Paper: Production Cost Control A People Problem

The cost-control procedures to be discussed were developed in the Western Division of Standard Oil Company of Texas, which is a subsidiary of Standard Oil Company of California. The Western Division operates approximately 2500 wells, located in the Permian Basin of West Texas and southeast New Mexico. Production ranges from 1300 ft pumping to 16,000 ft, flowing oil and gas. Operated oil and gas equivalent production was 132,000 BOPD in 1969 and will be approximately 145,000 BOPD in 1970. In early 1961 the cost-control system now used in the Western Division of Sotex was visualized. It could not be implemented, however, because the records necessary for control were not available. In 1963-64 this system was developed and sold to operating people with the result that the steady 10 per cent per year increase in field controllable costs was arrested. There has been no decrease in production as a result of the program. On the contrary, the Division's production has increased considerably each year without a corresponding increase in cost. With optimum producing expense as its eventual objective, the program's ultimate goal is maximum profits at all (times. Success is attributable to direct and active support by Division and District management. The system identifies areas of abnormal cost by comparing actual costs with forecast goals based on guiding standards. Comparison of actual costs vs. guides identifies the particular fields in which costs are above the forecast, tells why, and does so in time to allow corrective action.