The Road to Low Cost Well - A Case Study of Successful Cost Optimization Strategies to Remain Relevant in Low Oil Price Environment, Offshore Malaysia

Abstract

X-1 well is one of the wells from project X, a field development project located offshore Peninsular Malaysia. The well has become the signature well for project X as it managed to achieve single digit (in million dollar) well cost, a rare occasion for offshore Malaysia development wells. Project X wells team has taken several initiatives and strategies to reduce well cost and ultimately achieving low cost well (LCW) status as defined by the company's wells department. Since year 2014, crude oil price has fallen from its heyday to as low as USD27 per barrel in 2015. Oil and gas (O&G) operators around the world have been struggling to make profit and fulfill their capital commitment. The company's wells department has since came out with criteria for LCW to be benchmarked by the company's projects. To be recognized as LCW, a well needs to be below USD 15 million with minimum depth of 1500 m and key performance indexes (KPIs) better than or equal to Malaysia Petroleum Management's (MPM) Drilling Minimum Standard without compromising operational safety, reserve development, well integrity and environmental aspects. In the quest to achieve LCW, project X wells team has engaged several strategies to ultimately reduce X-1 well cost by 40% from initial estimated. These strategies involved the optimization of critical areas such as well design & engineering, well planning and operations. After painstakingly planned and implemented above cost saving strategies within restricted time frame, project X wells team has successfully reduced 40% of initially estimated X-1 well cost. The reduction has proven that with focused planning and execution, coupled with full support from management especially with new contracting strategy, LCW is possible and able to help O&G operators to improve their bottom line. Low oil price environment has appeared to be the silver lining in O&G operators’ efforts to drive down cost as it appears to provide the opportunity for operators to re-evaluate their current contracts, planning and operation practices.