Monday, February 16, 2015

Oil and gas 'drilling frenzy' in U.S. is over, but oil production continues to grow

"The U.S. drilling frenzy is over. What’s not is the boom in oil production," Asjylyn Loder reports for Bloomberg News. "While companies have idled 151 rigs in five shale formations since reaching a peak of 1,157 in October, they’ll need to park another 200 for growth to stall, according to data from the U.S. Energy Information Administration."

"The industry has become better at blasting crude out of deep underground layers of rock, according to productivity data tracked by the EIA in the major shale prospects including the Bakken, Eagle Ford, Niobrara, Permian and Utica," Loder reports. "The improvements have helped overcome the natural depletion of existing wells. Shale wells decline sharply at first and then trail off at a slower rate until they run dry."

Loder explains: "As drillers cut costs, the less efficient equipment is idled first while the best machinery is dispatched to the most promising acreage, which boosts the amount of crude produced for every rig in the field. At the same time, the existing pool of wells grows older," so the rate of decline in production shows down.

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