Low oil and gas prices, the rise of electric cars and tracking an overwhelming amount of data — there’s no shortage of challenges facing the oil and gas industry.
But executives who spoke Monday at the Society of Petroleum Engineers’ Annual Technical Conference and Exhibition, which is being held through Thursday at the Convention Center, said they see a world where oil and gas has a place at the energy table for a long time to come.
Advances in technology and improvements in efficiency continue to drive well costs down, keeping the industry economically competitive, executives said.
“The way we’re doing it now is dramatically different than the way we did it in the early 2000s,” said Dave Hager, CEO of Devon Energy.
Drilling and completion costs are down about 40 percent from the peak of the oil boom, which came in mid-2014 at $107 per barrel before crashing to a low as $26 by early 2016. While about half of that cost savings for companies is due to the drop in prices oil field service companies have been able to charge, wells are getting better in other ways, Hager said.
New wells in the first 90 days produce 4.5 times the amount of oil — in the same area — as wells drilled five years ago, Hager said.
Lorenzo Simonelli, CEO of Houston-based oil field service firm Baker Hughes, said that so much data is being gathered in the oil field that the challenge comes in making sense of it all. He compared it to going for a morning jog 20 years ago, when someone just ran out the front door, to today when people can use smart phones, smart watches and heart rate monitors to track everything from their diet to their pace.
“Now you take it to the world of oil and gas,” Simonelli. “That is the way we’re taking care of the wells.” The data collected over the lifetime of a well creates a digital “twin” that can then be tested under different scenarios.
Real-time monitoring of wells means that companies know exactly what’s going right or wrong at a particular well site. Instead of having people randomly drive around to check wells, Hager said employees can check their phones and go directly to problem areas where something like an open hatch could be releasing fugitive emissions. “It’s managing by exception,” Hager said. If there’s a problem, “they go straight to that well.”
Deborah Wince-Smith, president and CEO of the U.S. Council on Competitiveness, said the U.S. in the last decade has gone from being energy-weak to energy-strong, which has been a boost for domestic manufacturing.
“We’ve really changed the game when it comes to the cost of energy,” Wince-Smith said.
After a decades long slide, U.S. oil and gas production have surged with shale drilling, the process of using water, chemicals and sand pumped at high pressure to shatter tight rock.
National oil production next year is expected to reach around 9.9 million barrels per day and surpass the previous high of 9.6 million barrels per day from 1970.
This year, the U.S. Energy Information Administration expects the U.S. to become a net exporter of natural gas. It already surpassed Russia in 2009 to become the world’s largest natural gas producer.
The rush of new hydrocarbons into the U.S. market has helped create a glut of oil on the world market.
Even as electric cars come online, driving patterns shift as millennials show less interest in car ownership, and renewables such as solar and wind gain market share, natural gas for electric generation is a bright spot for the industry. About a third of all U.S. electric production comes from natural gas fired plants, according to the Department of Energy.
“People forget that electricity needs to created by something,” said Simonelli. “We’re here for numerous decades to come.”
What’s going to be the next big thing after the shale revolution?
“I get asked this question a fair amount of times,” Hager said. “We talk about, as you might imagine around our coffee, and we know the answer. We’re just not telling anybody.”
Everyone laughed, and Hager said that he’s convinced that the industry — which has transitioned from drilling onshore vertical wells, to shallow offshore, to deepwater offshore mega projects, to shale — is creative enough to continue to come up with new innovations.
“There is going to be something else,” Hager said. “I am absolutely convinced there is going to be some thing else.”