Well construction represents between 30%-50% of capital expenditure on the UK Continental Shelf (UKCS) and costs have escalated in recent years contributing to a reduction in drilling activity.
Reducing core drilling costs
If drilling costs can be reduced by 50%, this will not only help to reverse the decline in exploration and development drilling, but also potentially revitalise activity, unlock new developments and extend the life of existing assets.
It has been calculated that halving the cost of well construction could unlock in excess of 5 billion barrels of oil equivalent (bnboe) of known reserves over the next decade. Meanwhile, the development and broad uptake of new technologies could unlock further potential resources of between 11.5 and 22 bnboe. Higher activity levels would also likely increase productivity, helping to retain drilling rigs and experienced people in the market. In addition, new technologies and associated skills represent an extensive export opportunity.
Against this backdrop, the Well Construction Solution Centre plans, co-funds and manages technology development and deployment programmes focused on addressing problems and challenges identified in collaboration with the oil and gas industry. This includes facilitating faster adoption of technology, adapting existing technology from other industry sectors and developing new technology. We then work with our partners to implement technology development programmes to deliver these innovations into market.
Taking it to the next level
The initial focus is to build on the work done by the Wells Forum work group of the Technology Leadership Board.
In the short term, the emphasis is on drilling optimisation and efficiency, standardisation of well designs and equipment standardisation. The Wells Forum work group, working with the Industry Technology Facilitator, has defined a number of areas for us to explore. These are:
- Managed Pressure Drilling
- Liner and Casing Drilling
- Standardised CNS Well Design
- Rigless Operations
Longer term opportunities for developing new technologies are still to be identified and defined. A Well Construction Hackathon involving experts from across the industry took place in December 2016 to determine a number of priorities for 2017. We will seek potential project activity associated with these priorities with the intent of developing long term transformational opportunities that break new boundaries in well construction.
Delivering economic benefit
The industry target of a 50% reduction in well construction costs is expected to unlock 5 bnboe of known reserves and equate to the cost of 40 wells per year by 2020 or around £800 million.
This is anticipated to come from a balance of efficiency measures as well as new technologies – and would deliver around £400 million of annual cost saving along with far greater value from the additional reserves that could be realised through technology delivery.