LUFKIN (Reuters) – In the pine forests of eastern Texas, oilfield workers equipped with virtual-reality goggles are helping BP’s shale business turn a profit for the first time.
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Thousands of automated wells feed data on their performance into the firm’s supercomputers each evening. If they show a need for maintenance, an Uber-style system summons a subcontracted repair firm to keep the shale wells flowing at optimal output and minimal cost.
Such technology has helped slash BP’s shale oil and natural gas production costs by 34 percent over five years. The shale business turned a profit for the first time in 2017, BP said, although the company declined to disclose the figure.
BP’s progress in shale underpinned its $10.5 billion acquisition last week of BHP Billiton’s US shale operations. The deal highlighted BP’s newfound confidence in a sector that has challenged oil majors, which initially struggled to adjust to the quick pace and fast-evolving methods used to tap shale with horizontal drilling and hydraulic fracturing.
BP and other majors that had traditionally focused on large, multi-year conventional drilling projects – such as Royal Dutch Shell and Chevron – were left behind when the shale boom took off a decade ago.
The British energy giant is now catching up with smaller rivals, using technology and its institutional knowledge from global operations to push shale into a second phase that it hopes will reward its massive scale over the agility of smaller competitors.
“We spent the last four years retooling our business and getting ready for this opportunity,” David Lawler, who heads BP’s shale business, said in a call with analysts after the BHP deal announcement. “We’re at the lowest production costs we’ve seen in many years. We’ll take that model, put that to work on these (BHP) assets and dramatically improve production and performance.”
The BHP deal will transform BP into one of the world’s biggest shale oil and gas producers. BP’s total shale output will increase from 315,000 barrels of oil equivalent per day (boed) to more than 500,000 boed. Its reserves will jump 57 percent to 12.7 billion barrels of oil equivalent.
BP’s output of shale oil – which is worth more than natural gas – is poised to rise from about 10,000 barrels of oil per day (bpd) to about 200,000 bpd by the middle of the next decade.