Limits of Technological Efficiency of Shale Oil Production in the USA

Abstract

T he development of the shale oil extracting technology revolution in the United States led to the rapid growth of its production and reduced the related costs to an acceptable level. The shale oil revolution dramatically influenced the global oil market and was a key factor in the reduction of oil prices in 2014-2016. This paper investigates the problems of long-term forecasting of shale oil production and the productivity of drilling rigs. This research applies an asymmetric bell-shaped function using the OLS approach. This function is derived as an analytical solution of the differential equation of oil production. Another contribution of this study is the asymmetric function, which correlates better with the data on the extraction of traditional and non-traditional oil resources. Кeywords: shale oil production; technological efficiency; institutional factors; bell-shaped curve fitting; rig productivity. An analysis of the empirical data with the derived asymmetrical bell-shaped curve shows that the productivity of drilling rigs would peak by 2026 at 1,200 bbl per day, which is two times higher than the current level. The peak of production would correspond to the maximum oil production of 11.3 mln bbl per day and to technically recoverable resources of 96 bln bbl. This could mean that starting from 2023, the volume of oil shale oil production in the US may not be enough to meet growing global demand for oil and other resources with even higher production costs. The theoretically grounded and practically tested asymmetrical bell-shaped curve can serve as one of the tools for assessing the long-term impact of technological innovation over the course of Foresight studies for the oil and gas complex.

Did the Us Shale Oil Revolution Ruin Oil Industry Stock Market Returns?

“…Through these improvements, field production levels could be increased "in as few as 6 months at a small fraction of the capital investment required by their conventional rivals" (Hartmann and Sam, 2016). Other factors impacting the entrepreneurial environment included: "competitive oilfield services markets, the largest drilling rig fleet, an established institution of private land and subsoil ownership, investment and tax incentives for developing low-yield wells, advanced transport infrastructure, environmental requirements favorable for hydraulic fracturing, efficient financial markets including stock exchange insurance tools" (Malanichev, 2018). The US, property rights in many locations allow for ownership of mineral resources, which is different than what exists in many other countries (Maugeri, 2013;Salameh, 2013).…”

“…The US, property rights in many locations allow for ownership of mineral resources, which is different than what exists in many other countries (Maugeri, 2013;Salameh, 2013). As a side note, shale oil plays are usually found in "sparsely populated areas of non-agricultural states" (Malanichev, 2018).…”

“…In addition, the supply of active rigs in the US in 2012 was "more than the rest of the world combined" with the result that in the US there were more than 6 times the number of completed wells than in the rest of the world that year (Maugeri, 2013). The other major factor for the success of the shale oil developments is the amount of reserves which can be technically recoverable (Malanichev, 2018). Technically recoverable shale oil resources for the US are estimated at 58 billion barrels with those outside the US estimated at 287 billion barrels (EIAWorld, 2014).…”

“…Due to oil's preeminent position in the world economy, historically, crude oil prices are more volatile than other commodities with asymmetric impacts on future movements as "negative shocks lead to higher subsequent volatility than positive shocks" (Ural, 2016). The increases in US shale oil production influenced the world markets "and was a key factor in the reduction of oil prices in 2014" (Malanichev, 2018). As prices fell, further cost optimizations were made which reduced the production costs by more than 50% in the Permian midland area of West Texas (Malanichev, 2017).…”

Analytical Study of Iran Nonrenewable Energy Resources Using Hubbert Theory

“…In 2008, which is highlighted in Figure with a vertical dotted line, the production rate no longer followed the Hubbert curve and started a rising trend. This happened due to the U.S. policy change in oil production, , when it moved toward selling oil reserves. This increase shows that regional development can affect the Hubbert curve, and the analysis needs to be revised, for particular circumstances. , …”