by WorldTribune Staff, August 1, 2016
Significant cost-cutting measures and the ability to quickly erect new rigs has enabled Texas shale oil producers to “compete with anything Saudi Arabia has,” a report said.
Scott Sheffield, the outgoing chief of Pioneer Natural Resources, told Bloomberg that pre-tax production costs in the massive Permian Basin of West Texas have fallen to $2.25 a barrel.
“Definitely we can compete with anything that Saudi Arabia has. We have the best rock,” he said, adding that improvements in drilling technology and data analytics have “changed the cost calculus faster than almost anybody thought possible.”
The Permian is said to have the capacity to expand from 2 million to 5 million barrels per day “even if the price never rises above $55,” and is comparable to the giant Ghawar field in Saudi Arabia, Sheffield said.
Sheffield said Pioneer can have a new rig up and running in 135 days, while deep-water mega-projects can take seven to 10 years.
New technology has enabled Pioneer to cut production costs by 26 percent over the last year and is adding five new rigs despite oil prices remaining in the low $40s.
“Multi-pad drilling means that three wells are now routinely drilled from the same rig, and sometimes six or more. Average well productivity has risen five-fold in the Permian since early 2012,” Bloomberg reported.
While many frackers are managing to ride out the storm, high-cost projects off the coast of Nigeria and Angola, in the Arctic, or the oil sands of Canada and Venezuela’s Orinoco basin are the big losers. Some 4 to 5 million barrels a day of future supply has been shelved around the world, Bloomberg reported.
“This sets the stage for an oil shortage and a price spike later this decade. Whether OPEC can survive that long is an open question. Most of the cartel need prices of $100 to fund their regimes.”
Morgan Stanley says the long-awaited re-balancing of the global markets has been delayed until mid-2017.
You must be logged in to post a comment Login