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Why The U.S. Shale Boom May Come To Abrupt End
Submitted by Arthur Berman via OilPrice.com,
U.S tight oil production from shale plays will fall more quickly than most assume.
Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.
Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling. At the same time, average well productivity has decreased by about one-third.
This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts.
Most shale wells today are drilled from pads. One rig drills many wells from the same surface location, as shown in the diagram below
The Eagle Ford Shale play in South Texas is one of the major contributors to increased U.S. oil production. A few charts from the Eagle Ford play will demonstrate why I believe that U.S. production will fall sooner and more sharply than many analysts predict.
The first chart shows that the number of active drilling rigs (left-hand scale) in the Eagle Ford Shale play stabilized at approximately 200 rigs as pad drilling became common. The number of producing wells (lower scale), however, has continued to increase. This is because a single rig can drill many wells without taking the time to demobilize and remobilize. In other words, drilling has become more efficient as less time is needed to drill a greater number of wells.
The next chart below shows Eagle Ford oil production, the number of producing wells and the number of active drilling rigs versus time.
This chart shows that production growth has not kept pace with the rate of increase in new producing wells since mid-2012. That is because the performance of newer wells is not as good as earlier wells.
The final chart shows that the rate of daily production is now more dependent on the number of drilling rigs than on the number of producing wells. Rig productivity--the barrels per day per rig--has increased but average well productivity--the barrels per day per well--has decreased. In other words, production can only be maintained by drilling an ever-increasing number of wells.
Average rig productivity has almost tripled since early 2012. Average well productivity has decreased by one-third over the same period. This means that every rig taken out of service today has more than three times the impact on daily production as before pad drilling became common.
Most experts do not anticipate any significant decrease in U.S. tight oil production in the first half of 2015. Their analyses may not have accounted for the effect of pad drilling and the decrease in average well productivity.
Using the Eagle Ford Shale as an example, U.S. oil production should fall sooner and more sharply than many anticipate. This will be a good thing for oil price recovery but maybe not such a good thing for the future profitability of the plays.
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busted
musted
>> A new type of investment just recently became available to individual oil & gas investors. Because of the recent crash in oil and the timing of a new law, it could be the most lucrative investment in modern history. I want to give you a step-by-step guide (at no cost) on how you can get started and potentially retire from it.
So hot shot, give it up. /s
Peak Oil happens in 2015, no doubt about it now
Peak Oil happens in 2015, no doubt about it now
Peak trucknutz happens in 2015 as well, no doubt about it.
Peak Oil during a demand recession?
Don't think so.
Frikken fracked.
rusted
thrusted
agents can't be trusted?
Disgusted.
And can't be trusted.
Kinda like a nurse moving a needle around in your arm trying to find a vein.....
… or Bill Cosby at a slumber party.
Just got the word from my brother, who works in the oil fields, that they fired his whole crew. The weaker companies are going to fall by the side rapidly.
but but recovery? record low unemployed, new work places, cheap gas and oil are good for economy?
I think your brother have a questions about "recovery" xD
Many people have been getting fired and/or the companies have been folding under. This isn't good, many of those 6 figure checks are gone and many of those companies where loaned money and debt issued for that money on future finds and profits that aren't happening.
As I've said a number of times (since I've been here): Big fish will eat little fish.
IOW: Big Oil gets Little Boil. For pennies on the dollar. Wall St and Houston are laughing their ass off, at the expense of all those American Suckers, aka Entrepreneurs.
Same as ever.
noben, note that in a certain way, this is implicit in any strongly financialized economy, i.e. one where entrepreneurs are urged to get on financial markets for financing through stocks and bonds
because those markets immediately crash down the value of the smaller entrepreneurs, through the valuation of stocks and bonds, and so "facilitate"... mergers
contrast this with the rest of the world where you still find lots of fully private entrepreneurs that have their own money in equity and bank loans based on collateral for leverage
half of the european economy is this way, and the result is that small and medium biz is not crushed so fast, and does not have to be merged at the whims of the financial markets
in short: a strongly financialized economy eats it's best children, and favours the financial market guy over the small/medium entrepreneur, to the greater glory of Big Biz and the lawyers and lobbyists
Repoed F350 duallie diesels, bitchez.
I'm in the market for an old beater RV. I'm noticing rig workers RVs are popping up on the market.
I'm now thinking more along the lines of a 30,000-gallon tanker and a pump.
. . . and a 1,000-gallon jug of Sta-Bil.
30,000 gallons @ 7 lbs/gallon = 210,000 lbs.
Good luck with that
This: http://www.gbrx.com/files/images/Site_Photos/North_American_Rail/Headers...
They aren't profitable at $45 oil anyway. Personally, I couldn't be happier - I don't really think drilling holes in the ground and blowing the Earth apart is necessarily such a great idea anyway..
Yeah but what about the economic bump by the low oil prices. I know I am going to spend my 18$ savings from low oil prices all at one time to maximize the effect. I am thinking a 18 year old Glenfiddich
What is a good liquor to on hand for the apocalypse?
Five O’clock Vodka good??
Maker’s Mark?
A bathtub for gin and a still for the brandy?
Jameson.
you should make food supplies for about 2 years.
Mortlach!
Spoken by another know nothing on zh that only reads and repeats...........
