Preface. Conventional crude oil production may have already peaked in 2008 at 69.5 million barrels per day (mb/d) according to Europe’s International Energy Agency (IEA 2018 p45). The U.S. Energy Information Agency shows global peak crude oil production at a later date in 2018 at 82.9 mb/d (EIA 2020) because they included tight oil, oil sands, and deep-sea oil. Though it will take several years of lower oil production to be sure the peak occurred. Regardless, world production has been on a plateau since 2005.

What’s saved the world from oil decline was unconventional tight “fracked” oil, which accounted for 63% of total U.S. crude oil production in 2019 and 83% of global oil growth from 2009 to 2019. So it’s a big deal if we’ve reached the peak of fracked oil, because that is also the peak of both conventional and unconventional oil and the decline of all oil in the future.

Peak oil means peak everything else, including coal and natural gas, because diesel transportation makes all goods possible.

Peak oil in the news:

Geiger J (2023) Permian Growth Expected To Be Slow Before Peaking In 2030 (my comment: meanwhile the other seven shale/fracked oil basins are declining): The largest oil basin in the USA is set to grow its output by 40% over the next 7 years, according to a Bloomberg survey of four major forecasters—but that growth will be slow and steady instead of explosive. Major forecasters surveyed by Bloomberg are predicting that production from the Permian basin will hit 7.86 million barrels per day in 2030—the point at which they are expecting it to peak. According to the most recent Drilling Productivity Report published on Monday, the Energy Information Administration estimates that April’s 2023 crude oil production will average 5.681 million bpd, and rise to 5.694 million bpd in May. If forecasters are correct, their 2030 predictions would mean a production increase for the basin of more than 2 million bpd from today’s levels. or somewhere near 38 percent.

U.S. Shale Boom Shows Signs of Peaking as Big Oil Wells Disappear (WSJ) – The boom in oil production that over the last decade made the U.S. the world’s largest producer is waning, suggesting the era of shale growth is nearing its peak.  Frackers are hitting fewer big gushers in the Permian Basin, America’s busiest oil patch, the latest sign they have drained their catalog of good wells. Shale companies’ biggest and best wells are producing less oil, according to data reviewed by The Wall Street Journal.  The Journal reported last year companies would exhaust their best U.S. inventory in a handful of years if they resumed the breakneck drilling pace of prepandemic times. Now, recent results out of the Permian, spread across West Texas and New Mexico, are mimicking the onset of a production plateau that has taken place at other, more mature U.S. shale plays. Oil production from the best 10% of wells drilled in the Delaware portion of the Permian was 15% lower last year, on average, than top 2017 wells, according to data from analytics firm FLOW Partners LLC. Meanwhile, the average well put out 6% less oil than the prior year, according to an analysis of data from analytics firm Novi Labs.  The atrophy of once-booming sweet spots has big implications for the global oil market, which years ago could count on rapidly growing U.S. oil production to blunt the effects of supply disruptions and rising demand. Without successful exploration or technological advances, the industry’s inventory constraints are expected eventually to push companies to tap lower quality wells that would require higher oil prices to attract investment, industry executives say.

Exxon Has a Message for Europe: Don’t Mess With Oil and Gas (Bloomberg) – Exxon Mobil Corp. Chief Executive Officer Darren Woods used his prime-time address at the CERAWeek by S&P Global conference in Houston to criticize European energy policy, which in his view has gone too far.  After years of deterring investment in oil and gas, Europe had no alternative but to burn coal to keep the lights on when Russian gas stopped flowing. But by continuing to hit the oil and gas industry with “punishing” measures like the European Union’s windfall tax, things will only get worse, Woods said Tuesday.  “What we saw in Europe should be a wake-up call,” he said. Exxon “stepped back and reevaluated” its investment strategy in the continent, he continued. Meanwhile, it’s plowing ahead with new projects in the US, where the Inflation Reduction Act offers incentives for companies rather than punitive measures. For all the criticism Exxon has endured, including from its own shareholders, Woods insists that his decision not to waver from oil and gas has been the right one. Investors appear to agree with him: Exxon’s stock is up 134% since the pandemic, nearly double the performance of its closest peer Chevron Corp.

