With crude oil prices sitting in the low $30s due to the impact of a global pandemic, the oil and gas industry will have to be creative in how it responds to the impact around the world.
Companies will need to look for greater efficiency and squeeze more from wells that have already been drilled and completed. Is it possible for the industry to thrive at $30?
Coronavirus continues to have a devastating impact on the world economy. As of mid-March, the World Health Organisation (WHO) reported several thousand deaths with more than 100,000 reported cases globally.
Some are comparing it with the 2003 outbreak of Sars, when 8,098 cases were reported and 774 died, but the current virus is having a much greater toll.
Although markets “powered through” the Sars virus, it was reported that coronavirus has cost global stock markets $16 trillion in less than a month.
The outbreak has undermined energy demand worldwide, but especially in China, which is now the number one importer of crude oil, consuming about 10 million barrels per day. Factories have been idle and thousands of flights cancelled around the world.
As a result, we’ve seen crude prices plummet over the last few weeks. We could all just sit back and accept “it is what it is” but there are so many new technologies out there that can make “thriving at $30” a possibility.
We’ve seen lots of changes in efficiencies during past cycles and we’ve seen service providers squeezed for price, but this approach isn’t going to achieve the step change needed for the industry to survive.
According to some reports, the estimated global recovery factor (the percentage of the total conventional oil volume likely to be produced in the world’s oil fields) is around 22% of the oil in place. Even a 1% increase in the global recovery factor represents almost 90 billion barrels of oil, equivalent to replacing roughly three years of production at current levels.
Many techniques exist for enhanced oil recovery including mechanical and chemical solutions, but maybe the answer is a combination of both. Are we using all the information that exists to ensure optimal deployment of these techniques? Could faster, easier to understand Big Data take us to the next level? Are we making best use of the hardware that enables optimal placement of treatment fluids and management of reservoir fluids?
In the same way that it is imperative to get coronavirus under control as quickly as possible, as an industry, we need to be continually working on solutions that pull that last 78% out of the ground. This will allow us to continue to improve the quality of life for millions of people at the lowest, most environmentally responsible cost possible.
Suzanne Stewart is vice president of technology at Tendeka