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Rystad Energy

Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products. Rystad Energy’s…

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Rystad: US Shale Production To Peak At 14.5 Million Bpd

US shale supply will peak at approximately 14.5 million barrels per day (bpd) around 2030, according to Rystad Energy.

In the past decade, crude oil coming from shale patches such as the Permian in the US has grown from a negligible contributor to an upstream behemoth, reshaping the industry and the oil market.

US Light Tight Oil (LTO) represented less than 1% of global oil supply just nine years ago. Today, US LTO represents close to 10% of total global oil supply, a percentage which is expected to continue its ascent going forward. But by how much? That is the million-dollar question.

Different agencies and knowledge houses have responded to this with varying degrees of positivity and skepticism. Rystad Energy aims to shed some light on this uncertainty and provide its answer.

“Under our base-case price scenario*, US LTO supply should reach its peak at approximately 14.5 million barrels per day (bpd) around 2030,” says Sonia Mladá Passos, a product manager on Rystad Energy’s Shale Upstream Analytics team.

Assuming a flat $45 per barrel (bbl) WTI scenario, Rystad Energy estimates that LTO supply would once again peak in 2030, but at a more modest 11.5 million bpd. For our prediction to be as low as other institutions’, the oil price would have to drop sharply.

“Based on our analysis, the oil price would need to be as low as $42 per barrel WTI going forward for the 2030 US LTO supply to be as low as EIA presents in their Reference case,” Passos remarked.

There is a consensus in the market that the Permian Basin will be the dominant part of 2040 US oil supply. What varies, however, is the view on how large that supply is going to be.

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“Our forecast is the most bullish – in Rystad Energy’s base case price scenario we expect Permian’s production to grow to around 7.5 million bpd by 2040,” Passos remarked.

To better depict where the growth in our forecast comes from, Rystad Energy splits the overall production forecast for US LTO by life cycle.

The brown portion represents already producing wells, drilled but uncompleted (DUC) wells are represented in yellow, and green represents supply from risked drilling locations which have a high likelihood to be spudded and brought on production. The blue portion represents LTO supply which has been derived from unrisked drilling locations. 

It should be noted that various institutions apply different sets of assumptions representing their best assessment of the market. Rystad Energy’s empiric well-by-well information for every shale acreage in the US allows us to take a bottom-up approach to answering the salient questions of the future.

“The price factor is of course one of the deciding assumptions that defines our forecast for the US LTO supply in the long-term. As reflected by our base-case price scenario, we expect the oil price to increase in the long-term,” Passos remarked.

In addition, strong US supply is driven by a large inventory of wells remaining to be developed across a number of prolific shale plays. Permian Basin in particular is estimated to hold thousands of highly economic locations under the oil price environment prevalent in the future. We also estimate that growing production in the basin will be met by adequate takeaway capacity expansion as a number of additional not yet sanctioned pipeline projects have been proposed.

“However, it should be noted, that any changes in future market conditions would have an immediate impact on our shale production projections,” Passos concluded.

Note

*The Rystad Energy base-case price scenario assumes a WTI price at $55/bbl in 2019; $54/bbl in2020; $54/bbl in 2021 and $57/bbl in 2022.

By Rystad Energy

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  • Nawar Alsaadi on September 12 2019 said:
    Sometimes diverging materially from your peers is a sign of intelligence, or skill. In this case, I doubt this to be the case. Rystad has a history of extreme bullishness on US shale (Back in October 2015, Rystad projected US shale to grow by 330K in 2016, instead US shale declined by 320K that year). I believe Rystad is missing a key turning point in US E&Ps cash allocation priorities, after a decade of negative cash flow (which has effectively turned US shale into one massive mega project) the industry is transitioning towards cash flow harvesting due to investors' pressure and lack of external capital. Furthermore, there are signs that US shale productivity is peaking (some of it is visible in Rystad data itself). A combination of reduced drilling budgets and slower productivity is bound to slowdown US shale growth sharply from 2020 onward. Accordingly, Rystad will revise its growth numbers substantially lower in the next 6 to 12 months, but the damage they are doing to the oil market by putting such outrageous production wont be revised, and Rystad wont take responsibility for putting out such erroneous numbers either, the wrong projections will be simply shoved under the rug and a new set of projections will be hawked to the media in the hope of gaining additional media exposure and drumming new consulting business.
  • Jason Newsteed on September 12 2019 said:
    What would a presidential ban on fracking do to these estimates? :)
  • D Roul on September 12 2019 said:
    The data from Rystad seems a bit optimistic:

    ~20% yearly decline for existing shale wells. The guessed number should be between 20 an 40%. The real number, nobody knows. Shale reservoirs remain not well understood and we are just starting to see what a mature shale field looks like.
  • Martin Lohmann on September 13 2019 said:
    All this based on current drilling technology and assuming we will continue to stay at X percent of recoverable resources.
    We are just now beginning to understand our rocks. The next frontier.

    Presidential ban is illegal. A revolution will happen if this is even attempted. Keep your powder dry my friends.

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