By Sabrina Valle
HOUSTON (Reuters) – Technological advances are allowing U.S. shale oil and gas companies to reverse years of declining productivity, but the associated requirement to focus costs by drilling many more wells deters some companies to do so.
As overall production reaches record levels, the amount of oil recovered per foot drilled in the Texas Permian Basin, the main shale formation in the United States, fell 15% between 2020 and 2023, placing it in level of ten years ago, according to an energy researcher. Enverus.
Indeed, hydraulic fracturing, the extraction method that appeared in the mid-2000s, has become less effective. In this technique, water, sand and chemicals are injected under high pressure underground to release trapped resources.
Two decades of drilling relatively closely spaced wells, resulting in hundreds of thousands of wells, disrupted underground pressure and made it more difficult to extract oil from the ground.
“Wells is getting worse and it’s going to continue,” said Dane Gregoris, managing director of Enverus Intelligence Research.
But new innovations in oil, which began to be implemented more widely last year, have made hydraulic fracturing faster, less expensive and with a higher yield.
Advances in recent years include the ability to double the length of lateral wells to three miles and equipment capable of fracturing two or three wells simultaneously. Electric pumps can replace expensive, high-maintenance diesel equipment.
“Companies can now do (fracking) wells faster and more cheaply,” said Betty Jiang, an oil analyst at Barclays.
A drawback of new simultaneous fracturing technology, also called simul-frac, is that companies must have drilled many wells and be ready to move to the unison fracturing phase before they can proceed. The pumps inject fluids and extract oil and gas from two or three wells at the same time, instead of just one.
Because they act as an interconnected system, sinks cannot be added piecemeal. But companies eager to reduce costs have not deployed enough drilling rigs to fully capitalize on the innovations’ potential.
“Instead of drilling wells and getting production in a few months, you have to drill eight or 10 wells,” said Mike Oestmann, CEO of Tall City Exploration.
“That’s $100 million buried before we see any revenue,” he said. “For small businesses like Tall City, that’s a big challenge.”
The number of active drilling rigs in the United States this month fell nearly 18% from last year.
Simultaneous fracturing can also reduce well costs by $200,000 to $400,000, or 5 to 10 percent each, said Thomas Jacob, senior vice president of supply chain at researcher Rystad Energy estimates.
NEW TECHNOLOGY SUPPORTS RECORD PRODUCTION
Oil analysts predict that the use of the new technology will accelerate. “We saw a trend of companies moving toward co-fracking in the second half of last year, and that will only continue,” said Saeed Ali Muneeb of energy analysis firm Kayrros.
Well lengthening and advances in hydraulic fracturing techniques are more than offsetting declining productivity and limited drilling rigs, helping the United States achieve record oil production volumes.
Major U.S. shale-producing regions are expected to reach their highest production in five months next month, with production from new wells up 28% from last year, according to the Energy Information Administration. UNITED STATES.
“Companies are increasingly refining and getting better at hydraulic fracturing,” Oestmann said. “Without them, production would fall.”
The innovations will gain momentum once major producers like Exxon Mobil Corp and Chevron Corp adopt them more widely, shale experts said.
Mid-sized companies, like Pioneer Natural Resources, that can bear the costs, have been early adopters of the new methods. These positive results make them more attractive to large companies like Exxon, which is awaiting regulatory approval to buy Pioneer.
But the biggest shale producers have pledged to use oil revenues to fund shareholder returns rather than drilling expansion. Two of the largest shale oil operators, Exxon and Chevron, have missed their Permian production targets in recent years.
Exxon said its own new hydraulic fracturing technology would allow it to extract an additional 700,000 barrels of oil equivalent per day (boed) from Pioneer assets by 2027, tripling production to 2 million boed.
Chevron is increasingly using simulated fracturing and says the technique will help it increase Permian production by 10% this year, to 900,000 boed. It has also completed a triple fracking pilot project and plans to use it more widely, a spokesperson said.
(Reporting by Sabrina Valle; Editing by Cynthia Osterman)
