Hydrocarbon Independence?
Nah. Not possible; not even close. As Art Berman points out here, the shale oil production 'boom' that has occurred in the past eight years was driven entirely by no interest FED stimulus money. Over $200,000,000,000 dollars is still on loan to the US shale oil industry and $80,000,000,000 has already been defaulted on. US LTO production has increased in the past three years, in spite of much lower oil prices, not because of shale oil "resilience" but because of cheap money and a debt can (drum) that was filled with more debt and kicked further down the road.
By the way, the FOMC went up on interest rates 25 bp today: "The 7-2 vote for the rate move, the Fed’s third this year, raises the benchmark lending rate by a quarter percentage point to a target range of 1.25 percent to 1.5 percent. In another move that could tighten monetary conditions, the Fed confirmed that it would step up the monthly pace of shrinking its balance sheet, as scheduled, to $20 billion beginning in January from $10 billion." That is not going to help much.
On the front end of the shale oil phenomena well productivity is going up; no doubt. Longer laterals and bigger frac's costs more money, however, and profitability has improved only slightly in a few of the largest shale oil corporations. Not enough profitability, however, to pay back legacy debt. And most definitely not enough profit to pay down legacy debt and maintain current production levels, much less grow production levels as the EIA and IEA suggest.
On the back end of the phenomena, the part the public never hears about, shale wells are not meeting type curve profiles, reserves are being impaired, incremental lift costs are going up causing wells to reach economic limits sooner than expected and wells are "getting gassier and dying a disappointing death," to quote an ex-Pioneer reservoir engineer.
Case in point, provided by my friend Enno Peters at shaleprofile.com, after a decade of hammering away at shale oil development in America, where laterals in sweet spots look like a game of pixie sticks...
"40% of over 53,000 shale oil wells in America's major shale basins tracked by shaleprofile.com now make less than 25 BOPD."
That is a staggering number, 40%, after only eight years. For wells that initially cost $6,7,9,12 million dollars each to drill? On acreage that cost $3,5,15 then 40 thousand dollars per acre? Yeow!
How is this shale oil stuff going to get America to energy independence?
Mike Shellman