Oil Fracking Case Study

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4. Finance Perspectives: 4.1 Evaluation between Hydraulic Fracturing and Oil Drilling: 4.1.1 Cost Saving: The conventional oil drilling technique is much better from the oil fracking technique in terms of cost of production, as the cost of production of one barrel of oil via oil fracking technique is nearly 70-85 USD per barrel, on the other hand, the cost of conventional oil production estimated to be about 3-6 USD per barrel and even less than that in some cases. According to the Petroleum Policies and Strategic Outlook Center report that the oil fracking boom is just illusions where it is certain assured that dealing with oil fracking is facing technical difficulties that make it very high in production cost compared with the conventional…show more content…
About 70-90% of the well of shale oil drained in its the first year of extraction and the rest of it drained over 5 years later and thus the age of shale oil wells is considered very short compared to the conventional oil-drilling wells that last for up to 25-30 years, add to this that the shale oil does not have associated gas while there are significantly amounts of associated gas during the conventional oil extraction. And thus the associated gas can be used in investments in the field of energy such as in power generation operations. So it can be said that investment in the field of conventional oil drilling has much more return in investment than the shale oil hydraulic…show more content…
at the beginning of shale oil revolution in mid-2014, oil prices were around 100-110 USD and the shale oil producing companies was taking advantage as a result of the heavy demand for this type of oil, and in return was the conventional oil exporting countries, particularly OPEC producing same levels of oil which resulted in excess of supply over demand in the oil market. Then the oil prices began to drop gradually until it reached to low levels to below 50 USD a barrel, which form a major threat to shale oil production companies because of the high production cost along with low prices for oil, which led to a decline of shale oil production as well as the exit of some companies from the oil market as a result of losses. On the other hand, the conventional oil producing countries were not affected too much since the cost of conventional oil production is less than 10 USD a barrel which some countries such as Saudi Arabia was able to live with. It can be seen that the oil producing companies which use hydraulic fracturing technique are significantly affected by the fluctuation of oil prices and therefore the profit margin of these companies is very low. And that's why the conventional oil drilling gives higher profit margins to the companies that invest in it than the hydraulic

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