Low Oil Price Drives New Shale Revolution

cartoonEasy money, super-sized frack jobs, and desperate drillers offering deep discounts to oil producers ‚Äì all three have been credited for sustaining U.S. crude output during the worst price slump in six years. Now there appears to be a new factor in the mix: old vertical wells that can quickly be drilled, injected with water or fracked for a second time to increase production at low cost. The industry’s ability to find some workaround every time prices seem too low to keep pumping explains in part why 15 months into the downturn U.S. output stays near highs of around 9 million barrels a day and the government forecasts only modest declines through mid-2016. —Reuters, 15 September 2015

For Saudi Arabia and the rest of the world’s petrostates, facing off against upstart U.S. oil producers must feel like playing a game of whack-a-mole. The American oil industry’s ability to innovate has shocked the Saudis and stymied their strategy, and even now we’re seeing evidence of new techniques being employed to help keep the crude flowing in today’s bear market. This is far from the first creative U.S. solution to the problem of continuing to produce oil at sub-$50 per barrel prices, and you can be sure that it won’t be the last.  —The American Interest, 16 September 2015

Almost nine months have passed since the historic OPEC meeting when its swing producer role was abolished and its members were allowed to produce as much oil as they can in order to cause the oil prices to reduce so that US shale oil producers would be forced out of business. However, the opposite happened. Shale oil producers are still in business even though oil prices have dropped below $50 per barrel. In fact, USA oil production is at its peak with production of more than 9.5 million barrels a day, and is bound to increase further. So where did OPEC go wrong? Despite having all kinds of information regarding energy and being in daily contact with both sides of the market – consumers and producers, it still failed to estimate the power of the shale oil producers. In fact, it even failed to know the actual cost for producing one barrel of shale oil. —Arab Times, 30 August 2015

The flow of crude from what had been the country’s fastest-growing oil and gas regions, like Texas’ Eagle Ford shale, is declining rapidly, according to new data released by the federal government this week. The Energy Information Administration reports that across the country’s seven largest shale deposits oil production is expected to fall to 5.2 million barrels a day next month, the sixth consecutive month of decline and a six percent drop since April. Now drilling rigs are sitting idle and producers are actually opting not to turn on the wells they drill, letting the oil sit underground until prices improve. By and large, most forecasts predict U.S. oil production will continue declining through mid-2016. At that point, the theory goes, the decrease in supply should push up crude prices and get drilling rigs back in the fields. –James Osborne, The Dallas Morning News, 16 September 2015

SNP members are preparing to take on Nicola Sturgeon’s government over fracking in a highly unusual public show of rebellion within the nationalist party. In the most significant internal challenge to the controversial extraction practice, seven SNP activists, including a sitting councillor, have called on fellow members to back their bid for an outright ban. Holyrood has faced calls to clarify its policy on fracking from both sides of the debate ever since its moratorium was imposed in January. Jim Ratcliffe, the chief executive of the petrochemical firm Ineos, has claimed that he has received private assurances that the SNP is “not against” fracking, suggesting that the moratorium could eventually be lifted. Ministers were also criticised after it emerged that personal assurances were given to another firm, Cluff Natural Resources, over its proposals for an offshore operation in the Firth of Forth. –Paris Gourtsoyannis, The Times, 17 September 2015

The “Leap Manifesto” issued on Tuesday by an asylum full of celebrity victims of Harper Derangement Syndrome ‚Äì led by Naomi Klein and David Suzuki ‚Äì is certainly a thought-provoking platform. The main thoughts it provokes are: Does achieving celebrity cause a sharp drop in IQ and increase in hypocrisy, or does all-consuming artistic ego and/or power-hungry socialist inclination prevent all logical thought? –Peter Foster, Financial Post, 17 September 2015