Between 2010 and 2015, annual oil production in the U.S. grew by four million barrels per day (BPD). Production dipped in 2016, but then U.S. crude oil production again rose by 1.2 million BPD between January and December 2017, to levels that haven’t been seen since the early 1970s.
The surge in production is a result of growth in tight oil (more commonly known as shale oil). Many, including myself, never imagined that oil production could grow enough to threaten the U.S. oil production peak from 1970. But that looks inevitable at this point.
This production increase raises the question: Just how much will U.S. tight oil production increase before it peaks and begins to decline? Another million BPD? Three million BPD?
The Energy Information Administration’s latest Annual Energy Outlook (with projections to 2050) attempts to answer this question, modeling several scenarios for future oil production.
The Reference case projection assumes that known technologies continue to improve along recent trend lines. The economic and demographic trends that were used reflect the current views of leading forecasters.
In the High Oil and Gas Resource and Technology case, lower costs and a higher resource availability than in the Reference case are assumed. In the Low Oil and Gas Resource and Technology case, the assumption is of lower resources and higher costs.
Here are the EIA’s projections:
Every case assumes at least a few more years of tight oil supply growth. The Reference case shows shale/tight oil production growth of two to three million BPD over the next three years, before leveling off and remaining at approximately that level until 2050.
The Low Oil Resource case projects tight oil growth of another million barrels per day through about 2022, and then a steady production decline until 2050.
The High Oil Resource case projects sharply higher tight oil growth until about 2025, and then slower growth until 2050. Total production growth, in this case, was almost nine million barrels per day — implying a near doubling of tight oil production between now and 2050.
Supply Risks
But there’s one item that barely gets a mention in the EIA’s Annual Energy Outlook. It is something I witnessed firsthand when I was recently in the Permian Basin. Oil production can expand only as quickly as infrastructure can keep up. And it is struggling to keep up.
It’s not just crude oil pipelines that are an issue. Along with oil comes associated natural gas. In some cases, producers have no outlet for this gas, so they flare it. But there are various legal limits to flaring. This week, I heard about a producer who is having to reduce production because they are bumping up against their permitted limits for flaring.
In addition to potential infrastructure constraints, higher oil prices also lead to greater demand for oilfield services providers. That leads to higher costs for the oil producers and higher profits for drilling and fracking services providers.
At present, one of the bottlenecks in the Permian Basin is with the fracking service providers, and that is leading to a growing backlog of drilled-but-uncompleted wells (DUCs). This is helping to constrain production in the Permian Basin but was not a risk identified in the EIA’s production projections.
Conclusions
The latest Annual Energy Outlook from the EIA models the future potential of tight oil production under several scenarios. Some scenarios project tight oil production growth for another three to four years, but these scenarios apparently don’t consider supply risks posed by insufficient infrastructure, oilfield services or manpower. These factors could slow tight oil growth over the next few years, and could potentially shift the timing of peak tight oil.
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so, tight oil was able to provide an increase in US oil production capacity after peak conventional oil.
are there any other oil producing technologies in development which are expected to become viable in the time frame of peak tight oil?
I read this piece by Chris Martenson a couple of months ago which appears to suggest that expected shale production could be an illusion based on overly optimistic EUR estimates and was wondering if there’s anything to Martenson’s analysis?
https://www.peakprosperity.com/blog/113557/great-oil-swindle
Unfortunately, part 2 is unavailable unless you enroll but part 1 provides some provocative stats.
Agree that depletion rates for shale gas and tight oil are much higher than conventional wells. Also I expect that the Expected Ultimate Recovery (EUR) number
is lower than advertised. Not sure how this supply issue is going to play out in the 5+ year time frame.
We may need to fall back on our coal reserves.
The long term EIA outlook was released based on info from a few months ago. (SEP STEO which included last month of production being from JUN, I think.)
During last quarter of 2017 there was a phenomenal increase and a revision up of the STEO model. Now, we have already broken the low case ultimate peak of ~9.9 MM bpd in 2022 (we hit ~10 in last two months of this year). Based on revised STEO model for next year or two, we are (at least during that time) on the high growth case pathline, which is ~1MM bpd/year for next 5 years and then ~0.2MM bpd after that.
Of course, we don’t know what will happen. For one, price could crash again from OPEC issues (there is a lot of much cheaper oil in the Persian Gulf that can flood the market in the absence of collusion) or decreased demand from global warming legislation, electric cars, etc.
Right now, my impression is that shale while not as prolific as Saudi or Iraqi oil wells, is still very strong in a $50+ environment. Sure there will be depletion and sweet spot exhaustion. But there will be learning, finding, improvement also. And even the current known resource is not small.
A lot of peak oilers (or price bulls) like Martensen like to throw shade on shale, but you have to look at their record. They have been very wrong on many things over the years. There is an element of denying reality and of wishcasting versus unbiased analysis in their shale commentary.
It’s hard to imagine that we can go up another 5 million BPD, but I have learned never to say never.
Figure the following (MM bpd/year)
+0.7 Permian
+0.2 Bakken
+0.1 Eagle Ford
+0.1 Anadarko
+0.1 Niobrara
[Wash for conventional declines versus growth in the snips and snails like LA, UT, OH]
——–
1.2 MM bpd/year
Think we can do that for four years if prices evolve like the strip. Approximately average in the mid 50s. Higher now, lower later. It’s pretty sensitive though. $55 is a lot nicer than $50. $45 probably rolls us over to flat. $40 will bring decline.
First it all depends on price. If price ends up going to $80 per barrel you’ll see a lot more production.
Secondly, more importantly this misses the fact that the rest of the world has huge frack potential. US has only a few % of world area . . . apply US fracking reserves to rest of world and you end up with something like a trillion barrels. A few places in Europe have banned fracking, but huge areas (most of Asia, off shore, Africa, S America) not so.
That’s true, it is a function of price. I always say that peak oil is price dependent. I believe the world has passed peak $20 oil, but not peak $150 oil (for example).
As for the rest of the world, there are huge areas of potential, but many of them suffer from geological or water constraints that aren’t such a problem in the U.S. Argentina, for natural gas, is one area that does look like it will have a U.S.-type boom (at least for gas). China has big potential for oil, but lacks water where the resource is mostly located. Some other countries have good resources, but the layers are folded and broken (making horizontal drilling more challenging).