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Permalink Reply by Joseph-Ohio on August 5, 2015 at 6:48am

Maybe they also fracture off shore wells.

Greater or lesser or same risk for everyone offshore or landside I wonder ?

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Permalink Reply by Mike Murphy on August 5, 2015 at 7:02am

yes they frac off shore wells too    there is a lot more risk involved in off shore drilling ......look at the bp mess and offshore drilling is a lot more costly

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Permalink Reply by Joseph-Ohio on August 5, 2015 at 7:51am

That's what I was thinking about (BP) when I posed the question.

That was (and still is) a huge mess.

Hard getting over that.

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Permalink Reply by adam sorell on August 5, 2015 at 12:52pm

I mean convnetion sea drillling like deep water rigs and jack up rigs.  I wonder which are more in a hole companies like Seadrill ,Oceanrig, Transocean or frackers like Magnum Hunter, Sand Ridge Energy, Chesepeake etc,

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Permalink Reply by Mike Murphy on August 5, 2015 at 1:09pm

their all in the hole ......big companies as will as small companies    read the papers their is abunch on the verge of bankrupting ........but getting back to your question it is cheaper to drill on land    oil is right near 45 dollars a barrel a year ago it was over 90 a barrel their is no profit at those prices  ng is around 270 a thousand no profit at those prices

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Permalink Reply by Charles Hurlburt on August 5, 2015 at 1:55pm

First,  companies such as Magnum Hunter et al are NOT fracking companies.

They are petroleum producers who, from time to time, hire fracking companies such as Halliburton or Sclumberger, to fracture treat wells,  They also, from time to time, hire contract drilling companies to drill their wells,

Transocean et al are NOT petroleum producers.  They are contract drilling companies who get hired by Petroleum producers from time to time, to drill wells..

As drilling contractors, they have no financial interest in how productive the wells become.  Dry hole or gusher, they get paid just the same.

The oil & gas producers, of course, DO have a very real interest in well productivity.  They invest ton of money the public never sees in figuring out where, and how, and when and by whom wells should be drilled and completed.  They pick their contractor, buy the leases pay for drilling and completing the  wells live with the PR failures their operations (including their contractors operations) cause and all the rest of the head-aches producing oil & gas bring.

As compensation for that, they get the WI share (7/8 to 3/4 is common) of the vale of the production from which they must pay all production costs.

Now as to which type of operation is the bigger risks offshore drilling is orders of magnitude more expensive than land based drilling; just getting a stable place to "work";i.e. the production platform, may easily cost more that the entire land passed operation.  The  equipment to drill costs way more and is way more complicated in operation, than a land based rig.  Operating costs are far higher, and the potential down side if something goes wrong, well you all know about Deepwater Horizon, I'm sure.

The technical and economic risk is greater  offshore; the political risk is usually greater as well (see the idiots hanging off the bridge in Portland Oregon, "stopping" a barge carrying safety equipment from getting to the Artic Ocean to drill for Shell), but we have seen how the "kill the drill" movement has shut down exploration and development in New York, so that's not an "always" issue.

In order to account for these risks the producing company must balance them against the potential reward.  If the up side appears to be worth it, then they will spend the capital..

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Permalink Reply by Joseph-Ohio on August 5, 2015 at 9:36pm

Thank you for the insight Charles.

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Permalink Reply by Jim Litwinowicz on August 6, 2015 at 3:57am

Good posts on the risks involved but not much on the rewards. With all that risk, one would wonder why anyone would ever do deep drilling offshore.

The answer is that off shore wells have a history of massive oil production that holds relatively steady for several years. And a company can drill a lot of wells off a single platform.  Additionally, once that spot is depleted modern platforms can be moved to the next location.

The bottom line is ROI.  Which offer the best, off shore or land based?  For a long time off shore held the advantage for the majors that could afford it. Land fields were old and depleted. But now with new techniques like horizontal drilling and HVHF, land based appears to have the advantage.

A big question facing E & Ps now is planning on the future.  With crude so low, they don't want to invest billions in new offshore development that take years for a return on investments, and may even lose money if crude remains so low.  But if they quit off shore now and  fracturing phase runs its course quickly, we could end up with an oil shortage as the majors need time to get back to offshore production.

Oil production is in constant flux and it is hard to predict ten years out. Will even better techniques continue to benefit land-based drilling or will it be necessary to return to deep off shore drilling, especially in more difficult areas like Arctic Ocean drilling?

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