Oil Field Standardization? A Pipe Dream or Reality?

            For a long time, many people have discussed and debated the issue of oilfield part standardization as a method of overall cost reduction for drilling. So much, in fact, that in January of this year, the heads of Saudi Aramco, BP Plc, Statoil ASA, and Repsol SpA, as well as senior executives from Royal Dutch Shell Plc, Total SA, and Chevron Corp met behind closed doors at Davos in a push to cut costs by standardizing some of the equipment used in exploration and production. ( Few people seemed to notice. This was a signal the industry may be looking to move away from the bespoke kit designed on a project-by-project basis that currently dominates our industry. These industry leaders seem to believe they can reach a technical consensus with their suppliers so everyone in the industry uses the same kind of kit in some areas thereby reducing costs for new wells.

            Oil Companies have been experimenting with this type of standardization on their own. For example, Anadarko used its “design one, build two” philosophy for its Lucius and Heidelberg spars in the deepwater Gulf of Mexico. Replicating the design reduced engineering man-hours and the cycle time to first production. LLOG also used a similar platform design for its sequential deepwater GoM projects - Who Dat and Delta House - to reduce costs and accelerate cycle time. While the Anadarko and LLOG approaches are different, they share design efficiency as a key project enabler. In fact, Almost half (44 percent) of the upstream companies responding to a recent survey said they would increase standardization in 2016 (

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Ty’s Take

            This week is primarily about the demand side of the equation, coupled with some production concerns. Brexit continues to weigh on investors’ minds as concerns over a global economic slow down in the wake of the historic vote cause concerns over future demand. Additionally, the dollar has continued to strengthen against the British pound, thereby making oil more expensive to holders of other currencies.

            Some supply volatility remains. Libya has announced a potential agreement to consolidate different operating entities into one, thereby raising the possibility of increased production from Libya. Supply outages from Nigeria and Canada are abating and production is ramping up. Couple these factors with an increased U.S. rig count, and markets are skittish.

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By the Numbers

Each week, we strive to provide you a bare bones summary of what happened to the price of WTI, Natural Gas, and Brent Crude. In addition, we summarize the major reports from Genspace, API, and EIA on Inventory Data. And we also throw in the rig count for good measure.

WTI Open on July 05, 2016:   $49.14 WTI as of 12:30 on July 08, 2016: $45.48  Brent Open on July 05, 2016:  $50.61Brent as of 12:30 PM on July 08, 2016:


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Exxon and Chevron Expand

Recent Investment May Indicate Oil Company Confidence in REcovery

            On July 5, 2016, Exxon and Chevron, along with their other partners, announced plans to expand the Tengiz oil field in Kazakhstan ( Together, the companies will invest $36.8 billion to expand the existing field with the hope of ultimately increasing production by 850,000 barrels per day by 2022. Chevron, the operator of the project has a 50% stake, and Exxon Mobil a 25% stake in the field. Interestingly, this follows a June 30 announcement by Exxon in which they indicated they struck gold in the Liza field located in Guyana: they now believe the reserves are double their original estimated and the field could hold between 800 million to 1.4 billion barrels of crude oil.

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Prices Stabilized

Executives and Key Officials Agree Oil Prices Have Stabilized.

            A recent wave of comments by oilfield services executives and high ranking officials seem to point to stabilization and a beginning of an oil price recovery.

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Cost Savings May Be Here To Stay

Good News! Production Cost Savings May be here to stay.

            One hotly debated topic is whether or not the cost savings achieved by producers during the downturn are here to stay. If they are, drilling, particularly shale plays, is profitable even if oil prices are lower therefore reducing volatility and encouraging production because there is less fear of unprofitable wells should oil prices plunge again

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