Newer wells in the Permian see their oil and gas production declining much faster than older wells, and operators will need to drill a large number of wells just to keep current production levels, an IHS Markit analysis showed on Thursday.
IHS Markit has analyzed what it calls the “base decline” rate, calculating the actual or expected production of all the operating wells at the start of the year and tracking their cumulative decline by the end of the year. Over the past decade, the base decline rate of the more than 150,000 producing oil and gas wells in the Permian has “increased dramatically,” according to the analysis.
The Achilles heel of US shale wells has always been its steep depletion rate ranging from 70%-90% in the first year of production necessitating the drilling of more than 10,000 wells annually at a cost $50 just to maintain production. Now drillers are even encountering faster declining rates than with old wells according to HIS Markit.
The claim by the EIA that US oil production will average 12.29 mbd this year rising to 13.29 mbd in 2020 is not only self-delusional but a plain lie. US production could probably average less than 11 mbd this year and around 10 mbd if not less in 2020.
And with oil rig count declining steeply, the US shale oil industry is a sick industry with a terminal condition. It will be no more in 5-10 years.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London