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Page added on August 31, 2019

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USA Oil Production

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The Real Reason Why US Oil Production Has Peaked

Raymond James recently estimated that over the last three years the U.S. decline rate for oil has doubled from 1.6 to 3.2 million barrels per day. The drilled but uncompleted well inventory (“DUC”) is back to normal, so the number of wells being drilled and the number of wells being completed is now about the same. We need over 12,000 new horizontal oil wells completed each year to hold production flat and the number of completed wells will need to go up each year.

The U.S. Energy Information Administration (“EIA”) forecast at the beginning of this year was that the U.S. shale oil plays were just getting started and that production would increase by at least 2 million barrels of oil per day (“MMBOPD”) each year for several more years.

Now if you believe that U.S. shale production will increase by 2 million barrels per day each year for several more years, then I have a bridge that I think you might be interested in. But let’s just play “what if”, or what if it really did increase by 2 million barrels per day for the next five years.

According to the EIA’s Drilling Productivity Report, December 2018 shale production, all basins, was 8,232,750 barrels per day and the legacy decline, for all basins, averaged 6.14 percent per month or 505,737 barrels per day.

Legacy decline of over one million barrels per day would be a crippling requirement of shale producers. But not to worry, that is simply not going to happen. Now total US production did increase by two million barrels per day 2018. In fact, according to the EI.s Monthly Energy Review, US production increased by 2,064,000 barrels per day in 2018. But for the first 7 months of 2019, total US production has declined by 54,000 barrels per day.

USA production appears to have hit a snag. July production is now below November 2018 production.

In my opinion, legacy decline in shale production has reached a point where new production only replaces legacy decline. In fact, legacy decline may have reached a point where it is crippling shale oil production.

Those who have followed this blog for years know that Texas oil production is reported by the Texas Railroad Commission. But their data is very slow coming in, sometimes it is more than a year before all the data has come in. However, Dean Fantazzini, Energy economist, Deputy Head of MSU’s Chair of Econometrics and Mathematical Methods in Economics, has developed a program that uses the vintage data to make a pretty good estimate of the actual data. His past corrected data has been relatively accurate.

If Dr. Fantazzini’s data is correct then Texas peaked in December 2018 and has declined by 280,000 by June.

All the below charts were created from the EIA’s Drilling Productivity Report. The data is through September 2019 and the last few months is, of course, an estimate. Historically the estimate for those last few months has been overestimated.

Notice the last six months is pretty much a straight line. That is because most of it is just an estimate.

It looks like the Permian is pretty much the story as far as US shale is concerned.

The Permian is now just over 50% of total US shale production.

Permian Legacy Decline has been slowly rising and now sits at about 6%.

Eagle Ford has the highest legacy decline rate, now about 8.5% per month.

It looks like shale production, outside the Permian, has pretty much hit the wall. Pay no attention to those last four months. They are just the EIA’s wild ass guess.

In conclusion: Very high legacy decline, now over 6% per month, is shale’s Achilles heel. Of course, there are other problems as well. Bankruptcies are rampant, running out of sweet spots and the price of oil is just not high enough. It appears that the USA has peaked, or peaked until the price of oil rises at least $20 a month.

And check this one out:

Oil and Gas Bankruptcies Grow as Investors Lose Appetite for Shale

Peak Oil Barrelby Ron Patterson



11 Comments on "USA Oil Production"

  1. joe on Sat, 31st Aug 2019 11:54 am 

    economic sanctions on Venezuelas heavy oil is causing demand for fracked tight oil to plateau. Since fracked oil is blended with the Venezuela stuff to make gas etc then economic war with that country could be a limiting factor. also we are entering a quietish time for gas demand as we switch to stocking up on heating oil for winter. also imho as we buy more hybrids etc thats also having an impact mord generally, its doubtful anyone is keeping reliable stats on that stuff etc…..

