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U.S. Shale Could Peak Before 2025

In a previous post on U.S. LTO future output there were suggestions that a bottom up approach might be better than the top down approach and I agree. I will attempt the bottom up approach here. The chart below is a quick summary, based on three different oil price scenarios (high, medium, and low). The dashed line is just the average of the low and high oil price scenarios. Data is from Enno Peters’ website shaleprofile.com and the EIA. (Click on “Tight Oil Production Estimates” for tight oil output data.)

(Click to enlarge) 

Clearly, I do not know what future oil prices will be, but my expectation is that oil prices will be between the high and low price scenarios presented below.

(Click to enlarge)

Note that oil prices are assumed to remain at $80/b, $100/b, and $120/b (all in 2016) from 2040 to 2050 in the low, medium, and high oil price scenarios respectively. For comparison, the oil price reference scenario (Brent crude spot price in 2016$) for the EIA’s Annual Energy Outlook 2017 is also presented.

In the past, I have developed scenarios for the North Dakota (ND) Bakken/Three Forks (TF) and the Eagle Ford. That analysis has been combined with new analyses of the Permian Basin and “other LTO”, where other means U.S. LTO not produced in the ND Bakken/TF, Eagle Ford, or from Permian Basin horizontal wells. Also included in “other LTO” is roughly 7 percent of horizontal Texas Permian basin wells that could not be easily separated from vertical well output on the same lease as explained by Enno Peters.

The low, medium, and high oil price scenarios presented above are applied to all areas of U.S. LTO output to develop three separate scenarios for each of the four areas (Bakken, Eagle Ford, Permian, and other LTO) and these are then combined to create the U.S. LTO scenarios presented in the first chart.

The economically recoverable resources (ERR) for the three scenarios are 29 Gb, 38 Gb, and 43 Gb for the low, medium, and high oil price scenarios respectively. The high/low average (dashed line) has an ERR of 36 Gb. Related: TransCanada Gets Presidential Permit To Build Keystone XL

The Permian Basin scenarios are presented below.

(Click to enlarge)

ERR is 10 Gb, 17 Gb, and 20 Gb for the three oil price scenarios and 15 Gb for the high/low avg. scenario (dashed line).

The “other LTO” scenario is presented below.

(Click to enlarge)

The ERR of the three scenarios ranges from 6 to 7 Gb. This analysis would be improved by separating out the Niobrara and doing that analysis separately, possibly this will be covered in a future post.

The ND Bakken/TF Scenario is presented below.

(Click to enlarge) 

The Eagle Ford Scenarios

(Click to enlarge)

The economic assumptions used in the discounted cash flow analyses are shown below, it was assumed that in the long run, wells that are expected to be profitable will be completed.

(Click to enlarge)

Note that for other LTO $1 million would be too low a well cost for a horizontal multistage fracked well, but for a vertical well this might be roughly correct. I don’t have good information for areas besides the Bakken, Eagle Ford and Permian on costs, so this is a guess.

Average Well Profiles for late 2016 are shown in chart below, cumulative output in barrels on vertical axis and months from first output on horizontal axis. Related: OPEC Out Of Moves As Goldman Sachs Expects Another Oil Glut In 2018

(Click to enlarge)

The chart below shows the total number of U.S. LTO wells completed for the medium oil price scenario on the right-hand axis. The maximum annual rate of U.S. LTO completion in this scenario is 14,200 wells per year in 2021 (Jan to Dec), from Jan 2014 to Dec 2014 about 13,800 LTO wells were completed. This scenario has a rate of well completion only 2.9 percent higher than the previous maximum annual rate of well completion in 2014. The peak rate of output for the medium oil price scenario is 6495 kb/d in Oct 2021, 1825 kb/d higher than the previous peak of 4670 kb/d in March 2015.

The high oil price scenario has a peak output of 6813 kb/d in Jan 2022 (318 kb/d higher than the peak output of the medium oil price scenario), total wells completed of 233,500 by Sept 2031 and a maximum annual rate of well completion of 15,400 wells per year in 2021 (11.6 percent higher than the previous peak annual rate of well completion in 2014).

(Click to enlarge)

By Dennis Coyne via Peakoilbarrel.com

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