Murphy Pounds Sand | Russell T. Rudy Energy LLC
The recent oil price collapse resulted in massive reductions in capital spending, headcount and rig counts across the entire energy sector. Many industry observers predicted that oil production would decrease precipitously as a result. However, as “World Oil” reveals in a recent article, actual crude output has remained relatively stable. In fact, it is only 3% below its 40 year high.
A number of factors have contributed to this surprising performance, but one of them appears to be the ever increasing amounts of sand used in fracking shale oil wells. Fracking has been in widespread use for decades. Water, under very high pressure, is forced into the reservoir rock to crack it open, and sand is used to elongate these fractures, make them more jagged, and prop them open. Given the very tight nature of shale, much larger amounts of sand are needed than had been the case with vertical wells in traditional reservoirs.
There has been an ever increasing trend toward more sand to frack shale wells. In 2012 the average well in the Eagle Ford shale in South Texas used less than 1,000 pounds of sand per every foot of well. A year later that had increased to 1,200 pounds, and last year it was over 1,500. Shale operators are trying to determine at what point additional sand no longer contributes to increased oil production. According to a study by William Foiles and Andrew Cosgrave with Bloomberg Intelligence, we have not reached that point yet. In fact, they found that in some cases, increased use of sand can triple production.
Of course, there is a point at which additional use of sand becomes counterproductive. However, with sand prices 30% lower than at the peak of the shale revolution, operators such as Murphy Oil and EOG Resources are trying to determine how much is too much when it comes to sand. Brett Pennington, the head of exploration at Murphy, is conducting an experiment in the Eagle Ford to determine exactly where that point is. Pennington reasons “I can’t control the price of the commodity (crude oil). The only thing we can do is get better and faster and cheaper”. While the exact location of Murphy’s test wells is a closely guarded secret, early results are expected within the next few months.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/10/01/america-s-oil-output-refuses-to-collapse-here-s-one-reason-why .