  2. Sissyfuss on Sat, 31st Aug 2019 3:43 pm 

    If Israel keeps stinging Iran and/or its proxies, how will anyone know the price of oil then? So many tipping points, both environmental and geopolitical.

  3. makati1 on Sat, 31st Aug 2019 5:42 pm 

    Sissyfuss, in my 75 years, I have never seen the whole world so fucked up. I suspect it is the fact that the end is near and BAU is becoming extinct. The wealthy Western powermongers are seeing their end in sight and are panicking.

    Easy/cheap resources are gone. We are under the barrel looking for more but it ain’t there. Born in 1944, I’ve seen the best of the US and now I am seeing the worst, maybe the end. Interesting times, yes?

  4. Sissyfuss on Sat, 31st Aug 2019 6:04 pm 

    Mak, interesting times blech. I need some boredom asap.

  5. Anonymous on Sat, 31st Aug 2019 6:17 pm 

    1. Ron’s JUL datum is an estimate also. I have seen him make this error before. I think it is based on the font of the monthly report (versus using the 914 page or the field production page). In any case, JUL 914 is not out yet. JUL report is STEO based.

    2. It is true that US production has basically stalled since NOV18 (up 0.1 MM bopd in 7 months).

    3. I do expect JUL to be down, but because of GOM hurricane impact.

    4. Dean’s TX estimates are on autopilot and not very good. For one thing, he doesn’t even acknowledge the chance EIA made to doing the 914 survey. For another, he now has two widely varying estimates (all vintage and trailing month), so he’s not even making a definite estimate. And then the trailing month fits oil better and the all vintage works better for gas. It’s a mess.

    4. It is VERY normal for peak oilers to acknowledge price retarding oil growth (or even causing a decline) than at the same time saying “but geology is the issue also”. This is silly. You can’t tell that.

    5. What Ron doesn’t understand about decline is that it is just a result of how much recent growth we had. If we have a stall at 12, it will drop. You can look at 2016 and see how this happened before.

    6. Ron has a bad record of predicting peak oil in the past. Russia, GOM, World, SA, US…all bad calls several times.

    7. Yes, the EIA DPR recent months are an estimate. I would even agree that they are likely high NOW. This is because DPR is poor at guessing turning points. However, Ron says they’re consistently high. And that is wrong. They were low throughout the boom of 2H17-end18.

  6. Famlin on Sat, 31st Aug 2019 6:17 pm 

    “But for the first 7 months of 2019, total US production has declined by 54,000 barrels per day.”

    Oil production hit a high of 12.5 million b/d last week and this is an increase of 0.8 million b/d over the 11.7 million b/d in the last week of 2018-12.

    Where is the discrepancy.

    https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

  7. makati1 on Sat, 31st Aug 2019 6:26 pm 

    Sissyfuss, sorry, not going to happen. The pace will only increase until… Better to adjust and watch the show.

  8. makati1 on Sat, 31st Aug 2019 6:28 pm 

    Did I miss it or didn’t they mention NET oily energy produced? THAT is the only number that is important to run the world. I am sure that number has be declining for decades, but they will never post it. Gotta keep the suckers on board the sinking ship USS Petroleum.

  9. Duncan Idaho on Sat, 31st Aug 2019 6:34 pm 

    1958 — Cuba: Fidel Castro, Che Guevara & their rag-tag rebel army begin their destruction of the US-supported & Mafia/corporate-controlled dictatorship.

  10. Anonymous on Sun, 1st Sep 2019 3:34 am 

    Famlin:

    Those are weekly results. They are not good data. They are just an estimate, from the STEO a couple months before. Read up on the FAQ at the EIA page to understand this.

    The real data is the monthlies (based on an actual survey, not a projection):

    https://www.eia.gov/dnav/pet/PET_CRD_CRPDN_ADC_MBBLPD_M.htm

  11. Davy on Sun, 1st Sep 2019 3:59 am 

    Thanks for the link, Nony!

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