Friday, March 28, 2008
Stripper Well Economics
"The oil rig rumbles to life, breaking the early-morning quiet in this neighborhood of urban townhouses and big box stores with a deafening screech and roar. As sleepy commuters idle at a nearby stop light, a grease-caked crew scrambles to repair and expand one of the dozens of aging oil wells thart dot the landscape of this small, hillside city about 30 miles south of Los Angeles [Signal Hill]. With oil prices of $100 a barrel, producers nationwide are suddenly taking a second look at decades-old wells that were considered tapped out and unprofitable when oil sold for one-fifth the price or less. ... 'A lot of these wells have been sitting idle for many years,' said Mick Conner, who hopes to increase daily production on his half-dozen wells", Houston Chronicle, 23 March 2008.
Economics works. Even in the case of oil. As the price rises, extramarginal wells become intramarginal and produce again.