The days of explosive growth in US shale oil production are over. US oil production is growing, but at a much slower rate than before the 2020 crisis and at a slower rate than expected a few months ago.
New shale priorities — capital discipline and a focus on shareholder returns and debt repayment — have joined supply chain constraints and cost inflation to drag down U.S. oil production growth .
The Biden administration’s mixed signals on the US oil and gas industry, which has frequently blamed the industry for high gasoline prices and most recently threatened with more tariffs, have not motivated US producers either. . Many are reluctant to commit to more drilling in the absence of any medium to long-term vision for how to use U.S. oil and gas resources to enhance U.S. energy security and help other countries. Western allies depend on imports.
Oil production growth forecast falls
This year, the US Energy Information Administration (EIA) and many analysts have lowered their crude oil production forecasts for 2022 and 2023. Although the EIA still expects production to set a new average annual record record. next year, but the agency has significantly lowered its forecast from earlier this year.
For their part, oil company executives said the US Administration’s anti-oil policies and rhetoric, inflation, contractor time delays and regulatory uncertainty are negatively impacting drilling and production plans.
The EIA expects US crude oil production to average 11.7 million bpd (bpd) in 2022 and 12.4 million bpd in 2023, which would surpass record highs set in year 2019, calculated in November. Short-term energy outlook.
Despite expectations of record production next year, the EIA has repeatedly downgraded the 2022 numbers so far. The latest cut is a massive 21% drop in growth estimates, as calculated by Reuters.
in October forecastThe EIA lowered its average production estimate for 2023 to 12.4 million bpd from its September forecast of 12.6 million bpd.
“The lower crude oil production in the forecast reflects lower crude oil prices in the fourth quarter of 2022 than we previously expected,” the administration said in October.
Weeks Before Russia Invaded Ukraine, Upsetting Global Energy Markets, Enverus Intelligence Research expected US oil production growth will accelerate in 2022 above about 900,000 bpd.
However, inflation and supply chain delays from the second quarter onwards have significantly worsened the outlook for US crude oil production growth. Enverus Intelligence Research (EIR) cut This month’s forecast for U.S. production growth, due to “headwinds generated by oilfield service limitations, recession risk, and reduced performance from recently drilled wells in the U.S. Permian region.”
As a result, the Lower 48’s oil production forecast has been downgraded significantly and the EIR now expects around 450,000 bpd of output-to-output growth in 2022 and 560,000 bpd growth for 2020. 2023.
“OPEC Returns to the Drivers Seat”
A top industry executive said last week that the US shale patch is no longer a major oil producer and OPEC is back as the most important driver of oil fundamentals. oil supply.
“Shale is seen as a swing producer, the Saudis and OPEC have been waiting for this. Now, OPEC is really back at the helm, where they are the swing producer,” Hess Corp CEO John Hess speak at a conference in Miami last week.
The CEO believes US crude oil production will average 13 million bpd over the next few years, where it will stabilize, as investors pressure US oil companies focus on returning money to shareholders instead of investing in aggressive growth strategies.
The current state and prospects of the US oil industry are in stark contrast to the growth momentum of the decade to 2019.
Between 2009 and 2019, U.S. manufacturers captured the entire increase in global consumption in 3 out of 10 years, and at least two-thirds of the increase in consumption in 6 of those years, according to the report. estimate by Reuters senior market analyst, John Kemp.
“U.S. liquid production grew by 10 million bpd between 2011 and 2022, representing an incredible 10% of global supply in the process,” said Wood Mackenzie. speak last month. Nearly 6 million bpd of that increase came from the Lower 48’s crude oil and condensate production, with two-thirds coming from the Permian Basin alone, while the rest of the increase was liquid natural gas. produced from shale gas layers.
This year, while US oil and gas production continues to grow, growth is limited by cost pressures and supply chain delays, executives said. Dallas Fed Energy Survey for the third quarter. The shale array cites labor and equipment shortages, as well as inconsistent policies by the Biden Administration, as key barriers to expanding drilling.
“The government’s lack of understanding of the oil and gas investment cycle continues to lead to inconsistent energy policies, contributing to increased energy costs. This ongoing inconsistency increases uncertainty and reduces investment in energy infrastructure,” an executive at an oilfield services company said in a statement. comment to the survey.
“We are in an energy death spiral that will lead to higher highs and lower lows. Volatility will increase and the public is in a very difficult situation.”
By Tsvetana Paraskova for Oilprice.com
More top readings from Oilprice.com:
