Panelists commented on future recovery of oil prices and the growth of unconventional drilling, then took questions from an overflow audience during the opening plenary session of the Unconventional Resources Technology Conference (URTeC) in San Antonio July 20.
US Energy Information Administration Administrator Adam Sieminski said as supplies level off and even begin to decline this year and into 2016, oil markets will stabilize. The US is still the driver of global growth in oil production. Unconventionals are the source of that growth, and will continue to be as supply realigns with demand.
Sieminski said EIA modeling shows that if prices rebound modestly and there are increases in the efficiency and growth of unconventionals, US dependency on oil imports could fall below 15%. In such a scenario, US oil production would rise to 10 million b/d before 2020, surpassing so-called peak oil in the 1970s.
Sieminski would not comment on US policy regarding crude oil exports. He did say, however, that concerns over potentially higher gasoline prices if US crude is sent abroad might be unfounded. Gasoline prices tend to move based on global markets and Brent pricing, not West Texas Intermediate. More oil on the global market could actually translated into lower gasoline prices.
Luis Giusti, senior advisor for the Center for Strategic and International Studies and former chief executive officer of Petroleos de Venezuela SA (PDVSA), noted that since the 1950s industry has been warned about peak oil, but that such warnings have always underestimated the importance of human ingenuity and technology.
The shale revolution is a new era of growth based on these two ingredients. While we must strike a balance with other forms of energy, Giusti said fossil fuels will dominate for decades to come. We are at a very early stage of unconventional development and there is a lot of learning to do, he said.
Giusti said there will be always be down cycles. We have been through them before and we will go through them again, but we will see the industry recover.
Tony Vaughn, executive vice-president, exploration and production, Devon Energy Corp., said the unconventional sector is unique in its flexibility. The pace of activity can be ramped up or down where and when necessary much more easily than large, expensive offshore projects.
Vaughn said this resiliency is measurable. From mid-2014 to mid-2015, the industry has seen a 15% increase in well performance, and a 15% percent reduction in drilling costs as companies respond to the new price environment. Despite this, there are still underperformers.
One recipe for success, Vaughn said, is to have an outstanding portfolio. Not all plays are the same, there is variability in pay with sweet spots, fringe areas, and core areas. To compete successfully, an operator needs assets in top-tier basins, land positions in core plays, and a competitive product mix.
Vaughn stressed that execution is critical. On the surface, automation, optimization, and capital management are key. Subsurface, an analytical approach with more data and modeling to control variables makes the difference. And the disciplines at each stage must be integrated, such as we see at URTeC.
Contact Michael T. Slocum at firstname.lastname@example.org.