Not Deterred By Huge Risks, Shell Opts For Megaprojects
It is curious then that Royal Dutch Shell is not ready to give up on the huge complex oil project. It is only a few weeks away from starting to drill in the Chukchi Sea, a campaign that has cost the company somewhere in the neighborhood of $7 billion so far, with very little results to show for its troubles. Shell is committing another $1 billion this year, and it appears that it will only be able to drill one well.
By Nick Cunningham: 6 July 2015
U.S. shale has offered the oil industry a business model that is different from conventional drilling of the past.
High initial decline rates, especially compared to conventional wells, requires companies to continuously drill to keep up production. But with lower upfront costs and shorter ramp up times, shale drilling is arguably less risky than a multibillion-dollar megaproject that the oil majors had become accustomed to over the past decade. And in a period in which prices are relatively weak, shale could allow exploration companies to increase drilling or throttle back depending on market conditions, providing a degree of flexibility over conventional drilling that often has longer lead times.
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