Pressured for profit, oil majors bet big on shale technology

Global Stock Markets

For the last decade, smaller oil companies have led the way in shale technology, slashing costs by as much as half with breakthroughs such as horizontal drilling and hydraulic fracking that turned the United States into the world’s fastest-growing energy exporter.

Now, oil majors that were slow to seize on shale are seeking further efficiencies by adapting technologies for highly automated offshore operations to shale and pursuing advances in digitalization that have reshaped industries from auto manufacturing to retail.

The technological push comes amid worries that U.S. shale gains are slowing as investors press for higher financial returns. Many investors want producers to restrain spending and focus on generating higher returns, not volume, prompting some to pull back on drilling.

Production at a majority of publicly traded shale producers rose just 1.3 percent over the first three quarters this year, according to Morgan Stanley

Chevron Corpis using drones equipped with thermal imaging to detect leaks in oil tanks and pipelines across its shale fields, avoiding traditional ground inspections and lengthy shutdowns.

Ryan Lance, chief executive of ConocoPhillips  - the largest U.S. independent oil and gas producer - sees ample opportunity to boost both profits and output. Conoco also oversees remote drilling operations in a similar way to Shell. 

Shell, in an initiative called “iShale,” has marshaled technology from a dozen oilfield suppliers, including devices from subsea specialist TechnipFMC Plc  that separate fracking sand from oil and well-control software from Emerson Electric Co , to bring more automation and data analysis to shale operations.

Oil firms currently spend about $5.9 million to drill a new shale well, according to consultancy Rystad Energy. Shell expects to chop that cost to less than $4 million apiece by the end of the decade.  

 Anadarko Petroleum Statoiland others are using DNA sequencing to pinpoint high potential areas, collecting DNA from microbes in oil to search for the same DNA in rock samples. 

ConocoPhillips next year will start using magnetic resonance imaging (MRI) to analyze Permian rock samples and find the best drilling locations, a technique the company first developed for its Alaskan offshore operations.

EOG Resources Inc last year began using a detailed analysis of the oil quality of its fields. The analysis, designed by Houston start-up Premier Oilfield Laboratories, helps to speed decisions on fracking locations and avoid less productive sites.