Filed under: Uncategorized | Tags: Bakken, Bakken Shale, crude oil, energy, horizontal drilling, James Hamilton, Jeffrey Brown, marginal costs of production, natural gas liquids, Niobrara, oil price, oil shale, peak oil, shale oil, shale plays, tight gas, tight oil, tight oil formations, unconventional oil, westtexas
Throwing a little cold water on some recent, loudly reported unscientific predictions. When you read Hamilton, always be sure to read the comments by Jeffrey Brown for an important Big Picture view.
In addition to the uncertainties noted above about extrapolating historical production rates, the rate at which production declines from a given well over time is another big unknown. Another key point to recognize is the added cost of extracting oil from tight formations. West Texas Intermediate is currently around $85/barrel. With the huge discount for Canadian and north-central U.S. producers, that means that producers of North Dakota sweet are only offered $61 a barrel. Tight oil is not going to be the reason that we return to an era of cheap oil, for the simple reason that if oil again fell below $50/barrel, it wouldn’t be profitable to produce with these methods. Nor is tight oil likely to get the U.S. back to the levels of field production that we saw in 1970. But tight oil will likely provide a source of significant new production over the next decade as long as the price does not fall too much.
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