Accenture Reports Unconventional Oil and Gas Operators Can Reduce Costs through Better Managing Above-Ground Operations

Oil and gas operators can reduce the costs of constructing, drilling and completing unconventional wells, as well as the overall time it takes to complete them, by up to 40 percent through better planning and management of logistics, contractors and materials, according to a new Accenture report.

For the higher performers, this could mean a reduction in costs of $1.3 million to $2.6 million, on a $6.5 million well, and much more for the low performers. Operators can achieve these savings by adopting a more integrated planning process, better management of service contractors, and improved logistics and materials management for fresh and reused water, proppant and installed equipment.

This approach can also reduce the time to deliver an average unconventional well by up to 40 percent. In one example that Accenture analyzed, this meant an estimated reduction of up to 170 days, taking the overall cycle-time down from 464 days to 254 days.

Accenture’s new report, Achieving high performance in unconventional operations: Integrated planning, services, logistics and materials management, is based on a survey of leading operators across multiple basins and in-depth interviews with operators in the Eagle Ford Shale in southern Texas, one of the largest-producing oil and gas fields in North America.

“Using Eagle Ford Shale as a model we found that while operators in the top quartile spend about $6 million per well, some still struggle to deliver wells for twice that amount,” said Melissa Stark, global managing director for new energy at Accenture. “To generate the maximum savings and efficiencies, operators need to carefully balance their investments in technology, continuous improvement and people, and in the low-margin environment of unconventionals, trade-offs will need to be made. For example: Is investment in new rig technology a better choice than offering incentives to your service provider to ensure consistency of crew?”

The report covers several planning and management issues and ways operators can improve performance, including:

• Integrated Planning – With hundreds or thousands of wells in a single field and production forecasts largely driven by drilling new wells, the lack of an integrated planning approach in unconventional operations can lead to missed production targets and capital overruns. To avoid this, operators will need to apply planning tools, simplify planning schedules, break down organizational silos and integrate service providers into the planning process.
• Logistics Management – At 5 million gallons and 1,000 truck movements per well, efficient water use and movements continue to provide a competitive advantage in unconventional operations. But there’s also an opportunity to improve non-water movements, such as proppant and aggregates. It’s critical to make the best use of rail, road and pipeline transport and select the most optimal locations for permanent and temporary storage.
• Management of Drilling and Other Service Contractors – Unconventional development is characterized by a large number of service providers and a large number of handovers on the site. Operators need to ensure better collaboration between these contractors and apply strict financial controls and management to meet risk, commercial and operational requirements.
• Materials Management – Given the number of wells on a multi-well pad and 24-hour crews, an unconventional operation requires a much higher volume of materials than a conventional one. The management of these materials needs to be efficient and agile to ensure timely delivery, in order to minimize downtime and avoid tying up working capital and racking up needless storage expenses.

“Our research suggests that large independent operators are best positioned to implement these improvements, as they tend to have a trade-off mind-set when it comes to investments in technology, continuous improvement and people,” Stark said. “They know that you cannot invest in all three all of the time as that would be too expensive.”

Methodology

Accenture surveyed leading operators in multiple shale basins in North America to determine leading practices in the development of unconventionals. Based on these findings, it conducted half-day interviews with a variety of operators in the Eagle Ford basin to compare how leading operators address similar challenges and to identify areas of differentiation. This information was refined and validated by subject matter advisors at Accenture and oil and gas teams from basins all over the world.

About Accenture

Accenture (NYSE:ACN) is a global management consulting, technology services and outsourcing company, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.