When will the U.S. shale oil feast end?

The Wall Street Journal recently reported that for U.
S.
shale oil producers, the end of the shale boom is not far away
.
In less than 3 and a half years since the shale revolution made the United States the world's largest oil producer, shale oil extractors in Texas, New Mexico and North Dakota have drilled many high-quality oil wells
.

Shale well inventories are depleting too quickly

The Wall Street Journal article on U.
S.
shale well inventory data analysis said that if the top shale companies in the U.
S.
continue to keep shale oil production stable, many companies will continue to drill profitable wells in the next 10 or 20 years; If they ramp up production by 30 percent a year, equivalent to the Permian Basin's pre-pandemic production growth rate, their shale well inventories will be depleted
within a few years.

The Wall Street Journal investigated information about drilling inventories from analyst firm FLOW, Bernstein Research and Norwegian energy consultancy Rystad
.
While all three companies have made different assumptions, they all point to similar inventory limitations
.

For years, shale oil companies have been telling investors that they have acquired enough blocks to continue mining for decades
.
In 2018, Continental Resources said it could drill 65,000 wells in the Bakken Shale and produce 37 billion barrels of oil
.
But Rystad said to drill the wells, the company would have to further explore the area and improve existing technology
.
Rystad estimates that the region's eventual oil production will only reach 28 billion barrels
.
U.
S.
shale oil companies have drilled 18,500 wells in the Bakken Shale and ThreeForks shale areas in North Dakota and Montana, and even though high oil prices may stimulate further exploration in the area, there will be 16,500 wells left in the area with existing drilling technology, and fewer than 3,200 wells are considered high-quality wells
.

Well inventories at shale oil companies have been significantly reduced
as many oil companies seek to extract lower-cost wells in response to falling oil prices during the pandemic.
In recent years, shale oil companies have also found that predictions about how many wells can be crammed into a small space are overly optimistic
.
The proximity of new wells to old wells often affects the production of old wells or causes new wells to perform less than expected, and shale oil companies can only eventually widen the well spacing
.

Rystad estimates that the number of top drilling sites in the five major U.
S.
oil-producing regions has shrunk from more than 68,000 to less than 35,000 since the end of 2016
.

The Bakken Shale and Eagle Beach shale areas sparked a U.
S.
shale oil development boom, but growth in both fields had slowed
significantly before the pandemic.
Before the epidemic, the number of wells drilled in the Barken Shale area decreased by 77% from the historical peak, and the number of wells drilled in the Eagle Beach Shale area decreased by 70%
from the historical peak.
Rystad's analysis shows that even if production declines, the top wells in the Barkken Shale area will be exhausted in less than 6 years, while the top wells in the Eagle Beach Shale area will be exhausted
in less than 5 years.

Shale oil production growth will slow sharply

U.
S.
oil production is currently about 11.
5 million barrels per day, still below its peak of
13 million barrels in early 2020.
The U.
S.
Energy Information Administration (EIA) expects U.
S.
oil production to grow by 5.
4 percent
by the end of 2022.

Pioneer Natural Resources is the largest oil producer in the Permian Basin, and at its peak, the company's oil production increased by 19 to 27 percent
annually.
Now, the company plans to increase production
by 5% or less per year.
Chief Executive Scott Sheffield said investor pressure, combined with limited well inventories, meant shale companies could not drill at the pace they had in the past
.
He also pointed out that "you can't always maintain an annual production increase of 15 to 20 percent, because that will quickly deplete well stocks
.
"

Pioneer Natural Resources acquired two smaller drilling companies, Parsley Energy and DoublePoint Energy, last year, in a deal worth about $11 billion
.
Sheffield said that through these acquisitions, if production is kept stable, the company's well inventory can be maintained for 15 to 20 years; If production grows at a rate of 15% to 20%, the company's well inventory can be maintained for about
8 years.

While privately held oil producers have increased production in the Permian Basin over the past year, Sheffield warns that if they remain that way, even the largest producers could quickly deplete well inventories
.
Sheffield expects U.
S
.
oil production to grow by only 2 to 3 percent a year, even if oil prices are $70 to $100 a barrel.

Many shale companies say they will never return to pre-pandemic production growth levels of up to 30 percent a year, in part because of rising labor costs, a shortage of available capital, and the need for a large number of new wells
.

The Wall Street Journal commented that the five largest shale oil companies in the United States, EOG Resources, Devon Energy, Diamondback Energy, Continental Resources and Marathon Oil, could use profitable well inventories for 10 years or more if they were to be drilled at current drilling rates; If they increase production by 15% per year, profitable well stocks will be depleted
within 6 years.

It is urgent to explore new hotspots

It is well known that shale oil wells have amazing early production, but production has declined rapidly
.
To keep production steady, large U.
S.
shale companies have to drill hundreds of new wells
each year.
In this case, the company will have fewer and fewer
existing drillable sites.
Company executives and investors say some shale companies will eventually have to start spending money exploring new hotspots, and even then, those efforts are unlikely to lead to production growth
.
And few companies are currently willing to spend money to explore new hot spots
.

EOG Resources is exploring new drilling areas and is the fourth-largest oil company
in the United States by market capitalization.
The company pioneered hydraulic fracturing and horizontal drilling techniques for extracting oil from shale formations
.
Under the leadership of new CEO Ezra Jacob, he is now one of the few companies trying to find a new oil and gas extraction location in the
United States.
Jacob said the company's exploration activities are not motivated by concerns about inventory depletion, but by constantly seeking to improve returns
by finding the most profitable drilling sites.

EOG Resources said last year that it had spent $300 million on exploration in the United States, but has not disclosed the location of
domestic exploration wells.

Lagerfeld, president of FLOW, estimates that if EOG Resources' production is basically flat, the company's well inventories will last for 12 and a half years; If annual production is increased by 15%, it can only be maintained for 4.
4 years
.
EOG Resources disagreed with FLOW's assessment, saying there are more economic wells available for drilling, and if at last year's rate of mining, the inventory could be mined for 23 years
.