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Shell Looks to Lower The Cost of Drilling on The High Seas

Oil drilling isn’t like it used to be.

Mnet 123582 Britain Earns Shell Parr

Oil drilling isn’t like it used to be.

In the good old days, when oil fetched $100 a barrel, companies like Royal Dutch Shell could embark on ambitious projects in remote locations or deepwater sites in an ongoing push to ramp up production and stock up on reserves.

Oh, how times have changed.

With oil prices hovering around $50 a barrel or less, and a rising amount of renewable energy chipping away at market share, Shell is going lean on its deepwater projects to make sure it can eke out a profit from all of its operations.

In the past few years, oil companies have often slashed operating costs by cutting jobs. Shell has been no exception. As recently as July 2016, the company announced that it was cutting one-quarter of its deepwater positions in the Gulf of Mexico.

Mnet 125333 Shellrig

Now, according to a report in the Wall Street Journal, the oil titan has also been employing a number of other cost-cutting strategies to its deepwater efforts, many of which were learned on dry land.

For example, Shell has hired a “chief irritant” for all of its divisions whose sole focus is to shake up the way they operate and find ways to increase efficiency.

Shell is also maximizing oil recovery by drilling horizontal water-injection wells — a technique perfected by many fracking upstarts. This technique has come in handy at Mars, a massive drilling platform in the Gulf of Mexico that produced as much as 225,000 barrels a day in 2002. By drilling horizontally from the existing deep wells at Mars and into shallower layers of rock, Shell can use infrastructure that’s already in place to reap new rewards — sometimes producing oil for as little as $10 to $15 a barrel.

Venturing into old wells can carry risks, however, because hydrogen sulfide, a corrosive and flammable gas, can build up in sealed-off wells. But Shell reported that it is using finely tuned monitoring equipment to detect hydrogen sulfide problems. The extra precaution can slow down nearby drilling, which can cost Shell — but the price is nothing compared to the potential cost of a well blowout.

Shell’s strategy is part of a growing industry-wide shift towards boosting efficiency with lean manufacturing.

Pedro Parente, president of Brazil’s state-run oil company, Petrobras, recently commented that his company is focusing on a number of cost-cutting measures including debt reduction and increased efficiency. In particular, Petrobras has been focused on standardization throughout all of its processes.

“Now is the time to change how we run this industry,” he said.

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