US oil production peaking?

Dec. 10, 2018
The shale insurgency in the US continues to defy the doubters, producing more than 11.7 million b/d of crude oil at the end of November, according to the US Energy Information Administration.

The shale insurgency in the US continues to defy the doubters, producing more than 11.7 million b/d of crude oil at the end of November, according to the US Energy Information Administration. That is a 20.8% increase over the same period a year ago. Crude productivity over the past decade has shattered the production peak of 10 million b/d in November 1970.

The advancement of hydraulic fracturing and horizontal drilling technologies to extract oil from shale formations has propelled this insurgence to its current production levels. Texas and North Dakota have led this rise in shale oil production. Texas is currently producing more oil than Iraq—the world’s fourth-largest crude oil producer.

Currently the EIA’s Drilling Productivity Report estimates the Permian region will produce 3.7 million b/d for December, about 47% of the total production of the seven regions the report surveys. Eagle Ford and Bakken regions both are producing roughly 1.4 million b/d.

Wolfcamp play

The rise in oil production from the Permian basin is largely due to the Wolfcamp play during the past decade. Production from the Wolfcamp play in September reached about 1 million b/d of oil, or nearly a third of the total production from the Permian basin. By midyear, there were 7,750 producing wells in the Wolfcamp play vs. 2,200 in 2005. In 2017, the Wolfcamp shale play exceeded the Bakken-Three Forks play in North Dakota to become the largest oil producing tight oil play in the US.

EIA attributes this rising production in the Wolfcamp and other plays within the Permian to “drilling longer horizontal laterals and optimizing completions.” EIA notes that “the length of the horizontal segments, or laterals, increased from an average of 2,500 linear ft in 2005 to over 8,500 linear ft in 2018.” It added, “Well completion efficiency has also improved, primarily by more effectively using sand, or proppant, during the hydraulic fracturing process, as well as by using zipper fracturing-the completion of two or more wells side by side.” Despite potential growth, pipeline capacity will limit production and slow the rate of growth through 2019.

Forecasting

Global oil supply has risen nearly 60% because of rising US oil production since 2008. A question arises: How long can the US sustain this rate of high-yield production?

Many find this tough to answer. The shale windfall itself has demonstrated that calculating future energy production is an unpredictable business. In the past, both the EIA’s Energy Modeling System and the International Energy Agency’s World Energy Model—each with innovative forecasting methods—could not have predicted how quickly the boom in US shale oil production would alter the world energy markets. Forecasting production with higher prices amplified by continued advancements in extraction technologies will continue to make predictions about US peak production difficult.

EIA recently released its annual proved reserves report, which stated that the US surpassed the previous level of 39 billion bbl of oil set in 1970 to reach 39.2 billion bbl of crude and 2.8 billion bbl of condensate. Texas experienced the largest net increase of all states in 2017 by adding 3.3 billion bbl of crude and lease condensate proved reserves primarily from the shale oil plays.

To accurately calculate future oil production, one must study US crude reserves. Proved reserves must be clearly proved and precisely documented and must be commercially recoverable with existing technology. Resources are described as accumulations that are identified but can’t be commercially produced with current technologies. Even with both reserves and resources identified, it is particularly difficult to pinpoint exactly how much oil is in the world. It is the objective of oil and gas companies to convert resources into reserves with new developments in technology. In doing so, US production won’t peak anytime soon.