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Going Long: The End of Easy Oil

By Elliott H. Gue on Oct. 5, 2012

Oil-field services outfit Halliburton (NYSE: HAL) estimates that unconventional oil and gas fields located onshore require three times to five times as much work as traditional wells.

Although the shale oil and gas revolution has taken the domestic energy market by storm from seemingly nowhere, geologists and oilmen long knew of the hydrocarbons trapped in these formations. However, the technology and economic incentive to exploit these resources didn’t exist until somewhat recently.

The reservoir rock in conventional fields exhibits enough porosity and permeability for the hydrocarbons to flow into the well. Shale formations, on the other hand, lack these pathways and must undergo hydraulic fracturing, a process that produces a network of cracks through which the oil and gas can flow. Hydraulic fracturing involves pumping large quantities of water and some chemicals into the formation until the reservoir rock cracks. The inclusion of a proppant–usually sand or ceramic material–ensures that these fissures remain open.

Hydraulic fracturing greatly increases production costs relative to traditional onshore wells.

In the offshore market, even shallow-water developments–the source of 45 percent of all oil reserves booked in the last decade–require five times the services content as a conventional onshore field. Deepwater fields can require between 11 and 13 times this service intensity.

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