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Scott Sheffield, the chief executive of Pioneer Natural Resources said on Thursday that improved methods of hydraulic fracturing, or fracking, have cut his company’s costs to approximately two dollars on the barrel in some fields.
That’s enough, says Sheffield to be competitive with Saudi Arabia. His comments indicate that the stronger, fitter shale producers in the United States will be able to weather the drop in prices, which was brought on by a move by Saudi Arabia and OPEC in 2014 to up production in a bid to claim market share from producers that operated at higher costs.
Sheffield noted that some production costs have dropped to US$2.25 per barrel, not including taxes. That price was for oil from the west Texas Permian basin. Sheffield stated: “Definitely we can compete with anything that Saudi Arabia has. My firm belief is the Permian is going to be the only driver of long-term oil growth in this country. And it's going to grow on up to about 5 million barrels a day from 2 million barrels.”
He added that the figure even accounts for a situation in which oil is trading for US$55 per barrel. Sheffield noted, however, that other areas, such as North Dakota’s Bakken and the Eagle Ford in Texas may not fare well during the price drop, due to higher production costs. He did not see any way for those areas to return to their previous levels.
Pioneer, on the other hand is forecasting a growth rate of 15 percent per year through 2020, with most of its growth coming from the Permian basin. The company is saving money by doing much of its service work on its own and using effluent water from Odessa Texas for fracking. The company is also using new techniques which allow it to extract more product from the ground.
By Lincoln Brown for Oilprice.com
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Lincoln Brown is the former News and Program Director for KVEL radio in Vernal, Utah. He hosted “The Lincoln Brown Show” and was penned a…