There continues to be great potential for surprises to the upside in production of US tight oil, according to Wood Mackenzie's latest integrated analysis.
"Growth in US tight oil continues to impress as development technology and techniques have yet to mature beyond adolescence," said Phani Gadde, senior North America upstream analyst for Wood Mackenzie.
Gadde said that additional volumes from enhanced oil recovery (EOR) will come on stream after 2020, and could add 1.5 to 3 million barrels per day (mb/d) by 2030, up to 25% more oil than is being forecasted today. These technologies are in early test phase and are not commercial yet, but indicators suggest up to a 100% increase in recovery rates. Gadde added that pilot tests are underway with operators, such as EOG, testing it out in the Eagle Ford shale play.
"This is going to happen, like horizontal drilling and fracking, leading to another step change in production technology," said Skip York, principal analyst, Americas Downstream, Midstream & Chemicals, for Wood Mackenzie.
Wood Mackenzie's analysis points out that the debate over whether the US crude oil export ban may be lifted does not fully take technical advances in the development of US tight oil into account.
"Policy makers need to get out in front of the next technological progression to not delay the full benefits,” York commented. He said that, if US crude prices fall compared to international benchmarks, e.g., West Texas Intermediate (WTI)-Brent, policy makers could lift the crude oil export ban to preserve current investment levels. This would result in improving domestic tight oil wellhead margins by approximately $5 per barrel, and the margin improvement would then attract additional investment, yielding another 0.35–0.45 million barrels per day. This environment will attract ever more capital, where every $5 billion invested could yield additional production of nearly 0.4 mb/d over five years.
However, if the US crude oil export ban remains, excessive production could drive down domestic crude oil prices by more than $30 per barrel versus their international benchmarks. This discount has the effect of stranding barrels in the reservoirs leading to no net change in US tight oil volumes and EOR in core areas might simply push out more expensive volumes from emerging plays.
Ann-Louise Hittle, head of Macro Oils for Wood Mackenzie, added a global perspective on the impact of additional tight oil output: "The fact that these additional volumes are poised to have an impact after 2020 means that the increased US tight oil production above our current forecast is likely to be absorbed without a strong effect on Brent oil prices. This is particularly the case because of potential long-term political risk in key future sources of supply such as Iraq's."