US shale operators are on course to increase oil production significantly in 2019. The growth in US onshore production from the first quarter through the fourth quarter could come in at around 1.1-1.2 million barrels per day (bpd), or 16% for the full year, according to Rystad Energy.
After a paltry first quarter, depressed by weather effects, US shale players have over the past weeks assured investors that they will achieve previously communicated production targets, as well as demonstrate excellent capital discipline and cost control.
"Despite temporary challenges faced in the beginning of the year, E&P companies are set to deliver on their original production and capital targets, with some being well positioned to perform above initial expectations. US shale players can still be expected to deliver around 16% oil growth in 2019. Several operators have in fact raised their production guidance for the remainder of the year," says Veronika Akulinitseva, senior analyst at Rystad Energy.
Rystad Energy has analyzed the first quarter results of around 50 US shale operators. The results indicate that US producers, on average, saw a slowdown in oil production growth in the first quarter. Output grew by 0.1% relative to the fourth quarter of 2018.
"The slow first quarter implies an even steeper expected growth curve for the remainder of the year. In fact, acceleration of oil production for many operators is already underway and oil additions are thus likely to increase notably already in the second quarter of 2019," Akulinitseva remarked.
The Canadian operator Enerplus was the player that raised its oil guidance the most, expecting 10% higher volumes than originally guided. It said growth is already underway and the company is aiming to generate a double-digit rise in production already in the second quarter. Likewise, SRC Energy, an independent operator in the Denver-Julesburg basin, raised its oil target by 7%, attributing the adjustment to overly conservative original guiding.
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Comments
If all authoritative reports have been talking of a slowdown in US shale oil production this year and the years after, on what basis does Rystad Energy makes such a hyped claim.
A recent report by Post Carbon Institute, one of many authoritative reports of recent times, highlights the fact that technological improvements don’t change the fundamental characteristics of shale production, namely a high depletion rate estimated at 70%-90% in the first year of production, declining well productivity, rising cost of production and declining acreage to allow for growth. They only speed up the boom-to-bust life cycle. The report points out that in 2018 the US shale oil industry spent $54 bn on tight oil plays, 70% of which served to offset field declines and 30% to increase production.
And despite impressive technological improvements, the US shale oil industry is already seeing diminishing returns.
The US shale oil industry has seen its best performance over the last few years but it is now in a state of decline with production projected to slow down to 10-11 million barrels a day (mbd) in 2019 and 10 mbd or even less in 2020.
The verdict is that US shale oil industry could be no more in less than 10 years.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London