Shale Enthusiasm Wanes as Challenges Emerge

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US shale has undoubtedly been the single most disruptive element in oil markets over the past decade, but its influence could be waning, former Schlumberger chief executive and current Saudi Aramco board member Andrew Gould told an audience Wednesday at the Oil & Money conference in London. Gould moderated the second half of a two-part upstream forum at Oil & Money, co-hosted by the New York Times and Energy Intelligence, that discussed the outlook for deepwater and shale plays (related). While the first half of the forum was marked by optimism about global deepwater's prospects, the latter portion did not match that enthusiasm. Panelists noted that US shale output could peak as early as the middle of the next decade -- a warning one speaker had sounded out earlier this year (OD Mar.8'18). According to Mark Papa, the chairman and CEO of Centennial Resource Development who led shale all-star EOG Resources to the top of the shale industry, two of the three major shale regions are at or near peak -- the South Texas Eagle Ford Shale and North Dakota's Bakken tight oil play -- leaving the Permian Basin as the lone source of sustained growth, in Papa's opinion. Papa's Centennial is a pure-play producer in the Permian's Delaware subbasin. The other two shale areas are "now drilling Tier 2 or even Tier 3 prospects" after wearing out the Tier 1 sweet spots during the post 2014 high-grading period, he added. Fellow panelist and former Chevron executive Ali Moshiri agreed that of the seven widely recognized US shale areas, the Permian is "the gorilla," but he generally sees US short-cycle shale as a bridge to the return of more traditional big-ticket international projects. The limited upside on shale development is partly a result of the inability to use secondary water injection recovery methods, which were effective in moving conventional production in the Permian last century, in shale plays, long-time Schlumberger scientist and current senior research scholar Robert Kleinberg said. Indeed, EOG's success was predicated on moving directly to very effective tertiary enhanced oil recovery using reinjected natural gas, Kleinberg noted. According to all three panelists, while other unconventional oil areas like Oklahoma's Scoop/Stack play and the Colorado-Wyoming Niobrara Shale areas are expected to be minor contributors to US oil production, gas shale areas in the eastern US and in western Canada could be hugely prolific if price and transport conditions allow. However, shale resources exist around the planet and some may eventually be developed, just not on the speed and scale of the US experience. Besides Canada, Moshiri pointed to Argentina's Vaca Muerta Shale as just one of a meaningful number of potential foreign shale plays that could become relevant with upgrading of local oil service capabilities and removal of institutional barriers (OD Aug.14'18). Gould highlighted the advantages of the US of being able to easily move a rig off an unsuccessful well in one state to a better prospect elsewhere in the US -- something that typically would be hugely difficult to do in places like Russia. David Knapp, London

Exploration, Shale
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