the U.S. is counting on

a long-term abundance of oil & natural gas

But what if the boom is just a bubble?

Eagle Ford Reality Check

The Nation’s Top Tight Oil Play After a Year of Low Prices

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Oil production in the Eagle Ford Play of southern Texas, the largest tight oil play in the U.S., is now falling after more than a year of low oil prices—but it has proven more resilient than many observers expected. This paper reviews the latest developments in the Eagle Ford Play and provides an update of the assessment in my Drilling Deeper report, which was published in October 2014 just as the turmoil in the oil markets began.

In Eagle Ford Reality Check, David Hughes, author of Drilling Deeper (which likely remains the most thorough independent analysis of U.S. shale gas and tight oil production ever conducted) and a number of other reports on North American shale gas and tight oil production, looks at how production in the Eagle Ford has changed after a year of low oil prices.

Oil production in the Eagle Ford is now falling after more than a year of low oil prices. The glory days of the Eagle Ford are behind it, at the ripe old age of six years. This paper reviews the latest developments in the Bakken Play and provides an update of the assessment in Drilling Deeper, which was published in October 2014 just as the turmoil in the oil markets began.

We recently asked David Hughes, author of Drilling Deeper (which likely remains the most thorough independent analysis of U.S. shale gas and tight oil production ever conducted) and a number of other reports on North American shale gas and tight oil production, to look at how production in the Eagle Ford has changed after a year of low oil prices.

Key Conclusions

  • Eagle Ford production is falling, which is a result of the decline in the rate of well completions to levels insufficient to offset the static 25% yearly decline rate of the play (2,900 well completions per year are required to maintain production at the peak level of 1.6 mbd).
  • Well productivity gains due to better technology have stopped and are declining in three of the six top counties, due to both exhaustion of the highest quality drilling locations and well interference from spacing wells too close together, which account for 44% of the play’s production. This is a harbinger of what will happen in all counties as high quality drilling locations are used up.
  • The best quality parts of the play are being exploited now, and that lower quality geology going forward will dictate lower well productivities, with worse economics, which will require higher prices to justify drilling. Thus even to maintain the peak rate of 1.6 mbd, the drilling rate would have to increase from the 2,900 wells per year currently required (needing $23 billion per year of capital input exclusive of leasing and other ancillary costs).
  • Both the Drilling Deeper and EIA AEO2015 forecasts for Eagle Ford production are likely too high in the short term given the drastic drop in the rate of well completions. Lower well completion rates now, however, will save drilling locations for later, which will serve to extend drilling in the field beyond 2025 when the 37,000 drilling locations in the play were forecast to be exhausted. The EIA’s assumption that production can continue at relatively high levels after drilling locations are exhausted and exit 2040 at 0.6 mbd is highly optimistic, however, and is unsubstantiated by the data.
  • The hype surrounding tight oil as a means to bolster global oil production over the long term is not justified. Geological fundamentals clearly show that high decline rates, limited sweet spots, and finite numbers of drilling locations will limit long term contributions to production. The Eagle Ford and Bakken plays have peaked after only a few years, and although they have made a significant short term impact, their best days are behind them. optimistic tight oil forecasts of the EIA, and even more optimistic forecasts of some industry watchers, are unhelpful abstractions in developing energy policy for a more sustainable future.

image credit: Tom Reichner / Shutterstock.com


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