US drillers try to thwart OPEC threat

Associated Press

NEW YORK

OPEC and lower global oil prices delivered a one-two punch to the drillers in North Dakota and Texas who brought the U.S. one of the biggest booms in the history of the global oil industry.

Now they are fighting back.

Companies are leaning on new techniques and technology to get more oil out of every well they drill, and furiously cutting costs in an effort to keep U.S. oil competitive with much lower-cost oil flowing out of the Middle East, Russia and elsewhere.

Spurred by rising global oil prices, U.S. drillers learned to tap crude trapped in shale starting in the middle of last decade and brought about a surprising boom that made the U.S. the biggest oil and gas producer in the world. The increase alone in daily U.S. production since 2008 — nearly 4.5 million barrels per day — is more than any OPEC country produces other than Saudi Arabia.

But as oil flowed out and revenue poured in, costs weren’t the main concern. Drilling in shale, also known as “tight rock,” is expensive because the rock must be fractured with high-pressure water and chemicals to get oil to flow. It became more expensive as the drilling frenzy pushed up costs for labor, material, equipment and services. In a dash to get to oil quickly, drillers didn’t always take the time to use the best technology to analyze each well.

When oil collapsed from $100 to below $50, once-profitable projects turned into money losers. OPEC added to the pressure by keeping production high, saying it didn’t want to lose customers to U.S. shale drillers. OPEC nations still can make good profits at low oil prices because their crude costs $10 or less per barrel to produce.

To compete, drillers have to find ways to get more oil out of each well, pushing down the cost for each barrel. Experts estimate that shale drillers pull up just 5 to 8 percent of the oil in place.

Engineers have adapted some of the best sensor technology and mathematical models, developed first for deep offshore drilling, to see into the rock better. As they drill, they use imaging technology to find natural cracks in the rock that they can then use as a target when they fracture the rock, to leverage natural highways for oil and gas.

The companies also are getting much faster.