Leading research and consultancy company Wood Mackenzie just released the second article in a three-part series about unlocking additional value for Unconventional Operators: “A New Era for UC Value – The Well Production System.”
As outlined in the first article, $10 billion of cash – and even more in value – is laying on the factory floor. The second article dives deeper into the next era of performance improvement and the associated new capabilities – the application of Project Production Management, an Operations Science-based approach to UC field development – and discusses the cost and time implications.
- The industry has consistently advanced UC development, adopting multi-stage fracing, pad drilling and end-to end supply chain management as needed. The industry has worked both sides of the breakeven equation: higher field and well productivity, as well as reduced costs.
- However, the absence of structural change in the industry’s approach is evidenced by the resurfacing of these challenges as focus turns to Permian development. The sustainable solution for the industry is the adoption of a systematic, dynamic and continuously improving approach to the well production system.
- As a whole, UC well production systems are higher variability systems that attempt to drive up operational utilization with the aim of increasing throughput, and/or reducing cost or cycle time. This unconsciously and directly increases the cycle time and related cost of that operation. In practice, a system ‘under control,’ with lower utilization and even ‘idle time’ for individual operations, will be lower cost, offer quicker end-to-end cycle time and consume less cash than a system in which owners attempt to run every operation at 100% utilization.
- Systematic adoption of PPM, a science-based approach, enables owners to address variability, optimize system inventory or WIP and as a result reduce cost, cycle time and cash required to run the well production system. For example, one Operator, using a PPM approach, has experienced a cost reduction of ~47% for drilling and completion vs a peer average of 8%, as well as cycle time reductions of ~37% vs a peer average reduction of ~7% in cycle time.
Project Production Institute researches and disseminates knowledge related to the application of operations science for the optimization of complex and critical energy, industrial and civil infrastructure projects.