Peak-Oil Fears Cast Shadow Over US Supply Outlook as Costs Climb (Bloomberg) – The specter of peak oil that haunted global energy markets during the first decade of the 21st century is once again rearing its head.   Major US oil producers are warning that production from one of the fastest growing sources of supply appears likely to top out by the end of the decade. ConocoPhillips and Pioneer Natural Resources Co. are among those saying the American shale-oil juggernaut soon will be a spent force as the best drilling targets are exhausted and financing new wells gets more difficult.  “You see the plateau on the horizon,” ConocoPhillips Chief Executive Officer Ryan Lance said during a panel discussion at the CERAWeek by S&P Global conference in Houston on Tuesday. Once US crude production peaks around 2030, it’ll plateau for a time before commencing a decline, he added. Although output in the world’s biggest economy is set to continue rising for a least a few more years, the zenith is fast approaching, executives and analysts said. “I wish we could get world leaders to realize that we need hydrocarbons for another 50 years,” said Pioneer CEO Scott Sheffield, who expects US production to peak in five or six years.

Opec back in charge as US shale oil growth flags, executives say (FT) – The Opec cartel is back in control of the world oil market as the shale revolution peters out, according to a number of industry executives who warned of higher prices for crude in the year ahead.  Despite recent record profits, the heads of American shale producers told the Financial Times that rising costs and investor pressure to return cash to shareholders would continue to hamper US supply growth.  The dim outlook is a reversal from the previous decade, when the shale industry’s ability to quickly boost production prompted claims the sector had become a new “swing producer” with market power to rival Opec kingpin Saudi Arabia.  “I think the people that are in charge now are three countries — and they’ll be in charge the next 25 years,” said Scott Sheffield, chief executive of Pioneer Natural Resources, the biggest independent US shale oil company. “Saudi first, UAE second, Kuwait third.”

OPEC Concerned About Demand Slowdown in US, Europe, Chief Says (Bloomberg) – OPEC’s top official said slowing oil demand in Europe and the US are posing a concern for the global market, even as Asia experiences “phenomenal” growth. “We see a divided market — almost like two markets,” OPEC Secretary-General Haitham Al-Ghais said at the CERAWeek by S&P Global conference Tuesday. Ensuring “security of demand” in regions where inflation is crimping consumption is as critical as ensuring supplies, he said. For now, though, rebounding demand in Asia will help keep the market broadly balanced in the first half of the year, with global consumption seen rising by 2.3 million barrels a day to average 101.87 million barrels a day in 2023, according to the latest report from OPEC’s Vienna-based secretariat. After that, the market is expected to tighten as global inventories decline and the 23-nation OPEC+ coalition, led by Saudi Arabia, aims to keep production levels unchanged for the rest of the year. The group is due to hold an online monitoring meeting to review market conditions early next month, followed by a full ministerial conference in June to set policy for the rest of the year.

Russian Oil Gets More Pricey as Pool of Asian Buyers Expands (Bloomberg) – The price of Russian crude and fuel is rising for buyers in Asia as a pool of bigger customers from China and India expands, putting pressure on smaller refiners that have eagerly consumed the cheap oil. Offer levels for Russia’s Urals and ESPO crude, as well as fuel oil, surged over the past weeks, according to traders with knowledge of the matter. Increased interest from Chinese state-owned and large private refiners such as Sinopec, PetroChina Co. and Hengli Petrochemical Co., in addition to a jump in Indian demand, led cargoes to be snapped up at higher prices, they said. Offers for ESPO that’s typically loaded at Kozmino port was close to $6.50 to $7 a barrel below ICE Brent on a delivered basis to China, while flagship Urals shipped from western ports was around $10 under the same benchmark, said traders. That’s an increase of as much as $2 from last month, marking one of the steepest jumps since sanctions were imposed on Dec. 5, they added.

