Archive

ShareThis Page
U.S. shale becomes oil industry’s safe haven as prices languish | TribLIVE.com
U.S./World

U.S. shale becomes oil industry’s safe haven as prices languish

Tribune-Review
| Tuesday, December 11, 2018 8:21 p.m
531854gtrshale121218
A drilling rig owned by Cabot Oil and Gas stands on a Susquehanna County property in the Marcellus shale. Despite a recent slide in crude oil prices, Big Oil is investing more, not less, in U.S. shale drilling. (Photo: AP)

Big Oil is investing more, not less, in U.S. shale after the recent tumble in crude prices.

It’s a far cry from four years ago when OPEC declared war on American shale areas, which at the time had some of the highest costs anywhere in the world and were often the first on the chopping block during tough times.

The cost of shale production has fallen so much since then that it’s becoming a safe haven for major oil companies in times of volatile prices, providing rapid, reliable growth and quick returns even with crude trading for just over $50 a barrel, down by almost a third since the start of October.

The U.S. shale sector has helped boost American production to an average of 10.9 million barrels a day this year, the most on record. Output is forecast to grow a further 11 percent next year, according the Energy Information Administration.

ConocoPhillips said Monday it’s spending half its 2019 budget in the continental United States, while Chevron Corp. is investing more at home than it’s done for more than a decade, with $3.6 billion going to the Permian Basin alone. Anadarko Petroleum Corp. and Hess Corp., both global operators, plan to increase spending on their American assets more than 40 percent.

Oil’s recent collapse caused “some different allocation going on within the budget,” Conoco Chief Executive Officer Ryan Lance said on Bloomberg TV. “We’re putting more toward our U.S. unconventional position,” he said, referring to shale.

Production growth “slows down at $50 but I don’t think it stops at $50, and it certainly continues if prices get back to $60,” Lance said. Skeptics thought shale “wouldn’t last long, but it’s here, it’s a huge resource and it’s going to be resilient and long lasting.”

Oil companies will spend almost $124 billion in the United States next year, a third of total capital expenditure globally, Evercore ISI wrote in a note. That’s a 10 percent increase from a year earlier, while expenditure outside North America is seen growing 7.2 percent.

In the United States, Conoco wells in the Eagle Ford Shale, the Permian and the Bakken field generate cash when prices are around $50 a barrel or more, Lance said. The company pumped 313,000 barrels a day from the three regions combined during the third quarter, or 25 percent of the Houston-based company’s global production.

Conoco alone will increase its shale production 25 percent next year, Lance said. That’s on top of growth of about 35 percent expected this year. The shale revolution is having a bigger impact on energy markets than the development of offshore production in the 1960s, he said.

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.