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Reducing the 'Drag' Delivers Oil, Gas Faster, Says PwC

Master integrated planning in the shale natural gas and liquids markets reduces working capital and makes the end-to-end process more consistent and predictable, according to an analysis by PwC.

In the first of a three-part series, "New Conventions for Unconventional Oil and Gas," PwC looked at ways to "reduce the drag" in shale operations to achieve speed and efficiency.

"Supermajors, independents and oilfield service companies are developing tens of thousands of well sites, and the increase in scale, geography, and complexity on top of existing base operations is pushing traditional management approaches beyond their breaking points," the report stated. "The competition is tough and the market is rewarding companies that can produce and deliver their products faster and more efficiently than their competitors."

However, even with the exponential growth over the past 10 years, the onshore unconventional drilling industry still is in its formative stages and management practices are evolving rapidly.

"These practices differ from company to company and basin to basin, but the management of shale gas/liquids development remains dominated by local and independent approaches that are heavily dependent on Excel spreadsheets and the talent of the team in the field," said PwC. "Given the scale of the work and the projected expansion over the next decade, this approach cannot be sustained long term."

There are thousands of repetitive activities and hand-offs between functions "that look as much like manufacturing operations as they do traditional oil drilling and production," the report said. Information technology and enterprise systems today are emerging as enablers to improve decision making and drive productivity.

"Given the high stakes, cost pressure, and intense competition in the build-out of the shale industry, companies are beginning to apply a holistic lens to all aspects of shale development and managing them end-to-end in an integrated way. Instead of many loosely related development projects in a field, the development of the entire field becomes the project. Key activities and resources are tied together into an integrated plan and executed in a comprehensive manner."

For example, many unconventional wells in North America "are in geographies where the infrastructure and facilities that are needed to produce, process, store and transport the product to market do not exist. The planning, engineering, procurement and construction of this infrastructure must be tightly integrated with the well development and production processes."

Activities often "span functions and groups that do not regularly work closely together, and the hand-offs between them often fail. As a result, production targets may be missed because the road to a new site was not completed in time, a permit was not received, or the local power company did not get the last mile of power distribution to where it was needed. These delays in production are compounded by increased capital and operating expenses due to stand-by time for crews and equipment."

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