U.S. regulator orders lower pressure on Keystone pipeline system after spill (Reuters) – The U.S. pipeline regulator said on Tuesday it would require TC Energy to reduce operating pressure on more than 1,000 additional miles (1,609 kilometers) of its Keystone pipeline that spilled about 13,000 barrels of oil in rural Kansas in December.  The Canadian pipeline operator completed a controlled restart of the 622,000-barrel-per-day (bpd) pipeline to Cushing, Oklahoma, on Dec. 29 last year, returning it to service after a 21-day outage following the biggest U.S oil spill in nine years. The amended corrective action order requires TC Energy to keep the operating pressure on the affected pipeline segment under the previously agreed upon 923 pounds per square gauge (psig) limit. The pressure reductions will lower crude flow rates on the entire Keystone system, which could affect price differentials between U.S. and Canadian crude, Credit Suisse analyst Andrew Kuske said in a note.

And Copper:

China Copper Exports Set to Jump as Domestic Demand Disappoints (Bloomberg) – China is poised to export a significant volume of copper in coming weeks, a relatively infrequent occurrence that underscores a tepid demand recovery in the biggest market. At least four major smelters are planning to deliver between 23,000 and 45,000 tons of refined copper in total to London Metal Exchange depots in Asia, according to people with knowledge of the sales, who asked not to be identified because the plans are private. The burst of exports confirms China’s weak economic rebound, with manufacturing and construction still gearing up after Covid-related disruptions over the past year. Market inventories have jumped recently, and a key question is whether the wave of outbound shipments will extend beyond this month. China imports huge amounts of copper in various forms, but refined metal occasionally flows out when there’s too much domestic supply and not enough elsewhere. Price differentials now make it more lucrative to sell at least some material on the world market. There are some signs that copper demand in the country is picking up. On-exchange inventories have begun to fall and the nation’s manufacturing index for February notched its highest reading in more than a decade.

Alice Friedemann  www.energyskeptic.com  Author of Life After Fossil Fuels: A Reality Check on Alternative Energy; When Trucks Stop Running: Energy and the Future of Transportation”, Barriers to Making Algal Biofuels, & “Crunch! Whole Grain Artisan Chips and Crackers”.  Women in ecology  Podcasts: WGBH, Jore, Planet: Critical, Crazy Town, Collapse Chronicles, Derrick Jensen, Practical Prepping, Kunstler 253 &278, Peak Prosperity,  Index of best energyskeptic posts

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2023. What the end of the US shale revolution would mean for the world. Financial times

The “golden age of shale mining” is coming to an end in the US, which could lead to unpredictable consequences. Rapid shale growth delivered a huge stimulus to the global economy by keeping fuel prices low, and freed Washington’s hands to take on oil-rich rivals in Iran and Venezuela without fear of economic blowback for voters at home. Shale supply the past 15 years shelterrf Americans from the sky-high natural gas and fuel prices rattling other economies, giving its industry a competitive advantage and its households more disposable income.

Today new wells are yielding less oil. “The aggressive growth era of US shale is over,” says Scott Sheffield, chief executive of Pioneer Natural Resources, the country’s biggest shale producer.“The shale model definitely is no longer a swing producer.  

The world could enter “an even more volatile energy market” after the end of the “aggressive growth” phase of US oil production, as demand for oil globally does not decrease significantly. States that import face a new round of higher prices, and strengthen OPEC’s influence back to what it was in 2009 and persist unless fracking can be done in other countries successfully .

Tobben S (2023) North Dakota’s Bakken shale “holding back” U.S. oil production. Bloomberg 

https://www.worldoil.com/news/2023/2/8/north-dakota-s-bakken-shale-holding-back-u-s-oil-production/

North Dakota’s Bakken shale — traditionally one of America’s larger, busier shales — is showing signs of maturation, threatening to hold back U.S. oil production as the world thirsts for more crude. Mature wells that are producing more gas than expected are hurting crude output from the Bakken, the Energy Information Administration said in an email on 2/7. The deteriorating performance was the main reason the agency cut its estimate for 2024 U.S. oil output to 12.65 MMbpd from an earlier projection of 12.8 million.

Messler D (2023) Will U.S. shale ever return to its glory days? oilprice  

https://oilprice.com/Energy/Crude-Oil/Will-US-Shale-Ever-Return-To-Its-Glory-Days.html

In November 2022 I discussed signs of maturing of the drilling inventory: the number of Top-Tier locations in on the decline, and operators are being forced to drill less productive, lower-tier reservoirs to maintain output. While there is no concern about production from shale reservoirs “falling off a cliff” anytime soon, the fall-off in productivity in at least some basins, is becoming noticeable by a number of metrics.

