What's new in production

Such a reaction, to a recently announced Joint Industry Proposal (JIP) to define best practices in shale completion operations, is understandable. As Endeavor Management said, in its announcement of the JIP, “[We are] of the opinion that shale production is very close to becoming a very attractive investment again, in North America. For many operators, the difference in economics is found in the inefficiency of their drilling and completion operations processes, and the resulting cost differentials.

“Given the apparent lack of consistency among shale operators in executing operations, and in collecting operational data, [we believe] this is the time to pursue solutions to the most pressing issues facing shale operators’ completion practices.”

Operational best practices. For this JIP, Endeavor has broken the shale operational areas down into six study areas for data collection, observations, analysis, benchmarking: site preparation, hydraulic fracturing, zone isolation, milling processes, flowback, economic analysis and impact of benchmarking.

The company’s final report will include detailed economic modeling of the estimated cost savings and detailed recommendations for each participating company to implement in their operations. Also included are the actions necessary to achieve the benchmarked operational practices.

Perusing these six issues, and their study areas, underscores that the JIP goals have more to do with operational best practices than specific hardware. For example, here are the questions that the hydraulic fracturing study area intends to answer:

• What is the interface between various well site services—how is a project team atmosphere created, and who acts as project manager?
• What are best practices in the selection of frac equipment?
• What are the logistical issues around treating lines, and how are efficiencies impacted by rate and pressure?
• What are best practices for monitoring and minimizing erosion risks?
• Which equipment types are susceptible to failure, and what best practices can minimize downtime?
• What are best practices to address coming EPA rules on sand/proppant dust mitigation?
• What are best practices for scaling logistics, as intensity and size of frac jobs increase?
• What are best practices for dealing with water recycling complexities?
• What are best practices to mitigate the negative impact of extreme heat and cold weather conditions on completion operations?
• What are the best practices for use of coordinated/simultaneous operations, taking into account safety, cost and efficiency?

All of the JIP study areas get into the weeds, as they say, to an extent similar to the hydraulic fracturing example. But, that’s not a bad thing. As most everyone knows from hard experience with complex processes, the devil is in the details.

Financial Modeling and Risk Management. The one non-technical area of the proposal may ultimately be the most generally beneficial. In its financial modeling and risk management segment, the proposal observes, “The upstream industry in the Americas has undergone a significant transformation during the last 20 months. This requires a holistic understanding of project valuation and execution, as continuing and new operations are considered.

“It is certain that a significant effort in the shale field development segment is focused into ‘factory drilling,’ while factories in other industries focus on keeping the manufacturing environment as stable as reasonably possible, to maximize throughput efficiency. It is clear that the environment in shale exploration and production is the only element that remains in flux.”

The proposal’s “Financial Modeling of Proposed Scenarios for Decision-Making” area describes sectors of study that intend to develop best practices that result in the most stable financial footing in a challenging business environment. These include economics modeling, the decision-making impact of new economic parameters, and possible banking and investment modeling impacts to project financing. Risk management, financial modeling’s cousin, also is considered.

Driving efficiency. The JIP does not intend to declare a winner in the best generic, multi-stage stimulation technique contest, or among competing technical methods in any other area. Nor should it. But, questions arise—the more paranoid among us may speculate on whether widespread adoption of the best practices eventually defined might have unintended consequences.

For example, the industry may decide on best practices jointly, but it certainly doesn’t innovate jointly, with each company guarding its trade secrets. Will product and service development continue unimpeded? In an epoch when every hole is a tight hole, will JIP participants be willing to share enough useful information to make the exercise worthwhile? Will preferences for one technical method over another get shaded by the results?

On the other hand, it’s been said that the good thing about being a pessimist is that things always turn out better than you expect. This much is certain: when a group of the industry’s brightest minds puts all of its heads together to solve problems, pessimism is a sucker’s bet.

As described by Michael Shook, Endeavor Management executive V.P., the JIP has noble goals. “It is not our intention to promote any particular technology or particular service company’s approach. Our goal is to drive efficiency, regardless of the preferred technologies that operators choose. In fact, we intend to define benchmarks using different…technology and techniques, where those technologies and techniques best fit the basin operations …”

There you have it. It really is time for best practices in shale completions.