(C) Daily Kos This story was originally published by Daily Kos and is unaltered. . . . . . . . . . . A near-future source of MAGA frustration: US oil production likely to start falling in ~1-3 years [1] ['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.'] Date: 2024-11-25 Five years at the most. And there’s nothing Trump or any other Republican can do about it. If you’ve followed the US oil industry at all for the past ~15 years, you’re well-aware that the steep rise in US oil (and natural gas) production over that time frame has come from deposits of oil and gas in “shale” rocks. These are the “source rocks” for the conventional oil that has been pumped from certain areas for decades, and even in some cases a century or more. Technical description made as short as I can: A “conventional” oil field consists of more porous rock with lots of oil trapped in the pores that a well can be drilled into, and the oil will gush up through the well bore via natural pressure. These conventional fields are surrounded by “source rocks,” usually called “shales,” which are denser rock formations also soaked with oil, which were created by large deposits of algae or plankton in (usually) shallow seas tens or hundreds of millions of years ago. The oil from the source rocks gradually seeped into the more porous rocks, creating the conventional oil fields. But there is almost always many more times more oil left in the source rocks than there is in the conventional fields. It sounds nice that these source rocks have so much oil, but the problem is, because they’re so dense, oil will not gush through a well bore via natural pressure. It’s just dense rock that happens to be soaked with oil. So you have to create “artificial” pores in the rocks to release the oil and finally get it to gush up through a well bore. This is done by pumping, at high pressure, a concoction of sand and other materials to literally crack the rocks — many thousands of feet underground. EDIT: This is also done via horizontal well bores, which enables these wells to access, crack open and drain large areas of shale rock. The thing is, when you do it this way, you get an initial big gush of oil coming up through your well, but it peters out pretty quickly. Because these wells peter out pretty quickly, if you want to grow, or at least maintain, your production volumes, you have to keep drilling new wells at a fast rate. The need to keep drilling new wells at a fast clip turns these shale plays into a real estate game: If you have a shale formation covering 1,000 square miles, and you drill wells that can drain 1 square mile of shale rock apiece, then when you’ve drilled 1,000 wells you’ve basically maxed out that particular shale formation, and it’s going to be all downhill from there. To some extent you can ameliorate the decline of the shale field by re-cracking the rocks in existing wells, and other techniques which can increase efficiency. You can even re-frack these rocks two, three, four and more times. But each additional time you do this, you’re getting into diminishing returns. The other problem here is, there is a finite number of these “shale” plays in the US, and most or even all of them are already well-known to geologists. The geology of the US is very well-known and studied, and thus, there aren’t going to be many, if any, undiscovered shale formations that someday will turn into new gushers of oil production. You can find a map of these shale formations here. It looks like a lot, but keep in mind that most of these are mostly prospective for natural gas, not oil so much, and many of them aren’t of particularly good quality. As for oil, there are three main ones in the Lower 48 that are of interest for oil: Bakken shale in western North Dakota Eagleford shale in south Texas Permian basin in west Texas and southeast New Mexico There is oil in some of the other shale formations, but again, not as much as in these three. In fact, among these three the Permian basin is the real biggie. The Bakken shale was the first one to be developed in earnest, starting around 2006-2008 or so. And unsurprisingly, it has also become the first to decline. Click on this link here to view the state of North Dakota’s statistics on oil production from the Bakken shale. It has already peaked in November of 2019 at 1,460,992 barrels/day and 108 barrels/well/day. The pandemic seems to have put an abrupt halt at its production rise, and while it recovered some after the pandemic ebbed, five years later it still is nowhere near its pre-pandemic peak. The latest figure (Sept of this year) is 1,169,611 barrels/day and 69 barrels/well/day, which has even declined from a more local high of 1,258,359 in September of last year (the pandemic low was 828,949 barrels/day in May of 2020). At this point it’s extremely unlikely the formation’s 1.46 million barrels/day record will ever be matched. Maybe some super-duper new technology will come along, but right now that seems unlikely. The key here is — this will also happen to all the other formations as well. The Bakken just happens to be the first to decline since it was the first to be developed. Essentially they’ve nearly run out of real estate to drill on and are now in the stage where they’re resorting mostly to secondary recovery efforts. The Eagleford shale in south Texas is also showing signs of maturing. Click on this link here and download the spreadsheet entitled “Eagle Ford Shale 2008 To Current.” There is a graphic of oil production from the shale on the first page of the spreadsheet. It has gone nowhere for four years. Maybe even a slight decline. Let us summarize: There are 3 big shale oil formations in the US: The Bakken, the Eagleford and the Permian. The Bakken is already in decline. The Eagleford is at a mature phase and might be in a slight decline. This leaves just one left: The Permian. When the Permian starts declining, it’s basically game over for US oil production. I’m not going to go into great detail on that one, but I’ll just say that most industry analysts (including those in the drilling industry itself) recognize that there is still some upside for the Permian, but not a whole lot. Maybe another year or two of production rises. The rate of growth of increases is already starting to flatten out. Absolutely key to understanding all of this is to read the following article from September. I’ve read other articles making the same or similar observations, but this one is quite recent and comprehensive: US Oil Production Is Slowing, The Ramifications Will Be Significant US oil production is finally showing signs of peaking. Since early 2023, almost all production growth has resulted solely from productivity gains. The rig count, frac spreads, Drilled But Uncompleted Well count and Completed Well count are now all in decline. What’s more, the EIA’s reported production numbers were likely overstated in 2023. Expect shale to continue to grow marginally in the short-term, but average growth is likely to surprise to the downside from here. Productivity gains will eventually catch up to geology. US shale production should peak sometime in 2025/2026 and plateau from there. Given the lack of capex spending, production growth outside of price spikes will be difficult to sustain. The ramifications will be significant. The only source of non-OPEC+ supply growth in the past 15 years will disappear. The burden will then fall on Canada, Brazil and Guyana as well as OPEC+ to fill that gap, a difficult task over the medium-term. And this needs to be emphasized: There is absolutely nothing the new Trump administration will be able to do to stop this. If they want to “drill baby drill” they are coming into power at exactly the wrong time. Politics does not trump (no pun intended) geology. At some point the oil markets will start to recognize that US oil production has started to decline, and since most of the rise in world oil production for the past 15 years has come from US shale production, these markets will start to panic. Exactly when this panic will start, and exactly how “panic-y” it will be is also difficult to predict, but I think we can expect some manner of conniptions to begin in a couple years or so. There are many other shale formations of this type all around the world, most of which have barely begun to be tapped. In particular, there is one in Russia called the Bazhenov Shale which is the source rock for Russia’s main oil fields in western Siberia just east of the Urals and is truly massive. But this is Russia we’re talking about and who knows how and when, if ever, that will be developed. At any rate, all of these others are in other countries which we have little or no control over. Lastly, there is also a very large shale on Alaska’s North Slope which is the source rocks for the North Slope’s conventional oil fields. There are a couple of smaller oil companies which have been poking around that for several years with mixed success. But this is the North Slope of Alaska, which is a very harsh place to do business. Since these shale plays need to have wells drilled frequently, they also need large amounts of labor to drill all those wells. And getting large amounts of labor to work on Alaska’s North Slope will be extremely challenging, even if the Trump administration gives everyone a green light to drill up there. It will be very interesting watching the new Trump administration constantly proclaim they’re doing everything they can to “drill baby drill,” only to see US oil production stagnate, and then maybe start declining while prices edge up over the next ~2 years. Grab some popcorn. 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