North American shale update

"Total drilling and completion costs (D&C) will increase by 10% in 2014 and reach a total of ~$141 billion. Permian Midland and Permian Delaware are expected to be the plays with the highest growth."

Rystad Energy estimates that the total liquid supply from North American shale production will increase by 1.4 million barrels of oil equivalent per day in 2014 compared to 2013. Out of this ~1.0 million boe/d will be light oil and 0.4 million boe/d will be natural gas liquids (NGL). This is the same level as in 2013, when 1.4 million boe/d was also added to the totals.

In terms of gas, shale will contribute an additional 4.7 million cubic feet per day in 2014 compared to 2013. This is higher than the 4.3 billion cf/d added in 2013. The higher additions for 2014 come as a result of higher gas prices during the winter months in early 2014. This has led companies to start to reinvest in some of the major gassy shale plays, such as Haynesville shale in northwest Louisiana and northeastern Texas.

Figure 1 shows the year by year additions of liquid volumes per shale play. Historically, the Eagle Ford and Bakken shales have added ~0.8 million boe/d yearly. In 2014, however, it is expected that these plays will be able to grow by only 0.6 million boe/d. At the same time, liquids production from the Permian in Texas and New Mexico is expected to grow faster going forward, with 0.3 million boe/d in additional liquids production in 2014. Production should grow in both the Delaware Basin in the western Permian and the Midland Basin in the eastern Permian.

Table 1 shows the current production and spending levels and trends. In 2013 the total supply from shale gas and tight oil plays averaged 9 million boe/d in the United States, of which 2.8 million barrels per day was crude oil and condensate. Canada contributed 1.0 million boe/d, where 0.3 million bbl/d was oil and condensate. For 2014 the total shale supply is expected to increase to 12 million boe/d, where 4.1 million bbl/d is oil and lease condensate.

To achieve this growth, it is expected that the total drilling and completion costs (D&C) will increase by 10% in 2014 and reach a total of ~$141 billion. Permian Midland and Permian Delaware are expected to be the plays with the highest growth.

About the author

Per Magnus Nysveen joined Rystad Energy in 2004 and leads the analysis team. He has expertise as an upstream portfolio and transaction advisor as well as experience with financial and fiscal regimes globally. He is also responsible for valuation analysis of unconventional activities and is in charge of North American shale analysis. Nysveen holds an M.Sc. degree from the Norwegian University of Science and Technology and an MBA from INSEAFD in France.

About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting, and research products. Rystad Energy's headquarters are in Oslo, Norway, with additional offices in London, Moscow, New York, and Houston. The firm also has a presence in Africa and Southeast Asia.