Impact of downturn on shale development
PERMIAN SUCCESS STORY
ARTEM ABRAMOV, RYSTAD ENERGY
IN THE BEGINNING of the recent downturn (2H 2014 – 1H
2015), a general consensus in the market had been calling for
a rapid collapse of the US shale oil industry. Contrary to this
belief, the industry was able to survive throughout the downturn. Indeed, total shale oil production declined by approximately 700 thousand barrels per day from March 2015 to
September 2016. Nevertheless, given numerous efficiency and
productivity gains accompanied by lower service prices, the
most dedicated shale operators have been able to complete
a successful transition into low-cost source of supply with
sustainable activity in a sub- 60 USD/bbl oil price environment.
There is no doubt that the Permian Basin provided a major
contribution to this transition, showing the earliest and steep-est recovery in new drilling activity since mid-2016.
Figure 1 provides a summary of key average well configu-
ration, completion intensity and productivity metrics for
horizontal wells in the Permian Basin and the rest of US shale
oil (major contributors to the latter are Bakken, Eagle Ford,
Niobrara, SCOOP and STACK). Average figures for 1Q 2014
and 1Q 2017 are shown in Table 1.
As the share of held by production (HBP) drilling was gradually reduced over time, operators were able to switch to
longer laterals. An average perforated lateral in the Permian
Basin has reached a length of 7,551 feet by 1Q 2017. The Delaware platform keeps pushing the basin average downwards
as many operators are forced to drill 5,000-6,000 feet laterals
due to the lease size constraints and scattered acreage positions. Significant further potential for longer laterals exists in
the Permian Basin.
Nevertheless, given better infrastructure for proppant, water,
and chemical logistics, wells in the Permian Basin exhibit
higher sand and fluid loading than in other plays on average.
An average proppant intensity in the Permian is observed at
1,927 pounds of sand per foot in 1Q 2017, while total fracking