U.S. Shale Nears Limits of Productivity Gains
When shale tips into decline, we will go the way of New Zealand
Natural depletion in shale reservoirs is signaling the end of rapid growth.
Despite advancements like AI driving cost reductions and improving well output, there are physical and technological limits to shale production.
Declining prime acreage and natural reservoir limits suggest that U.S. shale’s production growth peak is near.
U.S. shale is the biggest source of oil and gas output growth on a global scale. It’s in every forecast and projection that sees continued depression in oil prices. But that role as a growth driver might be coming to an end due to natural processes.
Well productivity and efficiency improvements have been in the spotlight of U.S. shale oil and gas discourse ever since the industry served up a massive surprise to analysts by reducing the total rig count but boosting production by 1 million bpd last year.
The unexpected jump in output was attributed to efficiency gains that made it possible for drillers to extract more oil at lower cost, driving the substantial increase in 2023 overall production of hydrocarbons. Now, the Energy Information Administration has predicted that productivity improvements and efficiency gains would continue driving output higher. The question, as usual, is just how high.
In its latest Shot-Term Energy Outlook, the EIA forecast that total U.S. oil production next year would hit 13.5 million barrels daily. That would be up from an estimated 13.2 million barrels daily this year. The estimated 2024 average itself was an increase from 12.9 million bpd for 2023. In other words, over the past two years, total U.S. production of crude oil has increased at a rate of 300,000 barrels daily. Yet shale specifically boomed—but this is about to end.
Well productivity in the Permian, the star shale play in the U.S. unconventional oil and gas industry, has declined by 15% since 2020, according to data from Enverus. However, at the same time, producers are drilling longer wells, and they are doing it more efficiently than before, squeezing ever more oil and creating a perception that there are no limits to the technological advancements that can keep that oil flowing.
As usual, there is a “but”. In this case, it goes like this: U.S. shale drillers—and, more specifically, drilling service providers—have done wonders of efficiency, but there are limits to all technological advancements. More importantly, there are also natural limits to shale reservoirs.
“We’ve tripled oil production in the last 15 years and we have doubled natural gas production.” But “there’s not a lot of gas left in the tank,” the chief executive of Quantum Energy Partners, Wil VanLoh, told Bloomberg back in September. “The US shale revolution has run its course,” VanLoh also said at the time, echoing warnings that some investors have been voicing for years, namely, that the pace of production growth that the U.S. shale industry has been keeping is unsustainable over a longer term.
Yet this doesn’t mean that growth is over for good. For one thing, AI has entered the oil patch and is helping drive additional efficiency gains, which has lowered breakeven costs in some parts of the patch, motivating higher production. According to Evercore ISI, AI and other tech could bring costs in the shale patch down by double digits as soon as this year. “There’ll be significant cost savings, at a minimum double digits, but probably in the 25% to 50% of cost savings in certain scenarios,” one analyst from KPMG, which compiled a report on the topic, told Bloomberg earlier this year.
There is also the factor of resilient demand for oil—perhaps more resilient than some forecasters would like it to be. This is, in fact, the strongest motivator for production growth anywhere. If there is demand for oil, there will be supply to respond to that demand—especially if producers can get the oil out of the ground more cheaply than before.
This is precisely what’s happening in much of the shale patch. In the Permian specifically, output from newly drilled wells has increased from some 350,000 bpd back in 2019 to over 450,000 bpd this year, per a recent report by the Energy Information Administration looking into the effects of improved efficiency in well output among 34 public oil companies. In evidence of the constraints that the industry faces, these same 34 public companies are currently producing as much oil as they were producing at the start of 2020—despite all the efficiency improvements, productivity gains, and lower costs.
Some would explain this with weakening demand, even though the oil demand growth trajectory remains on an upward curve despite apocalyptic predictions. A more likely reason for the EIA data—besides the devastating impact of pandemic lockdowns on demand—is natural depletion in some fields that offset stronger-than-expected growth in others.
U.S. shale producers are doing more with less, which has become something of their modus operandi in the past few years. Yet natural depletion is one fact of life that no one can change, and this fact of life means that as drillers run out of prime acreage and move on to relatively lower-quality reservoirs, production growth peak is on the horizon, as oilfield veteran David Messler wrote for Oilprice last year. Efficiency gains are certainly important—especially for investors who expect a steady stream of returns—but like everything else, these can’t last forever. Source
The Precarious State of the Shale Oil Industry:
Try to get your head around the idea that by 2027, US tight oil production might be 12 MM BOPD, not the 9 MM it is now, which is what cheerleaders say it will be, and that means we'll actually have to find and extract 12 MM BOPD... before we can ever grow the new 3 MM. Man, that is a slew of new wells!
That’s gonna take like...four times the HZ wells we've already drilled in the US.
Where? Read More
Conventional Oil Sources peaked in 2008 and the Shale binge has now spoiled US reserves, top investor warns Financial Times.
Preface. Conventional crude oil production may have already peaked in 2008 at 69.5million barrels per day (mb/d) according to Europe’s International Energy Agency (IEA 2018 p45). The U.S. Energy Information Agency shows global peak crude oil production at a later date in 2018 at 82.9mb/d (EIA 2020) because they included tight oil, oil sands, and deep-sea oil. Though it will take several years of lower oil production to be sure the peak occurred. Regardless, world production has been on a plateau since 2005.
What’s saved the world from oil decline was unconventional tight “fracked” oil, which accounted for 63% of total U.S. crude oil production in 2019 and 83% of global oil growth from 2009 to 2019. So it’s a big deal if we’ve reached the peak of fracked oil, because that is also the peak of both conventional and unconventional oil and the decline of all oil in the future.
Some key points from this Financial Times article: Read More
What Should be Done?
The Men Who Run the World have been aware since at least the 1950’s that barring a miracle this moment would arrive. In the following decades they left no stone unturned trying to transition off of fossil fuels spending hundreds of billions of dollars trying to develop alternative, affordable energy sources.
They eventually realized the futility of this endeavour and in an oak paneled room they gathered with their Deep State minions to decide what should be done.
The Deep State presented a very grim depiction of what would happen should the lights go off permanently, the supply chains collapse and 8+ billion humans left on the cold dark streets, angry, and starving. They referenced specific situations where starving humans resorted to cannibalism and explained that this would infinitely worse because those other incidents occurred in isolation and were temporary.
The following image was included in the presentation along with these.
The certainty of extreme violence including mass rape and murder was discussed as the most vile elements in society would be operating without the constraints of the police, courts and military forces. It was suggested that even previously law-abiding men and women would turn to violence to try to survive.
There was an extensive presentation on the issue of spent nuclear fuel and what would happen when the power goes out on the cooling systems.
That presentation concluded with the statement, “Gentlemen, this is an extinction event.”
The Biological Weapons team was then be asked to formulate a blueprint to pre-empt this holocaust and they came up with The Ultimate Extermination Plan.
I was not at that meeting, but I have pieced together a rough idea of how they planned to reduce the suffering as much as possible by killing as many of the 8+ billion prior to the collapse of civilization.
As we are aware, they moved heaven and earth to convince as many of the 8+ billion to inject lipid nano particles (which on their own are very dangerous substances) in order to bypass the body’s immune system and embed spike protein factories in the cells of the recipients.
They must have had a very good reason to go to so much trouble. I suspect 2025 is the year we will find out why they did this.
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And now for Barnyard Animal news! Let's hope we can fix this with a global thermal nuclear war. Just launch all the Nukes and lets rid stupidity from this Planet.
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https://www.zerohedge.com/political/prank-tiktoker-busted-after-filming-himself-spraying-walmart-produce-poison