The United States was the world’s top producer of petroleum and natural gas hydrocarbons in 2015, producing far more new output than comparable producers Russia and Saudi Arabia, according to U.S. Energy Information Administration estimates. The agency attributed the rise in U.S. production to the fracking of tight oil and shale gas formations.
In the EIA’s May Short-Term Energy Outlook (STEO), U.S. petroleum and other liquid fuels production is expected to decline by 500,000 barrels per day (b/d) in 2015 to about 14.5 million b/d through 2016 and 2017 due to low prices. Russia and Saudi Arabia are expected to maintain current levels of production.
Hydraulic fracturing a.k.a. fracking has fueled the rise of American hydrocarbon output and even as low prices devastate drillers the technique is set to make the U.S. a major natural gas producer for the foreseeable future. The EIA estimates that hydraulically fractured wells now provide over 60% of total U.S. marketed gas production. This share of production is even greater than the share of crude oil produced using the method as it accounts about 50% of current U.S. crude oil production. Most natural gas from fracked wells comes from onshore tight rock formations though it is also possible to use in more conventional drilling operations.
Surviving companies are finding ways to get more with less. Average well drilling and completion costs have fallen nearly 30% across all major U.S. shale plays from 2012 levels, while time needed to frack a well has been cut by half and then some. Richer, more diversified companies are even benefiting from the downturn as they see an opportunity to snap up distressed assets in preparation for the inevitable price rebound. As mergers and acquisitions sweep through, shale drilling is likely to come out a more mature and stable industry.
“If we make the right calls in 2016, it’s going to define the next decade,” said Torgrim Reitan, Statoil’s Houston-based executive vice president for U.S. operations. Mr. Reitan said expects that even with higher prices, growth will remain subdued as the industry has learned to do more with fewer rigs and workers. “We will not go back to the activity levels we used to have,” he said.