The shale “boom” is about thirteen years old, if you date it from 2010 and there are clear signs the meteoric growth of past years are behind us. Our expectations are for shale production to maintain an upward trend for most of this year, but with an arc that flattens as 2023 waxes on, and then begins to bend down. Perhaps as soon as the end of this year. This opinion flies in the face of generally accepted industry and governmental forecasts that show shale production exceeding 10 mm BOEPD at the end of 2024.

One of the problems with shale production, is the best locations in the various shale basins are well past their prime and shale output could be in the early stages of a death by a thousand cuts. (A death, I remind you again is decades hence, but hanging out there none the less.) This declaration runs in stark contrast to other data taken from the EIA Drilling Productivity Report-DPR, showing shale production is on the increase. How is this possible? The report shows production increasing significantly only in the Bakken, rising a little in the Permian, and barely staying even in the Anadarko, Appalachia, Eagle Ford, Haynesville, and Niobara.

There are observable trends indicating there may be a peak coming. If this trend continues, the only way to maintain output at or above current levels will be with increased drilling.

Wethe D, Crowley K (Dec 12, 2022) Oil Wells Creeping Into Texas Cities Herald Shale Era’s Twilight The world can no longer rely on the Permian Basin to keep crude prices in check, with new wells pumping less oil per foot drilled. Bloomberg.

https://www.bloomberg.com/news/articles/2022-12-12/oil-wells-creeping-into-texas-cities-herald-shale-era-s-twilight

An uptick in drilling within the city limits signals that the very best rock in one of the world’s most prolific oil fields has already been tapped. In the shale boom’s early days, with so much crude-soaked land up for grabs elsewhere in the Permian Basin, there was little reason to deal with the red tape needed to bore underneath populated areas. But with over two-thirds of the Permian’s premium land now drilled, according to BMO Capital Markets, producers are seeking more permits than ever to burrow beneath Midland and its 130,000 residents. 

Observers have long been predicting shale’s demise or heralding its rebirth. But this time is different: After years of honing their craft to boost output, producers in the Permian’s two main zones are pumping less oil per foot drilled in each new well, not more. Analysts say the Permian could reach a production plateau within five years. Wells drilled this year produced between 8% and 13% less oil per lateral foot than a year earlier.

That’s a problem that reaches far beyond Texas. US shale, led by the Permian, has provided 90% of global oil output growth in the past decade. A shale slowdown means the world can no longer rely on the US to be its swing oil supplier, capable of ramping up or down quickly to temper a volatile market. It complicates the Biden administration’s efforts to tame pump prices, and it hands more power back to OPEC as Russia’s invasion of Ukraine upends oil and gas supply.

Most of the top-tier land has already been developed in the Permian and in the Bakken of North Dakota, the top-producing shale regions. That leaves explorers with a lower inventory of the most valuable yet-to-be-drilled sites.  “We’re going to run out of inventory in the next four to six years,” said James West, an analyst at Evercore ISI. “We probably saw it earlier in other shales, which is why we left those other shales and moved so much activity into the Permian. It’s now rearing its ugly head in the Permian.”

Brower D (2020) Shale binge has spoiled US reserves, top investor warns. Financial Times

A fracking binge in the American shale industry has permanently damaged the country’s oil and gas reserves, threatening hopes for a production recovery and US energy independence, according to one of the sector’s top investors.

Wil VanLoh, chief executive of Quantum Energy Partners, a private equity firm that through its portfolio companies is the biggest US driller after ExxonMobil, said too much fracking had “sterilised a lot of the reservoir in North America”.

“That’s the dirty secret about shale,” Mr VanLoh told the Financial Times, noting wells had often been drilled too closely to one another. “What we’ve done for the last five years is we’ve drilled the heart out of the watermelon.”

Soaring shale production in recent years took US crude output to 13m barrels a day this year and brought a rise in oil exports, allowing President Donald Trump to proclaim an era of “American energy dominance”. 

Total US oil reserves have more than doubled since the start of the century as hydraulic fracturing, or fracking, and horizontal drilling unleashed reserves previously considered out of reach.

