Tight Oil Choking Out Its Competition – 8/25/16

World tight oil production is expected to more than double between 2015 and 2040, increasing from 4.98 million barrels per day (b/d) in 2015 to 10.36 million b/d in 2040, according to the U.S. Energy Information Administration’s International Energy Outlook 2016 (IEO2016) and Annual Energy Outlook 2016 (AEO2016).

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The EIA projects that most of the projected increase will come from United States production, which currently stands at about 4.1 million b/d or roughly 80% of total world output of tight oil. Canada, Russia, and Argentina are also expected to see large gains in their tight oil output as they adopt hydraulic fracturing techniques and other technologies to improve drilling efficiency.

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Production from tight oil in 2015 was 52% of total U.S. crude oil production and that share is expected to rise as oil prices recover to the point where shale drillers return to their rigs.

American energy companies have so far shown resilience to low prices beyond what most analysts expected. After cutting costs to the point of turning a profit at $50 a barrel, many shale companies are already preparing for a return to their fields even at the risk of putting a ceiling on oil prices that would stymie investment in other forms of oil extraction. Existing, conventionally-drilled wells can still make a profit at price levels far below the break-even points for shale oil wells for as long as they last, but offshore drilling and other oil megaprojects will struggle to survive a $50 a barrel price ceiling created by tight oil.

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