EIA: shale oil production declines in three key U.S. plays

Oil well and storage tanks in the Texas Panhandle.
Source: DollarPhotoClub

According to the most recent data from the Drillng  Productivity Report from the U.S. Energy Information Agency, the production of shale oil from the three major shale plays – the Eagle Ford, Niobrara, and Bakken – fell for the first time in six years. This is the effect of the low oil prices and the consequent reduction in drilling rigs. However, with production gains continuing in other regions, particularly the Permian, overall crude oil production rose slightly in March to 5.6 million barrels per day. In April, total production in the regions covered by the report is expected to be virtually unchanged from its March level.

The EIA suggests that the falling production in the Eagle Ford, Niobrara, and the Bakken is most likely caused by the fact that the overall productivity of shale wells is so high that meaningful increases in productivity – which made all the difference several years ago – are no longer possible in the more exploited shale plays.

Back in 2008-09, when falling crude oil prices led to decrease in rig counts, it did not result in falling production levels as – while older, declining, wells were taken offline – increased productivity in the remaining rigs more than made up for the abandoned wells. Nowadays, with the base level of rig performance so much higher than several years ago, it is not clear that productivity gains will offset rig count declines to the same degree as in the past.

The Permian region, where as late as December 2013 half the operating rigs were vertical rigs, still appears to be experiencing significantly larger productivity improvements than other regions. In general, average production from a vertical well is significantly smaller than that from a horizontal well. As more vertical rigs are brought offline, the ratio of vertical to horizontal rigs in the Permian, which has only fallen below 1:1 in recent months, is coming closer to, but remains above, the vertical-to-horizontal rig ratio in the other regions covered by the report.

The EIA expects that shale oil production will fall in the Bakken formation to about eight thousand barrels per day, in the Eagle Ford by ten thousand barrels a day, and in the Niobrara shale by five thousand barrels per day. Despite that, the production of crude oil in the United States is to increase by 24 thousand barrels thanks to the growing operations in the Permian Basin in West Texas and the Utica Shale in Ohio and Pennsylvania.

Source: U.S. Energy Information Administration, Drilling Productivity Report
Source: U.S. Energy Information Administration, Drilling Productivity Report

Source: U.S. Energy Information Administration, Drilling Productivity Report
Source: U.S. Energy Information Administration, Drilling Productivity Report

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