• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 5 hours Here We Go: New York Lawmakers Pass Aggressive Law To Fight Climate Change
  • 15 mins The Inconvenient Truth Of Electric Cars
  • 4 hours Iran downs US drone. No military response . . Just Completely Destroy their Economy. Can Senator Kerry be tried for aiding enemy ?
  • 3 hours Oil Demand Needs to Halve: Equinor
  • 8 hours Ireland To Ban New Petrol And Diesel Vehicles From 2030
  • 5 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 2 hours Solar Panels at 26 cents per watt
  • 3 mins The Plastics Problem
  • 9 hours NATO Article 5: Attack on one member is attack on all. Members all must come to defense . . . NOT facilitate financial transactions to circumvent and foil US Sanctions. Somebody please tell Angela.
  • 7 hours Is $60/Bbl WTI still considered a break even for Shale Oil
  • 8 hours Wonders of Shale - Gas, bringing investments and jobs to the US
  • 4 hours Hydrogen FTW... Some Day
  • 3 hours Section 232 Uranium
  • 1 hour Huge UK Gas Discovery
  • 59 mins Green vs. Coal: Bavaria Seeks Fast-Track German Coal Exit in Snub to Merkel Plan
Alt Text

Have Canadian Oil Prices Hit The Sweet Spot?

Canadian oil prices have recovered…

Alt Text

Oil Prices Jump On Hopes Of End To U.S.-China Trade War

Oil prices erased earlier losses…

Alt Text

Oil Just Had Its Worst Run Since 2008

Oil prices have entered bear…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

Trending Discussions

This Innovation Will Help U.S. Companies Win The Oil Price War

Although some US oil companies are struggling with low oil prices, a new wave of innovation is hitting the oil patch, allowing for a significant reduction in drilling costs.

A variety of different improvements in production are starting to show up at all levels across the industry from small firms to oil majors. Statoil for example recently noted that it is experimenting with different types of sand and chemicals to improve production. And a number of companies have noted that they are moving from drilling wells one at a time, on an ad hoc basis, to drilling multiple wells at once. GE Oil & Gas has produced variable-use pumps that can be turned on and off in order to save energy versus the previous 24-hour a day operation cycle. Related: Could This New Business Model Save Fracking?

The end result of these actions is that per-barrel costs of oil have fallen to around $60 today versus $75 a year ago according to Citi analysts. And executives from oil companies are now forecasting that per barrel prices could fall to $50 or less before long. America has not yet lost the price war.

Now, one small Denver-based oil company has come up with a whole new model for producing in order to further drive down costs. Described as an “oil factory,” Liberty Resources LLC and its CEO Chris Wright have developed a novel method for extracting oil. The firm is starting out by doing everything it can to eliminate the need for trucks traveling to and from its site. The company notes that trucks are often an irritant with local residents and more importantly, they add significantly to the cost of producing oil. Related: Who Is The Biggest Player In Energy?

To do that Liberty will build a series of pipelines to its massive 10,000 acre Bakken site. The firm has pipelines that carry water and gas produced by wells, as well as other pipelines to carry oil. This technique is called ‘centralized resources’ and while other firms like Continental have explored it to some extent, Liberty is pioneering the process. In essence, the firm is trying to bring the efficiency focus of industrial engineering to the production focus of petroleum engineering.

In addition, like Statoil and a few other larger oil firms, Liberty is also focused on creating a production process than can be stopped and started based on optimal production times, costs, and oil prices. This could be an invaluable capability. Take Russia for example. Russian oil wells will freeze if they are shut down, and the country lacks significant storage capacity. As a result, Russian oil producers cannot respond to price downturns. Related: U.S. Could Go All Out On Offshore Exploration

Moreover, Liberty is developing the entire 10,000-acre site to be fracked at once with nearly a 100 oil wells operating simultaneously. By drilling multiple wells at once and controlling inputs and output supply, the firm has significant cost advantages versus traditional ad hoc production methods. Even employee costs are lower, with Liberty citing the use of a third less workers than a conventional production process.

So what is the combined result of all these efficiency improvements? Liberty says it will still make money even with oil at $50 a barrel. And the firm expects costs to keep falling as oil service companies become more efficient and lower their own prices. At these prices and efficiency levels, US production becomes competitive with virtually any other oil source. And if efficiency gains continue at this pace, the US may weather the onslaught of Saudi oil much better than many expected.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment
  • Lee James on May 18 2015 said:
    Not sure the developments cited in the article are significant. Spin? Main thing is, the petroleum service countries are hungry for work. Investors are hungry for miracle technologies and operational breakthroughs.

    We need to shift to clean energy.
  • Seth on May 19 2015 said:
    "So what is the combined result of all these efficiency improvements? Liberty says it will still make money even with oil at $50 a barrel. And the firm expects costs to keep falling as oil service companies become more efficient and lower their own prices. At these prices and efficiency levels, US production becomes competitive with virtually any other oil source. And if efficiency gains continue at this pace, the US may weather the onslaught of Saudi oil much better than many expected."

    Nice article and the big picture is the cost per barrel continues to dramatically drop and will continue to drop with new approaches, and technology. Even with Iran likely joining the party driving down prices even further, U.S. shale will thrive. If it drops below $40, shale will act as a strategic reserve keeping a ceiling on prices and this harms the economies of countries like Saudi Arabia, Russia, Iran, and Venezuela, leaving them less money to finance mischief.
  • Gary on May 26 2015 said:
    America does not have to beat the Saudi price. Just the price needed by Venezuela, Russia, tar sand and other high cost open countries.

    Russia and the Saudis can't supply the world.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News