I wish this place would take more articles from http://peakoilbarrel.com/
Plenty of good data and interpretation.
It seems clear they've drilled out the sweet spots in Texas and ND. And the Saudis are flat after an infill drilling program.
Get your own storage tanks if you want to keep paying under 2 bucks.
Seems clear? How is that? Do you know where the sweet spots are or what they amount to? No, I bet not. No one knows what the shale actually looks like and it takes experimentation to figure out where to enter the play and what direction to drill as well as how to frac in order to make good wells. It's different for each shale play. Once the direction, location and frac process are understood, the wells turn out fairly uniform. That was never true of conventional oil because there it's just poking a straw somewhere into a pond.
Me thinks peak oil was another bankster scam o'rama. Looks like the abiotic theory is the place to be. Sure different holding places run dry for a time, but it sure seems like the world continues to swim in excess oil.
Just hire the guys that have been diligently defending 2.455 on CU. Its been fucking magical these past few trading days.
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I can has well?
Lots of birds with one Zionist stone.
1) Undermine Russia and friends.
2) Assist new base of operations, Europe, economically (cheaper energy).
3) Keep things propped up while the "dollar exit" is still open. I.e. while the dollar is artificially pushed up.
4) Utilize the "'printing' to assets theft-cycle" to bankrupt the less than gigantic oil firms, and related, and then snap up their assets in foreclosure.
5) Further divide and anger the sheeple out in the neo-con's rural, and evangelical Christian, support base so as to rile them up for supporting the return of the neo-cons, and later imposition of one-party rule.
The banksters need to repay us.
So if the stone is "Zionist" does that mean it's like David's stone that he smacked goliath with and killed him? I'm not following your allusion here.
The domestic shale industry will do down in the annals of financial tomfoolery. An entire US industry born of federal malfeasance and nurtured, boomed, and then died out of nothing less then ZIRP malinvestment.
Somehow I'm seeing these charts with sperm count.
Can we hurry this up so I can cash out my OAS puts?
Everyone else on Earth understands that low oil prices are an economic advantage, but not Zero Hedgers.
I hear ExxonMobil is opening a new line of filling stations for Zero Hedgers and others that prefer higher prices.
$5.00 gas is perfect for Zeroes!!
Its not the low price that's the problem, but the "baked-in" high cost production based on cheap debt.
Dont worry, Ogenius just opened up 1000 sqkm of Atlantic seaboard to drilling ( and wind farms), after closing a big chunk of ANWR to drilling (dude must be bipolar).
And when the Atlantic is drilled out, he will close it and Open up the ANWR. Either that or ANWR is out of oil or has no oil and they decided to make it seem like they are doing something while they threaten the entire Eastern Seabord with oil spills. Good going Uncle Tom Obama.
Not that anyone here actually cares but the above article is rather extraordinarly misleading as they appear to have included legacy production in the per rig productivity in an apparent effort to drive down the numbers. The author is going to be awfully surprised to discover that the new-well oil production per rig in Eagle Ford has, in fact, increased by roughly an order of magnitude over the past five years ... and that it's on an upward trajectory. See e.g., http://www.eia.gov/petroleum/drilling/pdf/eagleford.pdf
We now return you to your regularly scheduled Russian-funded anti-shale propaganda.
take note...new line in the sand at "OILPRICE".investment $45.00 barrel oil is the new price to defend with endless stories about why oil should be at least $100.00 barrel. "OILPRICE.INVESTMENT.CON has taken out bets again for higher prices!!!! must go higher must go higher.............
EIA.
Didn't they have to reduce their estimate of the Monterey shale formation reserves by 96%?
YAO, read what Berman said -- you have to make a distinction between oil production per rig and oil production per well.
I would like to see this data associated with the number of wells per lease. If this is a 3x4, then it's meaningless compared to a 6x7.
"Fire everybody, fire yourself, go bankrupt, be bought for pennies on the dollar for storage."
There are energy co-ops and utilities who do have the wherewithal and perhaps even risk tolerance to try and integrate and diversify their business.
"Etc etc..."
And if the proposed argument holds water, the shale drillers--who can't be uninformed--are amping up for the next price spike; and that--an exponential increase in drilling--as they all jump in without regard to the others, could actually keep prices gas-gut low in the same fracking greedy manner that has made unprofitable gas available.
And you know they're all thinking they're going to be first to the shortage...
This may be the only case of "greed is good" that actually benefits the average American--et al.
it's academic at 45$ and less isn't it?
Well hell lookie here the anti hydrocarbon progressive freak out over low oil prices just continues to churn out bullshit.
Oh no! Tanks in the streets! Oh No! Must have HIGH HIGH oil prices Oh Nooooooooooo save us Al Gore! We must CRUSH the poor people of the world and kill all hope for a higher quality of life cheap energyu brings to the poor masses of sheeples!
FOAD progressive scum.
Grimaldus
So, they may not have considered.....
So they miss on their forecast, like they'ed be the first?
Look, it's not like the o'l bidness has never seen some hellacious cycles before.
For those that placed bets with their eyes closed and bet on current price levels, or higher forever, it will come down the same recipe as in past down turns, "how low for how long?"
Quoting Roy Dean; "This ain't rocket surgery."
Back to killin' snakes