now. But most of the time, it is just another cycle. A cycle of up and downs. Therefore, it is wise for these oil and gas organizations to be leaner and fitter, rather than bulky and heavy.
Categories: Oil & Gas Notes