Baker Institute experts Major parts of the US shale sector will ramp

first_imgAddThis ShareDavid [email protected] [email protected] Institute experts: Major parts of the US shale sector will ramp up with $60 oil pricesHOUSTON – (Jan. 23, 2016) – If West Texas Intermediate (WTI) crude oil prices stabilize at or above $60 per barrel, major parts of the United States shale sector that are currently dormant will ramp up, according to an analysis by experts in the Center for Energy Studies at Rice University’s Baker Institute for Public Policy. This as the oil production targets agreed to at the Nov. 30 OPEC meeting have created the firmest prospect in the past two years of a meaningful oil price recovery.Credit: shutterstock.com/Rice University“Assessing Shale Producers’ Ability to Scale-up Activity” was co-authored by Gabriel Collins, the Baker Botts Fellow in Energy and Environmental Regulatory Affairs, and Kenneth Medlock, the James A. Baker III and Susan G. Baker Fellow in Energy and Resource Economics and senior director of the Center for Energy Studies. The issue brief highlights the challenges U.S. unconventional liquids producers will likely face during a scale-up. It also points out price and timing inflection points likely to broadly influence industry decision-making.“Fundamentally, U.S. shale producers are likely to commence higher activity levels in two broad, price-dependent phases: bringing online drilled but uncompleted wells (DUCs, in industry parlance) and scaling up drilling and completions of new wells if WTI prices can stay at or above a sustainable level, most likely $60 per barrel,” the authors wrote. “That said, the manner in which costs respond to any uptick in drilling and completion activity will serve as a check on pace, and not all regions will see the same level of interest as prices climb. The Permian Basin is already adding rigs and will likely continue to see a majority of new interest, but as prices stabilize other plays such as the Bakken, Eagle Ford and Niobrara will follow.”The extent to which this occurs depends upon the extent to which the productivity gains observed over the last couple of years can persist, the authors said. A significant ramp-up in development would likely induce crunch points in the long and complex shale supply chain and impact costs per well. But operators’ moves to capture economies of scale can help blunt the impact of such headwinds, according to Medlock and Collins. Examples include the 19,000 ton unit train of frac sand that Halliburton and U.S. Silica moved into the Eagle Ford region in October and the frac jobs in the Delaware Basin that now sometimes exceed 30 million gallons of water — enough to fill more than 45 Olympic-size swimming pools.“As the benefits of such structural shifts percolate through the industry, if and when oil prices reach a sufficient level to stimulate broader drilling and completions activity, logistics will matter as much as geophysics in driving production forward,” the authors wrote. “Indeed, near-term constraints on equipment and personnel could force extended lead times for those not fortunate enough to have long-term agreements or vertically integrated supply chains already in place. Thus, the pace at which shale responds to a higher price could become as much a function of logistics and oilfield service capabilities as it is geology and mineral rights. In sum, many factors must be elastic in the short run for shale production response to be robust.”-30-For more information or to schedule an interview with Medlock and Collins, contact Jeff Falk, associate director of national media relations at Rice, at [email protected] or 713-348-6775.Related materials:Issue brief: www.bakerinstitute.org/media/files/files/7bfea3e9/BI-Brief-011717-CES_ShaleScale.pdf.Collins biography: www.bakerinstitute.org/experts/gabe-collins.Medlock biography: www.bakerinstitute.org/experts/kenneth-b-medlock-iii.Follow the Baker Institute Center for Energy Studies via Twitter @CES_Baker_Inst.Follow the Baker Institute via Twitter @BakerInstitute.Follow Rice News and Media Relations via Twitter @RiceUNews.Founded in 1993, Rice University’s Baker Institute ranks among the top five university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog. last_img

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