Helping America Navigate a New Energy Reality

Why America’s Oil Output Refuses to Collapse

By on 30 Sep 2015 in analysis, notable posts

(Bloomberg) Somewhere amid the maze of wells that Murphy Oil Corp. has scattered across Texas’s sprawling Eagle Ford shale formation, Brett Pennington is carrying out a little experiment.

What will happen, the exploration chief wants to know, when he jams huge quantities of sand down the narrow mouth of one of these wells. Will more crude seep out? Or, rather, will he smother the opening and choke off the flow?

For the experiment, he’s amped up the sand meter all the way to 3,000 pounds per foot, almost double the average that each well in the Eagle Ford gets nowadays. If Pennington’s project seems a bit extreme, it also serves to underscore a trend spreading rapidly across a shale industry that’s scrambling to remain profitable after oil prices sank 50 percent. More and more sand is getting stuffed down wells to try to better pry open the rock and bolster output.

Some of this is just a cost phenomenon. In the wake of crude’s selloff, the sand market collapsed too, driving down the price 30 percent and making it cheaper to shovel more grit in. The initiative, though, began years earlier, the result of engineers tinkering with inputs and discovering one of the many little technological breakthroughs that have helped the shale industry weather the downturn better than its legions of skeptics predicted. For proof of greater productivity, look no further than total U.S. output: It remains within 3 percent of a 40-year high even though drillers have idled more than half of their rigs. And a report Wednesday showed production actually rose 1 percent in July to 9.4 million barrels a day.

“I can’t control the price of the commodity,” Pennington said in a recent interview. “The only thing we can do is get better and faster and cheaper. There’s a general correlation that more sand equates to a better well.”

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