Originally published on Chestnut Exploration & Production Inc. by Mark Plummer, founder and CEO.
Most of the oil and gas industry is made up of conventional and unconventional drilling. But what is the difference and what does the future look like for these two types of drilling techniques? You cannot distinguish whether the oil in the tank is produced from conventional or unconventional sand or reservoir. Once the oil is on the surface it is just another barrel of oil. The difference between the two is the cost of getting the barrel to the surface.
Conventional Oil
The conventional oil drilling process includes the drilling of a well, a reservoir having pressure and oil flowing out of the ground. Eventually as a well gets older, drillers must put a pumpjack on the well to pump the oil out of it. Conventional oil drilling is cheaper than unconventional oil drilling.
Unconventional Oil
Unconventional drilling is a longer process. Usually the well is tight and the movement of oil takes longer geologic time. To alleviate the slow process, Chestnut Exploration & Production drills the oil horizontally and fracks it. The fracking process opens up the rock and lets the oil flow more quickly. Unconventional oil drilling is a much more expensive process than conventional oil drilling.
Are the two techniques in competition with each other?
Many people believe that conventional and unconventional oil are in competition with one another. However, the opposite is true. Both drilling techniques go hand-in-hand with each other. For example, in the Eagle Ford Shale, an underlying reservoir to the conventional sands that were being produced is in an area where there is very old production. At first, companies were only pumping small amounts of oil per day. Soon, companies began horizontal drilling and fracking the area, and now it is economically producible. At first the assets were worthless, but they quickly became worth millions of dollars because of the unconventional oil field underneath the conventional oil field.
Which technique is most profitable?
Some companies specialize in conventional or unconventional drilling. Most of the time companies begin drilling conventional oil only, but then begin unconventional drilling later on. While it can be very expensive, unconventional oil plays have the opportunity to be repeated many times. If you drill five wells on a spread across 100,000 acres, and the five wells are repeatable, you know you can drill another 1,000 more wells. In the end, it becomes more like an oil and gas manufacturing operation.
Environmental approaches
With conventional oil drilling techniques, companies do not need as much work onshore because the mechanical and carbon footprints for drilling and completion operations are much smaller. On the other hand, the beauty of unconventional drilling is its repeatability. Companies may run into mechanical issues, but it’s similar to driving a car; you put a key in the ignition, the car starts and you are driving down the road.
Is conventional oil declining?
In the oil and gas industry today there is a great mixture of both conventional and unconventional drilling. Finding fields that will produce a million barrels of oil per day is hard to find and does not come along very often. The good news is we have not completely discovered every crevice of the world, and there is the possibility to discover land with oil awaiting.
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