Following a tumultuous 2020, U.S. shale producers face a new dilemma of ramping up production in the face of global oil supply uncertainty. With West Texas Intermediate (WTI) trading above $50/barrel, there is significant temptation for shale producers to surge their output, however, the constant growth strategy of previous years may prove to be costly at this juncture. Daily production is still down about 2 million barrels per day (bpd) from the same time last year, but many industry leaders are calling for a cautious approach to ramping up production again.
Over the past few months, there has been a drastic increase in U.S. shale producers’ race to acquire drilling permits from the Federal Government. This is due to the upcoming November presidential elections and concerns that a win by Joe Biden could mean a crackdown on oil and gas exploration. According to Reuters, “As of August 24, producers have received 974 permits for new wells on federal land in the Permian, compared with 1,068 for all last year and 265 in 2018, according to data firm Enverus. In the 90 days up till August 24, producers received 404 permits in the Permian, compared with 225 and 11 The scramble for permits comes due to the ongoing coronavirus pandemic.”
Over the weekend, it came as a surprise to the oil industry when prices crashed more than 30% after the recent OPEC+ alliance issued an all-out price war between Russia and Saudi Arabia, leading the market with cheaper oil. During the OPEC+ meeting last week, Russia rejected a proposal to cut 1.5 million barrels per day of production.
U.S. shale production has sustained a years-long boom of rapid growth, but that appears to be coming to an end sooner rather than later. Following a mixed bag of earnings reports from shale executives, the common belief is that the growth frenzy is slowing down and coming to an end. According to World Oil, “The key challenge for producers now is to meet investors’ new focus on return of capital. This comes at a time when companies are facing a prolonged period of lower prices and when access to financing from capital markets has become difficult.”
As the debate over the environmental impact of hydraulic fracturing rages on, a new report from the Susquehanna River Basin Commission’s (SRBC) continuous water quality monitoring project does not show evidence of water quality changes as a result of natural gas development. In an article by Kevin Randolph from the Pennsylvania Business Report, he reports that “in January 2010 the SRBC began measuring and reporting water quality conditions in small streams that could potentially be impacted by the natural gas industry.” The SRBC water quality monitoring project monitors specific conductivity, turbidity and water temperature, which would reveal any immediate impacts from natural gas drilling activities. One organization that has a particularly strong interest in this report is the Marcellus Shale Coalition (MSC).