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Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Is The Shale Boom Running On Fumes?

By Nick Cunningham - Dec 30, 2019, 5:00 PM CST

Shale drilling does not produce as much oil and gas as the industry promised, raising questions about the productivity, profitability and, ultimately, the longevity of the fracking boom.

The Wall Street Journal published a damning investigation into the productivity of thousands of shale wells, finding that as time has passed, oil and gas production from shale wells has proved to be more disappointing than previously thought. The report adds more evidence to the conclusion that the WSJ came to nearly a year ago, which raised serious questions about problems endemic to shale drilling.

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After an initial burst of production, shale wells decline rapidly, a fact that has been widely known since the fracking boom began more than a decade ago. However, companies promised that these wells would stay online for years, perhaps even decades, even though they would produce at a small fraction of their initial peak.

But as time has passed, wells drilled years ago are now producing a lot less than previously thought. The WSJ collected data on the 29 largest shale producers. A year ago, the WSJ found that wells produced from those companies were on track to extract 10 percent less oil and gas over their lifespans than the companies promised. Now, with new data, the WSJ finds that those wells could produce 15 percent less than initially advertised.

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That adds up to a gap of around 1.4 billion barrels of oil and gas over 30 years, the WSJ says, or around $60 billion at current prices. Put another way, the 29 largest shale companies are set to produce $60 billion less value than they initially told investors. Related: Iraq’s 550,000 Bpd Oil Deal Is In Jeopardy

The WSJ pointed to the example of Whiting Petroleum, which told investors that each of its wells drilled in North Dakota in 2015 would produce a cumulative 700,000 barrels of oil and gas over their full lifetimes. In early 2019, using data from Rystad, the WSJ found that the real figure might be more like 590,000 barrels. As 2019 comes to a close, the WSJ found that the most up-to-date data now pegs that estimate at 540,000 barrels. In other words, Whiting’s wells are on track to produce nearly a quarter less than previously thought.

There are some serious implications from this revelation. Shale companies may not be as valuable as investors previously thought. Shale drilling in general may be less profitable than previously thought, and it has long been dogged by a questionable business model. Moreover, to keep output from falling, companies will have to spend more and drill at a faster rate. In the end, the U.S. may not produce as much oil and gas as expected.

Critics of the shale industry have raised similar concerns in the past. For instance, the Post Carbon Institute has repeatedly published reports questioning the longevity of the shale boom. The latest analysis came in November, in which author J. David Hughes said the EIA’s reference case for U.S. oil and gas production from each shale basin through 2050 is “extremely optimistic for the most part, and therefore highly unlikely to be realized.”

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