The shale boom continues unabated. Despite demand-side issues making the headlines recently, the continued growth of the US shale sector is just as significant.
As prices remain relatively stable in the US$70s, and the sector overall is on track to make a profit, investors are pouring money into shale. Indeed, as Stephen Brennock, oil analyst at PVM Oil Associates, said: “US shale doom-mongers should not get ahead of themselves. They ought to remember that the US shale patch is in better financial shape than ever [...] When it comes to US shale, it is still very much a case of the only way is up.”1
A recent report by Rystad Energy shows that US shale producers are continuing to spend more money in order to boost their production.2 Occidental Petroleum has increased its capital guidance in the Permian by US$900 million, Pioneer has increased by US$400 million and Apache and WPX have increased spending by US$400 million and US$250 million respectively. The report does point out that part of the increase is due to service cost inflation, but notes that “a significant part of the incremental budget is also planned to be used for additional drilling throughout 2H 2018 to support more intensive completion activity and production growth in 2019.”3
In late July, BP agreed to buy BHP’s US shale assets for US$10.5 billion as part of the supermajor’s first major expansion into the US upstream sector since the Deepwater Horizon spill back in 2010. The assets acquired by the company produce roughly 190 000 boe/d. BP’s Upstream Chief Executive Bernard Looney said: “We’ve just got access to some of the best acreage in some of the best basins in the onshore US, and I think we have one of the best teams in the industry to work it.”4
The Chinese government is also getting in on the act. Despite escalating tensions over trade tariffs on US and Chinese goods, a US$83.7 billion shale gas deal between China Energy Investment and the state of West Virginia is reportedly going ahead.5 The deal, signed by President Trump on his visit to China in November of last year, is part of US$250 billion worth of deals agreed between the two countries. Ling Wen, president of China Energy Investment, admitted that the trade conflict between the two countries would likely have an impact on the economics of the deal, but confirmed that it would “be aggressively and soundly pursued under the principle of profit maximisation.”6
Even local councils in the UK are (admittedly indirectly) now part of the shale boom; through their pension funds, they have invested approximately £9 billion into the industry.7
The Oilfield Technology team will be at this year’s SPE ATCE, held on 24 – 26 September in Dallas, Texas. We’d love to hear from you, so feel free to drop by our stand (#1816) and let us know how your company is pushing the industry forward.
References
- ‘US shale growth will offset global production problems over the coming months, analysts say’ – https://www.cnbc.com/2018/08/15/us-shale-growth-will-offset-global-production-problems-over-the-coming.html
- ‘US shale operators prepped to spend more to produce more’ – https://www.rystadenergy.com/newsevents/news/newsletters/UsArchive/shale-newsletter-august-2018/
- Ibid.
- ‘BP buys US onshore assets from BHP’ – https://www.bp.com/en/global/corporate/media/latest-news/bp-buys-bhp-us-assets.html
- ‘Chinese state-owned company advances $84bn US shale gas deal’ – https://asia.nikkei.com/Business/Business-Deals/Chinese-state-owned-company-advances-84bn-US-shale-gas-deal
- Ibid.
- ‘UK local government pension funds invest £9bn in fracking companies’ – https://www.ft.com/content/fdbfe85a-609f-3ec5-b20e-12dc873e6f74\
