Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This Innovation Will Help U.S. Companies Win The Oil Price War

Commodities / Oil Companies May 21, 2015 - 12:49 PM GMT

By: OilPrice_Com

Commodities Although some US oil companies are struggling with low oil prices, a new wave of innovation is hitting the oil patch, allowing for a significant reduction in drilling costs.

A variety of different improvements in production are starting to show up at all levels across the industry from small firms to oil majors. Statoil for example recently noted that it is experimenting with different types of sand and chemicals to improve production. And a number of companies have noted that they are moving from drilling wells one at a time, on an ad hoc basis, to drilling multiple wells at once. GE Oil & Gas has produced variable-use pumps that can be turned on and off in order to save energy versus the previous 24-hour a day operation cycle.



The end result of these actions is that per-barrel costs of oil have fallen to around $60 today versus $75 a year ago according to Citi analysts. And executives from oil companies are now forecasting that per barrel prices could fall to $50 or less before long. America has not yet lost the price war.

Now, one small Denver-based oil company has come up with a whole new model for producing in order to further drive down costs. Described as an "oil factory," Liberty Resources LLC and its CEO Chris Wright have developed a novel method for extracting oil. The firm is starting out by doing everything it can to eliminate the need for trucks traveling to and from its site. The company notes that trucks are often an irritant with local residents and more importantly, they add significantly to the cost of producing oil.

To do that Liberty will build a series of pipelines to its massive 10,000 acre Bakken site. The firm has pipelines that carry water and gas produced by wells, as well as other pipelines to carry oil. This technique is called ‘centralized resources’ and while other firms like Continental have explored it to some extent, Liberty is pioneering the process. In essence, the firm is trying to bring the efficiency focus of industrial engineering to the production focus of petroleum engineering.

In addition, like Statoil and a few other larger oil firms, Liberty is also focused on creating a production process than can be stopped and started based on optimal production times, costs, and oil prices. This could be an invaluable capability. Take Russia for example. Russian oil wells will freeze if they are shut down, and the country lacks significant storage capacity. As a result, Russian oil producers cannot respond to price downturns.

Moreover, Liberty is developing the entire 10,000-acre site to be fracked at once with nearly a 100 oil wells operating simultaneously. By drilling multiple wells at once and controlling inputs and output supply, the firm has significant cost advantages versus traditional ad hoc production methods. Even employee costs are lower, with Liberty citing the use of a third less workers than a conventional production process.

So what is the combined result of all these efficiency improvements? Liberty says it will still make money even with oil at $50 a barrel. And the firm expects costs to keep falling as oil service companies become more efficient and lower their own prices. At these prices and efficiency levels, US production becomes competitive with virtually any other oil source. And if efficiency gains continue at this pace, the US may weather the onslaught of Saudi oil much better than many expected.

Source: http://oilprice.com/Energy/Oil-Prices/This-Innovation-Will-Help-U.S.-Companies-Win-The-Oil-Price-War.html

By Michael McDonald of Oilprice.com

© 2015 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in