• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 2 hours Emissions Need To Be Halved To Avoid 3C Warming
  • 5 hours The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 41 mins Pioneer CEO Said U.S. Oil Production would be up to 15 mm bbls/day NOW if we had the pipelines. Permian pipelines STARTING Q3
  • 14 hours Hormuz and surrounding waters: Energy Threats to the World: Oil, LNG, shipping markets digest new risks after Strait of Hormuz attack
  • 15 hours OPEC, GEO-POLITICS & OIL SUPPLY & PRICES
  • 5 hours Coal Boom in Asia is Real and a Long Trend
  • 3 hours Solar Panels at 26 cents per watt
  • 8 hours The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 8 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 8 hours US to become net oil exporter in November: EIA
  • 5 hours US Shale Drilling lacks regulatory body.
  • 13 hours Trudeau approves Trans Mountain Pipeline
  • 16 hours The Latest: Iranian FM Says US Cannot Expect To ‘Stay Safe’
  • 15 hours The Plastics Problem
Alt Text

Are Oil Prices About To Bounce Back?

Money managers have gotten increasingly…

Alt Text

Are Oil Markets At A Turning Point?

Oil prices rebounded on Tuesday…

James Hamilton

James Hamilton

James is the Editor of Econbrowser – a popular economics blog that Analyses current economic conditions and policy.

More Info

Trending Discussions

Is the U.S. Energy Boom being Oversold?

I attended the American Geophysical Union meeting in San Francisco two weeks ago at which I heard a very interesting presentation by David Hughes of the Post Carbon Institute. He is more pessimistic about future production potential from U.S. shale gas and tight oil formations than some other analysts. Here I report some of the data on tight oil production that led to his conclusion.

A number of analysts have issued optimistic assessments of the future production potential of U.S. shale or tight oil. For example, the International Energy Agency recently predicted that the U.S. would be producing over 10 million barrels per day of oil and natural gas liquids by 2020 before resuming a gradual decline. Citigroup is even more optimistic.

IEA 2012 Projection of US Pteroleum
Source: David Hughes, AGU presentation, December 2012.

Citigroup 2012 Projection of US Shale Oil
Source: David Hughes, AGU presentation, December 2012.

Related Article: What does the Future "Really" Hold for US Oil Production?

David Hughes has been studying detailed data on each individual well in shale gas and tight oil formations in the United States as part of a study that will be released by the Post Carbon Institute in February. The most successful new oil-producing region is the Bakken in North Dakota and Montana, which currently accounts for 42% of the U.S. tight oil total and accounts for about 1/5 of the tight oil production that is projected by Citigroup for 2022. Hughes finds that once output from a typical Bakken well begins to decline, within 24 months its production flow is down to 1/5 the level achieved at its peak. This is in line with estimated decline rates separately published by the North Dakota Department of Mineral Resources.

Decline Curve for Bakken
Source: David Hughes, AGU presentation, December 2012.

Given the observed decline rates on existing wells, it is then a straightforward mechanical exercise to ask the following question. Suppose that no new wells were drilled after 2010. What would the path of Bakken oil production then look like?

Overall Field Decline for Bakken
Source: David Hughes, AGU presentation, December 2012.

Increasing the annual production thus requires not just new wells but an increasing number of new wells each year; Hughes estimates that 820 new wells are needed just to offset Bakken field decline. But a second feature in the data posing challenges for that plan is that while a few wells in the Bakken have proven to be very productive, the average well productivity is much lower. A limited number of lucrative sweet spots account for much of the success so far.

Related Article: ExxonMobil Eyes South Africa's Untapped Frontier

Bakken Well Quality
Source: David Hughes, AGU presentation, December 2012.

Bakken Well Quality
Source: David Hughes, AGU presentation, December 2012.

Hughes argues that there are limits to the number of new wells that will plausibly be drilled each year and the number of available well locations. These factors make achieving the IEA or Citigroup objectives difficult and mean a much more rapid decline in the production rate after the peak is reached. For example, here are Hughes' calculations if the current drilling rate were maintained-- 1500 new wells per year leading to a tripling in the number of operating wells-- and if the EIA's estimate of remaining productive locations is accepted. By contrast, the Citigroup projection of a continuous plateau after reaching peak production would require tens of thousands more well locations than estimated to be available by the EIA.

Bakken Shale Oil Production
Source: David Hughes, AGU presentation, December 2012.

Oil produced from shale or tight formations is going to be very helpful to the U.S. economy. But this is an expensive way to try to get oil, and there may have been some overselling of how much these fields are actually going to deliver.

By. James Hamilton

Original Source: http://www.econbrowser.com/archives/2012/12/future_producti.html




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment





Oilprice - The No. 1 Source for Oil & Energy News