Core Storage: Why Now Is the Time to Outsource
Core and cuttings hold secrets that may lead to big oil and gas plays. However, this information is lost when the materials are not stored properly. Here is an overview on why now is the time to outsource core storage.
In decades past, many oil and gas producers operated both refineries and drilling rigs. At times, they even operated the pipelines that transported their product to market. With each wave of price downturns reported by the U.S. Energy Information Administration over the past 40 years, producers have given up most of these assets and operations. However, there are still some remaining in-house functions, such as core storage, that should also be shed.
According to a recent white paper titled "Outsource Drill Core Storage to Increase Oil & Gas Operational and Financial Efficiency," upstream companies are starting to realize that preserving core samples and maintaining a large facility require a huge investment of time and money.
In-house core storage further wastes resources because many oil and gas producers leave core and cuttings management to their geological and geophysical (G&G) personnel. This is not the most effective use of employees whose primary task is to find new oil and gas reserves. Additionally, many producers do not maintain a storage facility. Thus, their experts do not have easy access to the valuable physical rock samples, which are often parked at field offices.
This environment is neither particularly secure nor ideal for preserving and properly examining the rock. Upon procuring a location and equipment for examination, the G&G experts need to lay out the material sequentially. While the G&G team works to solve problems related to travel logistics, facility preparation and equipment procurement, the clock is ticking. During this complicated process, the G&G team may find the core and cuttings are degraded, which makes them useless.
By outsourcing core storage, producers can free up their facilities so they can be used for more margin-enhancing activities. In fact, producers now generate more cuttings than ever in their unconventional resource developments, drilling to as much as 12,000 feet below the surface and up to another 10,000 feet laterally. According to the white paper, by outsourcing core storage, management, archiving and security, G&G companies can free their personnel to find new oil and gas reserves, while still maintaining their access to useful physical rock data.
Minding the Margin
According to CME Group, U.S. oil futures are trending below $70. Furthermore, it reports U.S. gas futures are expected to be below $4 for the next several years. Given these economic conditions, it is clear that it is now a great time for producers to outsource the storage and management of their core.
"Leveraging the expertise of third parties with geological core storage solutions is a natural and logical extension of the outsourcing process and is gaining high recognition in the oil and gas industry," according to the white paper.
By actively procuring secure, third-party storage of their seismic data, well logs and other records, producers can fully understand their assets and how to enhance their value. Enlisting a single provider lets producers bring economies of scale, and outsourcing the storage and management of their core is a great way for them to save both time and money.