But the pandemic-induced crash, which sent US crude prices to less than zero in April, has devastated a shale patch that was already out of favor with Wall Street for its failure to generate profits, even while it made the country the world’s biggest oil and gas producer. 

The number of operating rigs has collapsed by more than 60% since the start of the year. US output is now about 11m barrels a day, according to the US Energy Information Administration, or 15% less than the peak. 

“Even if we wanted to, I don’t think we could get much above 13m” barrels a day, Mr VanLoh said. “I don’t think it’s physically possible, because we’ve messed up so much reservoir. I would argue that what the US was touting three or four years ago, in theoretical deliverability, is nowhere close to what we think it is now.”

He said operators had carried out “massive fracks” that created “artificial, permanent porosity”, inadvertently reducing the pressure in reservoirs and therefore the available oil. 

The comments will cause alarm in the shale patch, given the crucial role of investors such as QEP in financing the onshore American oil business.

The Houston-based investor has assets under management of about $11.2bn, according to data provider PitchBook, and is one of the few private equity groups still focused on shale.

Private companies account for about 30% of US oil production excluding Alaska and Hawaii, about 2.7m b/d, according to consultancy Rystad Energy.

Other private equity investors have warned that the shale growth story has ended, despite an oil-price recovery in recent months to about $40 a barrel.

“They were making lousy returns at $65 a barrel,” said Adam Waterous, head of Waterous Energy Fund. “You need at least north of $70 before you start achieving a cost-of-capital return in the US oil business.”

Production from the Permian, the prolific shale field of west Texas and New Mexico, peaked even before the crash this year, Mr Waterous said. At current prices, only 25 per cent of US shale was economical, he added.

Analysts also say US oil output will struggle to recover its previous heights. Artem Abramov, head of shale research at Rystad, said production would remain between 11.5m b/d and 12m b/d at $40 a barrel. S&P Global Platts forecasts a decline to 10m b/d by mid-2021. 

But the crash could create opportunities for QEP in the short term, Mr VanLoh said, especially if prices recovered.

While listed producers had mostly sworn off production growth, some QEP-backed companies, such as DoublePoint Energy — which played host to Mr Trump during the president’s July fundraising visit to Midland, Texas — were increasing drilling activity. It says its Permian acreage can still be profitable at current prices.

QEP’s portfolio companies would increase output this year by about 25 per cent, to 500,000 barrels of oil and gas a day, Mr VanLoh said. 

“The next five years may be the best five years we’ve ever had for hydrocarbon investing,” he said. 

But he is also adjusting his company’s strategy to reflect investors’ growing disquiet with fossil fuels. QEP’s new 10-year fund, VIII, would be launched in early November, he said, with $1bn of about $5.6bn of total capital commitment reserved for “energy transition” investments. 

The company would soon appoint someone from outside the oil industry to enforce better environment, social and governance performance at QEP’s companies, Mr VanLoh added. 

He said they would have to improve ESG “because ultimately you’re not going to get capital from us if you don’t . . . And we won’t be able to get capital from our limited partners if you don’t.”

A more efficient US shale sector would re-emerge from the crash, Mr VanLoh said, but it would be smaller and require a reduced workforce. He is now advising his friends’ children not to pursue a career in oil. 

“I tell all of them — honestly, it’s a very risky bet and, if I were you, I would not go into it today.”

A comment from a reader:

“A technical point: shale has a lot of porosity as a function of its many tiny grain particles, but no permeability as the pore necks are too small to allow flow. All reservoirs are under pressure due to the burial of the reservoir. Fracking creates instantaneous fissures into which hydro carbons are spontaneously released and the pressure keeps flow going. But that pressure flags quickly. Hence the rapid decline of shale wells, typically 50% of initial flow after 6 month. The bigger the frack, the higher the first release in the perimeter of the well. Refacking will not do anything as the matrix is already destroyed. Poor practice does the reservoir in, but the frackers needed to keep it up to maintain production. The fag end of the oil businesses.”

References

EIA. 2020. International Energy Statistics. Petroleum and other liquids. Data Options. U.S. Energy Information Administration. Select crude oil including lease condensate to see data past 2017.

IEA. 2018. International Energy Agency World Energy Outlook 2018, figures 1.19 and 3.13. International Energy Agency.